SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number 0-14681
J. BAKER, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2866591
State of Incorporation) (I.R.S. Employer Identification Number)
555 Turnpike Street, Canton, Massachusetts 02021
(Address of principal executive offices)
(617) 828-9300
(Registrant's telephone number, including area code)
The registrant (1) has filed all reports to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such
period that the registrant was required to file such reports), and (2) has been
subject to filing such reports for the past 90 days.
YES [ X ] NO
The number of shares outstanding of the registrant's common stock as of November
2, 1996 was 13,892,010.
1
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
November 2, 1996 (unaudited) and February 3, 1996
November 2, February 3,
Assets 1996 1996
---------- -----------
Current assets:
Cash and cash equivalents $ 2,298,981 $ 3,287,141
Accounts receivable:
Trade, net 30,399,523 19,514,985
Other 2,524,726 3,219,862
----------- -----------
32,924,249 22,734,847
----------- -----------
Merchandise inventories 319,134,625 285,703,289
Prepaid expenses 10,874,458 8,600,990
Income tax receivable - 7,236,732
Deferred income taxes 6,949,350 9,198,000
----------- -----------
Total current assets 372,181,663 336,760,999
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 25,064,423 25,064,423
Furniture, fixtures and equipment 124,520,204 115,099,770
Leasehold improvements 47,382,680 43,442,932
----------- -----------
196,967,307 183,607,125
Less accumulated depreciation 77,739,566 62,524,262
----------- -----------
Net property, plant and equipment 119,227,741 121,082,863
----------- -----------
Deferred income taxes 6,939,000 6,939,000
Other assets, at cost, less accumulated amortization 53,553,855 61,298,880
----------- -----------
$551,902,259 $526,081,742
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,500,000 $ 1,500,000
Accounts payable 92,497,995 105,113,721
Accrued expenses 13,968,446 25,066,874
----------- -----------
Total current liabilities 107,966,441 131,680,595
----------- -----------
Other liabilities 1,785,893 2,598,026
Long-term debt, net of current portion 181,500,000 133,000,000
Senior subordinated debt 2,941,736 4,412,711
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity 187,355,189 184,037,410
----------- -----------
$551,902,259 $526,081,742
=========== ===========
See accompanying notes to consolidated financial statements.
2
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the quarters ended November 2, 1996 and
October 28, 1995
(Unaudited)
Quarter Quarter
Ended Ended
November 2, 1996 October 28, 1995
---------------- ----------------
Sales $222,763,576 $245,255,488
Cost of sales 126,579,222 140,655,165
----------- -----------
Gross profit 96,184,354 104,600,323
Selling, administrative and general expenses 83,321,536 93,583,557
Depreciation and amortization 7,513,198 7,826,000
Restructuring charges - 69,300,000
----------- -----------
Operating income (loss) 5,349,620 (66,109,234)
Net interest expense 3,025,257 2,748,348
----------- -----------
Earnings (loss) before income taxes 2,324,363 (68,857,582)
Income tax expense (benefit) 906,000 (27,530,000)
----------- -----------
Net earnings (loss) $ 1,418,363 $(41,327,582)
=========== ===========
Net earnings (loss) per common share:
Primary $ 0.10 $ (2.98)
=========== ===========
Fully diluted $ 0.10 $ (2.98)
=========== ===========
Number of shares used to compute net earnings (loss) per
common share:
Primary 13,892,318 13,865,879
=========== ===========
Fully diluted 13,898,704 13,898,865
=========== ===========
Dividends declared per share $ 0.015 $ 0.015
=========== ===========
See accompanying notes to consolidated financial statements.
3
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the nine months ended November 2, 1996 and
October 28, 1995
(Unaudited)
Nine Months Nine Months
Ended Ended
November 2, 1996 October 28, 1995
---------------- ----------------
Sales $650,099,176 $749,160,219
Cost of sales 361,867,161 420,825,725
----------- -----------
Gross profit 288,232,015 328,334,494
Selling, administrative and general expenses 250,916,559 294,039,167
Depreciation and amortization 22,175,821 22,510,000
Restructuring charges - 69,300,000
----------- -----------
Operating income (loss) 15,139,635 (57,514,673)
Net interest expense 9,026,990 8,035,044
----------- -----------
Earnings (loss) before income taxes 6,112,645 (65,549,717)
Income tax expense (benefit) 2,383,000 (26,257,000)
----------- -----------
Net earnings (loss) $ 3,729,645 $(39,292,717)
=========== ===========
Net earnings (loss) per common share:
Primary $ 0.27 $ (2.84)
=========== ===========
Fully diluted $ 0.27 $ (2.84)
=========== ===========
Number of shares used to compute net earnings (loss) per
common share:
Primary 13,885,926 13,853,211
=========== ===========
Fully diluted 13,900,010 13,925,488
=========== ===========
Dividends declared per share $ 0.045 $ 0.045
=========== ===========
See accompanying notes to consolidated financial statements.
4
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended November 2, 1996 and
October 28, 1995
(Unaudited)
November 2, 1996 October 28, 1995
---------------- ----------------
Cash flows from operating activities:
Net earnings (loss) $ 3,729,645 $(39,292,717)
Adjustments to reconcile net earnings (loss) to cash
used in operating activities:
Depreciation and amortization:
Fixed assets 15,215,304 15,809,000
Deferred charges, intangible assets and
deferred financing costs 6,989,542 6,736,906
Deferred income taxes 2,248,650 (17,800,000)
Loss on disposal of Fayva assets - 30,845,328
Change in:
Accounts receivable (10,189,402) (10,929,494)
Merchandise inventories (33,431,336) (4,141,147)
Prepaid expenses (3,704,513) (1,900,518)
Accounts payable (12,615,726) 4,082,041
Accrued expenses (11,098,428) 25,701,368
Income taxes payable/receivable 7,236,732 (10,782,048)
Other liabilities (722,385) (2,255,562)
----------- -----------
Net cash used in operating
activities (36,341,917) (3,926,843)
----------- -----------
Cash flows from investing activities:
Capital expenditures for:
Property, plant and equipment (13,360,182) (21,608,410)
Other assets (1,037,195) (3,624,685)
Payments received on notes receivable 3,163,000 2,175,000
----------- -----------
Net cash used in investing activities (11,234,377) (23,058,095)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 48,500,000 26,700,000
Repayment of senior subordinated debt (1,500,000) (1,500,000)
Proceeds from issuance of common stock 213,081 153,269
Payment of dividends (624,947) (623,492)
----------- -----------
Net cash provided by financing activities 46,588,134 24,729,777
----------- -----------
Net decrease in cash (988,160) (2,255,161)
Cash and cash equivalents at beginning of year 3,287,141 4,915,491
----------- -----------
Cash and cash equivalents at end of period $ 2,298,981 $ 2,660,330
=========== ===========
Supplemental disclosure of cash flow information Cash paid
(received) for:
Interest $ 7,728,559 $ 6,742,493
Income taxes 4,631,650 2,325,048
Income taxes refunded (8,315,483) -
=========== ===========
See accompanying notes to consolidated financial statements
5
J. BAKER, INC. AND SUBSIDIARIES
NOTES
1] The accompanying unaudited consolidated financial statements, in the opinion
of management, include all adjustments (which consist only of recurring
accruals) necessary for a fair presentation of the Company's financial position
and results of operations. The results for the interim periods are not
necessarily indicative of results that may be expected for the entire fiscal
year.
2] Primary earnings per share is based on the weighted average number of shares
of Common Stock outstanding during such period. Stock options and warrants are
excluded from the calculation since they have less than a 3% dilutive effect.
Fully diluted earnings per share is based on the weighted average number
of shares of Common Stock outstanding during such period. Included in this
calculation is the dilutive effect of stock options and warrants. The common
stock issuable under the 7% convertible subordinated notes was not included in
the calculation for the quarter and nine months ended November 2, 1996 and
October 28, 1995 because it was antidilutive.
3] On September 5, 1995, the Company announced its intent to dispose of its
Fayva footwear division by the end of fiscal 1996. When the Company acquired
Morse in early 1993, it did so primarily for the strategic fit of the Morse and
Baker licensed footwear divisions. In addition, the Company believed, at that
time, that it could improve the operations of Morse's Fayva division. Fayva's
profitability had suffered in the years prior to the Company's acquisition of
Morse due, in part, to the financial difficulties of Morse. The Company believed
that by bringing additional financial resources to Fayva, along with making
divisional management changes, it could restore the division to profitability.
However, after operating Fayva for two and one half years, the Company decided
to dispose of Fayva due to the continued operating losses generated by the
division, along with Fayva's declining market share in an already crowded
discount retail footwear industry.
During the third quarter of fiscal 1996, the Company recorded
restructuring charges of $69.3 million ($41.6 million or $3.00 per share on an
after tax basis) related to the disposal of Fayva. Such charges include the
costs to exit from and dispose of the Fayva division, including the loss on the
disposal of inventory, severance payments, the write-off of fixed assets and the
costs to dispose of store leases. Accrued at November 2, 1996 are costs of $1.7
million, primarily related to lease termination costs, which are expected to be
paid by the end of fiscal 1998. As part of its Fayva exit strategy, the Company
engaged a third party to maximize the Company's net recovery from the
liquidation of the Fayva inventory. All of Fayva's inventory was liquidated by
the end of fiscal 1996. The Company also hired a consultant to mitigate the
disposition costs of the Fayva store leases. Sales in the Company's Fayva
division for the quarter ended October 28, 1995 were $24.7 million, and $106.0
million for the nine months ended October 28, 1995 and fiscal year ended
February 3, 1996.
4] On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the
Company, filed for protection under Chapter 11 of the United States Bankruptcy
Code. At the time of the bankruptcy filing, the Company had outstanding accounts
receivable of approximately $1.8 million due from Bradlees. Under bankruptcy
law, Bradlees has the option of continuing (assuming) the existing license
agreement with the Company or terminating (rejecting) that agreement. If the
license agreement is assumed, Bradlees must cure all defaults under the
agreement and the Company will collect in full the outstanding past due
receivable. The Company has no assurance that the agreement will be assumed or
that Bradlees will continue in business. Although the Company believes that the
rejection of the license agreement or the cessation of Bradlees' business is not
probable, in the event that the agreement is rejected or Bradlees does not
continue in business, the Company believes it will have a substantial claim for
damages. If such a claim is necessary, the amount realized by the Company,
relative to the carrying values of the Company's Bradlees-related assets, will
be based on the relevant facts and circumstances. The Company does not expect
this filing under the Bankruptcy Code to have a material adverse effect on
future earnings. The Company's sales in the Bradlees chain for the quarter and
nine months ended November 2, 1996 were $15.9 million and $44.7 million,
respectively.
5] On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor of
the Company, filed for protection under Chapter 11 of the United States
Bankruptcy Code and announced its intention to liquidate its inventory, fixed
assets and real estate and to cease operation of its business in all of its 90
stores. During the quarter ended February 3, 1996, the Company participated in
Jamesway's going out of business sales and liquidated substantially all of its
footwear inventory in the 90 Jamesway stores during the going out of business
sales. At the time of the bankruptcy filing, the Company had outstanding
6
accounts receivable of approximately $1.4 million due from Jamesway. Because
Jamesway ceased operation of its business, the Company believes that rejection
of its license agreement is probable and has asserted a substantial claim for
damages. The Company has negotiated a settlement of its claim with Jamesway
which remains subject to approval by the Bankruptcy Court. The Company does not
expect the closing of the Jamesway stores to have a material adverse effect on
future earnings. The Company's sales in the Jamesway chain for the quarter and
nine months ended October 28, 1995 and fiscal year ended February 3, 1996 were
$6.2 million, $18.9 million and $24.3 million, respectively.
6] On November 10, 1993, a federal jury in Minneapolis, MN returned a verdict
assessing royalties of $1,550,000, and additional damages of $1,500,000 against
the Company in a patent infringement suit brought by Susan Maxwell with respect
to a device used to connect pairs of shoes. Certain post trial motions were
filed by Susan Maxwell seeking treble damages, attorney's fees and injunctive
relief, which motions were granted on March 10, 1995. Judgment was entered for
Maxwell. The Company appealed the judgment. On June 11, 1996, the United States
Court of Appeals for the Federal Circuit reversed the trial court's findings in
part, affirmed the trial court's findings in part and vacated the award to
Maxwell of treble damages, attorney's fees and injunctive relief. Maxwell
subsequently requested a rehearing in banc of the matter which request was
denied by order of the Court dated August 28, 1996. The case has been remanded
to the trial court for a redetermination of damages consistent with the opinion
of the appellate court. Maxwell has petitioned the United States Supreme Court
for a writ of certiorari to hear the case, and it is anticipated that no action
will be taken by the trial court on remand until the Supreme Court acts with
respect to the petition.
A complaint was also filed by Susan Maxwell in November, 1992 against
Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement
of the patent referred to above. The Morse trial was stayed pending the outcome
of the J. Baker appeal. In light of the decision of the appellate court and the
petition to the Supreme Court, it is not clear when a trial date will be set for
the Morse case.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All references herein to fiscal 1997 and fiscal 1996 relate to the years ending
February 1, 1997 and February 3, 1996, respectively.
Results of Operations
First Nine Months Fiscal 1997 versus First Nine Months Fiscal 1996
Net sales decreased by $99.1 million to $650.1 million in the first nine
months of fiscal 1997 from $749.2 million in the first nine months of fiscal
1996. Sales in the Company's footwear operations decreased by $126.2 million to
$453.1 million from $579.3 million primarily due to a $106.0 million sales
decrease in the Company's Fayva division (which is the result of the closing of
all 357 Fayva stores in the third quarter of fiscal 1996) and a decrease in the
number of licensed shoe departments in operation during the first nine months of
fiscal 1997 versus the first nine months of fiscal 1996 (which was due in large
part to Jamesway ceasing operations), partially offset by a 0.1% increase in
comparable footwear store sales (comparable footwear store sales
increases/decreases are based upon comparisons of weekly sales volume in
licensed departments and Parade of Shoes stores which were open in corresponding
weeks of the two comparison periods) and an increase in the number of Parade of
Shoes stores in operation during the first nine months of fiscal 1997 versus the
first nine months of fiscal 1996. Sales in the Company's apparel operations
increased by $27.1 million to $197.0 million from $169.9 million primarily due
to an increase in the number of Casual Male Big & Tall stores and Work 'n Gear
stores in operation during the first nine months of fiscal 1997 over the first
nine months of fiscal 1996 and a 3.3% increase in comparable apparel store sales
(comparable apparel store sales increases/decreases are based upon comparisons
of weekly sales volume in Casual Male Big & Tall stores and Work 'n Gear stores
which were open in corresponding weeks of the two comparison periods).
Cost of sales constituted 55.7% of sales in the first nine months of
fiscal 1997 as compared to 56.2% of sales in the first nine months of fiscal
1996. Cost of sales in the Company's footwear operations was 57.7% of sales in
the first nine months of fiscal 1997 which was comparable to the 57.7% of sales
in the first nine months of fiscal 1996 primarily due to lower markdowns as a
percentage of sales, offset by a lower initial markup on merchandise purchases
in the Company's continuing footwear operations and the closing of the Company's
Fayva division in the third quarter of fiscal 1996, which had lower cost of
sales as a percentage of sales than the Company's continuing footwear
operations. Cost of sales in the Company's apparel operations was 50.9% of sales
in the first nine months of fiscal 1997 as compared to 51.1% of sales in the
first nine months of fiscal 1996 primarily due to lower markdowns as a
percentage of sales partially offset by a lower initial markup on merchandise
purchases.
Selling, administrative and general expenses decreased $43.1 million or
14.7% in the first nine months of fiscal 1997 as compared to the first nine
months of fiscal 1996 primarily due to the closing of the Company's Fayva
division in the third quarter of fiscal 1996. As a percentage of sales, selling,
administrative and general expenses were 38.6% in the first nine months of
fiscal 1997 as compared to 39.2% in the first nine months of fiscal 1996.
Selling, administrative and general expenses in the Company's footwear
operations were 37.1% of sales in the first nine months of fiscal 1997 as
compared to 38.2% of sales in the first nine months of fiscal 1996. This
decrease was primarily the result of the closing of the Company's Fayva
division, which had higher selling, administrative and general expenses as a
percentage of sales than the Company's continuing footwear operations. Selling,
administrative and general expenses in the Company's apparel operations were
42.1% of sales in the first nine months of fiscal 1997 as compared to 42.7% of
sales in the first nine months of fiscal 1996. This decrease was primarily the
result of the increase in comparable apparel store sales.
Depreciation and amortization expense decreased by $334,000 in the first
nine months of fiscal 1997 as compared to the first nine months of fiscal 1996
primarily due to the write-off of furniture, fixtures and leasehold improvements
as a result of the closing of the Company's Fayva division in the third quarter
of fiscal 1996. This decrease was partially offset by capital expenditures for
depreciable and amortizable assets.
8
During the quarter ended October 28, 1995, the Company recorded
restructuring charges of $69.3 million ($41.6 million on an after tax basis)
related to the disposal of its Fayva footwear division. Such charges included
the costs to exit from and dispose of Fayva, including the loss on disposal of
inventory, severance payments, the write-off of fixed assets and the costs to
dispose of store leases.
As a result of the above described effects, the Company's operating income
increased to $15.1 million in the first nine months of fiscal 1997 from an
operating loss of $57.5 million (operating income of $11.8 million excluding the
restructuring charges) in the first nine months of fiscal 1996. As a percentage
of sales, operating income was 2.3% in the first nine months of fiscal 1997 as
compared to an operating loss of 7.7% in the first nine months of fiscal 1996
(operating income of 1.6% excluding the restructuring charges).
Net interest expense increased $992,000 to $9.0 million in the first nine
months of fiscal 1997 from $8.0 million in the first nine months of fiscal 1996
due to higher levels of borrowings and higher interest rates.
Taxes on earnings for the first nine months of fiscal 1997 were $2.4
million, yielding an effective tax rate of 39.0%, as compared to a tax benefit
of $26.3 million, yielding an effective tax rate of 40.1% in the first nine
months of fiscal 1996.
Net earnings for the first nine months of fiscal 1997 were $3.7 million as
compared to a net loss of $39.3 million in the first nine months of 1996.
Third Quarter Fiscal 1997 versus Third Quarter Fiscal 1996
Net sales decreased by $22.5 million to $222.8 million in the third
quarter of fiscal 1997 from $245.3 million in the third quarter of fiscal 1996.
Sales in the Company's footwear operations decreased by $31.4 million to $153.1
million from $184.5 million primarily due to a $24.7 million sales decrease in
the Company's Fayva division (which is the result of the aforementioned closing
of all 357 Fayva stores in the third quarter of fiscal 1996), a decrease in the
number of discount licensed shoe departments in operation during the third
quarter of fiscal 1997 versus the third quarter of fiscal 1996 (which was due in
large part to Jamesway ceasing operations), partially offset by a 4.7% increase
in comparable footwear store sales and an increase in the number of Parade of
Shoes stores in operation during the third quarter of fiscal 1997 versus the
third quarter of fiscal 1996. Sales in the Company's apparel operations
increased by $8.9 million to $69.7 million from $60.8 million primarily due to
an increase in the number of Casual Male Big & Tall stores in operation during
the third quarter of fiscal 1997 over the third quarter of fiscal 1996, coupled
with a 5.4% increase in comparable apparel store sales.
Cost of sales constituted 56.8% of sales in the third quarter of fiscal
1997 as compared to 57.4% of sales in the third quarter of fiscal 1996. Cost of
sales in the Company's footwear operations was 59.4% of sales in the third
quarter of fiscal 1997 as compared to 59.1% of sales in the third quarter of
fiscal 1996. The increase in such percentage was primarily attributable to the
closing of the Company's Fayva division in the third quarter of fiscal 1996,
which had lower cost of sales as a percentage of sales than the Company's
continuing footwear operations, coupled with a lower initial markup on
merchandise purchases partially offset by lower markdowns as a percentage of
sales in the Company's continuing footwear operations. Cost of sales in the
Company's apparel operations was 51.1% of sales in the third quarter of fiscal
1997 as compared to 51.9% of sales in the third quarter of fiscal 1996. The
decrease in such percentage was primarily attributable to a decrease in
markdowns as a percentage of sales partially offset by a lower initial markup on
merchandise purchases.
Selling, administrative and general expenses decreased $10.3 million or
11.0% in the third quarter of fiscal 1997 as compared to the third quarter of
fiscal 1996 primarily due to the closing of the Company's Fayva division in the
third quarter of fiscal 1996. As a percentage of sales, selling, administrative
and general expenses were 37.4% in the third quarter of fiscal 1997 as compared
to 38.2% in the third quarter of fiscal 1996. Selling, administrative and
general expenses in the Company's footwear operations were 36.5% of sales in the
third quarter of fiscal 1997 as compared to 37.3% of sales in the third quarter
of fiscal 1996. This decrease was primarily the result of the closing of the
Company's Fayva division, which had higher selling, administrative and general
expenses as a percentage of sales than the Company's continuing footwear
operations coupled with the increase in comparable footwear store sales.
Selling, administrative and general expenses in the Company's apparel operations
were 39.5% of sales in the third quarter of fiscal 1997 as compared to 40.9% of
sales in the third quarter of fiscal 1996 primarily due to the increase in
comparable apparel store sales.
Depreciation and amortization expense decreased by $313,000 in the third
quarter of fiscal 1997 as compared to the
9
third quarter of fiscal 1996 primarily due to the write-off of furniture,
fixtures and leasehold improvements as a result of the closing of the Company's
Fayva division in the third quarter of fiscal 1996. This decrease was partially
offset by capital expenditures for depreciable and amortizable assets.
During the quarter ended October 28, 1995, the Company recorded
restructuring charges of $69.3 million ($41.6 million on an after tax basis)
related to the disposal of its Fayva footwear division. Such charges included
the costs to exit from and dispose of Fayva, including the loss on disposal of
inventory, severance payments, the write-off of fixed assets and the costs to
dispose of store leases.
As a result of the above described effects, the Company's operating income
increased to $5.3 million in the third quarter of fiscal 1997 from an operating
loss of $66.1 million (operating income of $3.2 million excluding the
restructuring charges) in the third quarter of fiscal 1996. As a percentage of
sales, operating income was 2.4% in the third quarter of fiscal 1997 as compared
to an operating loss of 27.0% in the third quarter of fiscal 1996 (operating
income of 1.3% excluding the restructuring charges).
Net interest expense increased $277,000 to $3.0 million in the third
quarter of fiscal 1997 from $2.7 million in the third quarter of fiscal 1996 due
to higher levels of borrowings and higher interest rates.
Taxes on earnings for the third quarter of fiscal 1997 were $906,000,
yielding an effective tax rate of 39.0%, as compared to a tax benefit of $27.5
million, yielding an effective tax rate of 40.0% in the third quarter of fiscal
1996.
Net earnings for the third quarter of fiscal 1997 were $1.4 million as
compared to a net loss of $41.3 million in the third quarter of fiscal 1996.
Financial Condition
November 2, 1996 versus February 3, 1996
The increase in accounts receivable at November 2, 1996 from February 3,
1996 is primarily due to seasonal factors, licensed sales in October being
higher than licensed sales in January.
Merchandise inventories at November 2, 1996 were higher than at February
3, 1996 primarily due to a seasonal increase in the average inventory level per
location.
The decrease in income tax receivable is due to receipt of the estimated
federal income tax refund recorded at February 3, 1996 which related to the
federal income tax carryback benefits resulting from the disposal of the Fayva
division.
The decrease in other assets is primarily due to the recording of
amortization expense and collections on notes receivable in fiscal 1997.
The ratio of accounts payable to merchandise inventory decreased to 29.0%
at November 2, 1996 as compared to 36.8% at February 3, 1996 primarily due to
seasonal factors and the Company's decision to reduce the average financing
terms of its foreign purchases.
Accrued expenses at November 2, 1996 decreased from the balance at
February 3, 1996 primarily due to payments of costs related to the disposal of
the Fayva division.
Debt increased $47.0 million to $254.8 million at November 2, 1996 from
$207.8 million at February 3, 1996 primarily due to additional borrowings under
the Company's revolving line of credit to meet seasonal working capital needs
and to fund capital expenditures.
10
Liquidity and Capital Resources
The Company currently has a revolving credit facility on a predominantly
unsecured basis with Fleet National Bank, The First National Bank of Boston, The
Yasuda Trust and Banking Co., Ltd., Bank Hapoalim B.M., National City Bank of
Columbus, Standard Chartered Bank and Citizens Bank of Massachusetts (the
"Banks"). The aggregate commitment amount under the revolving credit facility
was reduced from $240 million to $225 million on November 30, 1996. Borrowings
under the revolving credit facility bear interest at variable rates and, at the
discretion of the Company, can be in the form of loans, bankers' acceptances and
letters of credit. This facility expires on December 31, 1997. As of November 2,
1996, the Company had outstanding obligations under the revolving credit
facility of $217.5 million, consisting of loans, obligations under bankers'
acceptances and letters of credit.
Following is a table showing actual and planned store openings by division
for fiscal 1997:
Actual Openings Planned Openings Total
First - Third Fourth Actual/Planned
Division Quarter Fiscal 1997 Quarter Fiscal 1997 Openings
-------- ------------------- ------------------- --------------
Licensed 83 12 95
Parade of Shoes 42 0 42
Casual Male 42 7 49
Work 'n Gear 0 0 0
Offsetting the above actual and planned store openings, the Company closed
192 licensed departments, 11 Parade of Shoes stores, 6 Casual Male stores and 3
Work 'n Gear stores during the first nine months of fiscal 1997. The Company has
plans to close approximately an additional 120 licensed departments, 9 Parade of
Shoes stores and 1 Casual Male store during the fourth quarter of fiscal 1997.
The information on store openings and closings reflects management's
current plans and should not be interpreted as an assurance of actual future
developments.
The Company believes that amounts available under its revolving credit
facility, along with internally generated funds, will be sufficient to meet its
operating and capital requirements under ordinary circumstances through the end
of the current fiscal year.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits in the Exhibit Index are filed as part of this report.
(b) No reports on Form 8-K were filed by the registrant during the quarter
for which this report is filed.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
J. BAKER, INC.
By:/s/Alan I. Weinstein
---------------------
Alan I. Weinstein
President and Acting Chief
Executive Officer
Date: Canton, Massachusetts
December 12, 1996
By:/s/Philip Rosenberg
----------------------
Philip Rosenberg
Executive Vice President and Treasurer,
Acting Chief Financial Officer
(Chief Accounting Officer)
Date: Canton, Massachusetts
December 12, 1996
13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
EXHIBITS
Filed with
Quarterly Report on Form 10-Q
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Quarter ended November 2, 1996
14
EXHIBIT INDEX
Exhibit Page No.
10. Material Contracts
(.01) Performance Share Award granted to James Lee, dated October 18, *
1996, attached.
(.02) Performance Share Award granted to Stuart M. Needleman, dated *
October 18, 1996, attached.
(.03) Performance Share Award granted to Philip G. Rosenberg, dated *
October 18, 1996, attached.
11. Computation of Primary and Fully Diluted Earnings Per Share, attached. *
-----------------------------------------------------------
27. Financial Data Schedule **
-----------------------
* Included herein
** This exhibit has been filed with the Securities and Exchange
Commission as part of J. Baker, Inc.'s electronic submission of this
Form 10-Q under EDGAR filing requirements. It has not been included
herein.