SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 May 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
__________ to __________
Commission file Number 0-14681
J. BAKER, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2866591
(State of Incorporation) (IRS Employer Identification Number)
555 Turnpike Street, Canton, Massachusetts 02021 (Address of
principal executive offices)
(781) 828-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 Registrant was required to file
such reports), and (2) has been subject to filing such reports for the past 90
days.
YES [ X ] NO [ ]
14,064,139 shares of common stock were outstanding on May 1, 1999.
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
May 1, 1999 (unaudited) and January 30, 1999
May 1, January 30,
Assets 1999 1999
------ ---- ----
Current assets:
Cash and cash equivalents $ 1,423,389 $ 3,679,115
Accounts receivable:
Trade, net 13,687,256 9,979,178
Other 2,640,249 2,768,651
--------- ---------
16,327,505 12,747,829
---------- ----------
Merchandise inventories 175,028,033 164,057,913
Prepaid expenses 5,984,121 3,595,858
Deferred income taxes, net 4,535,000 4,535,000
--------- ---------
Total current assets 203,298,048 188,615,715
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 19,726,648 19,726,648
Furniture, fixtures and equipment 78,481,406 76,008,130
Leasehold improvements 27,359,568 26,869,958
---------- ----------
125,567,622 122,604,736
Less accumulated depreciation and amortization 57,040,151 54,109,006
---------- ----------
Net property, plant and equipment 68,527,471 68,495,730
---------- ----------
Deferred income taxes, net 55,019,631 55,404,641
Other assets, at cost, less accumulated amortization 9,949,062 11,518,573
--------- ----------
$336,794,212 $324,034,659
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,126,850 $ 2,112,955
Accounts payable 50,019,132 55,830,124
Accrued expenses 9,320,153 8,772,148
Income taxes payable - 1,811,701
---------- ---------
Total current liabilities 61,466,135 68,526,928
---------- ----------
Other liabilities 2,710,200 2,741,591
Long-term debt, net of current portion 123,312,534 104,229,825
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity 78,952,343 78,183,315
---------- ----------
$336,794,212 $324,034,659
============ ============
See accompanying notes to consolidated financial statements.
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings For the quarters ended
May 1, 1999 and May 2, 1998
(Unaudited)
Quarter Quarter
Ended Ended
May 1, 1999 May 2, 1998
----------- -----------
Net sales $129,192,610 $126,636,564
Cost of sales 68,973,108 68,312,559
---------- ----------
Gross profit 60,219,502 58,324,005
Selling, administrative and general expenses 51,720,385 50,782,456
Depreciation and amortization 3,488,615 3,098,046
--------- ---------
Operating income 5,010,502 4,443,503
Net interest expense 3,478,512 3,597,160
--------- ---------
Earnings before income taxes 1,531,990 846,343
Income tax expense 552,000 330,000
------- -------
Net earnings $ 979,990 $ 516,343
========= ==========
Net earnings per common share:
Basic $ 0.07 $ 0.04
========= =========
Diluted $ 0.07 $ 0.04
========= =========
Number of shares used to compute net earnings per common share:
Basic 14,064,526 13,920,294
========== ==========
Diluted 14,149,469 14,064,373
========== ==========
Dividends declared per share $ 0.015 $ 0.015
========= =========
See accompanying notes to consolidated financial statements.
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the quarters
ended May 1, 1999 and May 2, 1998
(Unaudited)
May 1, 1999 May 2, 1998
----------- -----------
Cash flows from operating activities:
Net earnings $ 979,990 $ 516,343
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization:
Fixed assets 2,931,145 2,670,162
Deferred charges, intangible assets and
deferred financing costs 559,448 429,853
Deferred income taxes, net 385,010 1,025,620
Grants of performance share awards - 255,563
Change in:
Accounts receivable (3,579,676) 2,337,747
Merchandise inventories (10,970,120) (12,786,580)
Prepaid expenses (2,388,263) (2,393,160)
Accounts payable (5,810,992) (3,553,649)
Accrued expenses 548,005 (635,758)
Income taxes payable/receivable (1,811,701) (50,195)
Other liabilities (3,453) (110,913)
------ --------
Net cash used in operating activities (19,160,607) (12,294,967)
----------- -----------
Cash flows from investing activities:
Capital expenditures for:
Property, plant and equipment (2,962,886) (3,512,446)
Other assets (18,767) (486,017)
Proceeds from sales of footwear businesses 887,903 2,902,335
------- ---------
Net cash used in investing activities (2,093,750) (1,096,128)
---------- ----------
Cash flows from financing activities:
Repayment of senior debt - (1,500,000)
Proceeds from other long-term debt 19,244,729 12,404,379
Repayment of mortgage payable (148,125) (135,422)
Payment of mortgage escrow, net 112,989 (78,912)
Payment of dividends (210,962) (208,789)
-------- --------
Net cash provided by financing activities 18,998,631 10,481,256
---------- ----------
Net decrease in cash (2,255,726) (2,909,839)
Cash and cash equivalents at beginning of year 3,679,115 3,995,995
--------- ---------
Cash and cash equivalents at end of period $ 1,423,389 $ 1,086,156
=========== ===========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 2,493,430 $ 2,398,464
Income taxes 1,978,691 50,195
Income taxes refunded - (876,349)
======== ========
Schedule of non-cash financing activity:
Common stock issued for performance share awards - 255,563
======== ========
See accompanying notes to consolidated financial statements
J. BAKER, INC. AND SUBSIDIARIES
NOTES
1] The accompanying unaudited consolidated financial statements, in the opinion
of management, include all adjustments necessary for a fair presentation of the
financial position and results of operations of J. Baker, Inc. (the "Company").
The results for the interim periods are not necessarily indicative of results
that may be expected for the entire fiscal year.
2] In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share" ("EPS"), which the Company adopted in fiscal 1998. Basic EPS is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted EPS is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding, after giving effect to all
potentially dilutive common shares outstanding during the period.
For the quarters ended May 1, 1999 and May 2, 1998, the calculation of
diluted earnings per common share includes the dilutive effect of outstanding
stock options and warrants. The common stock issuable under the 7% convertible
subordinated notes due 2002 and the convertible debentures was not included in
the calculation for the quarters ended May 1, 1999 and May 2, 1998 because its
effect would be antidilutive. All net earnings per common share amounts for all
periods presented have been restated to conform to SFAS No. 128 requirements.
Net earnings and shares used to compute net earnings per share, basic
and diluted, are reconciled below:
May 1, 1999 May 2, 1998
----------- -----------
Net earnings, basic and diluted $ 979,990 $ 516,343
=========== ===========
Weighted average common shares:
Basic 14,064,526 13,920,294
Effect of dilutive securities:
Stock options and performance share awards 84,943 144,079
------ -------
Diluted 14,149,469 14,064,373
========== ==========
3] On May 23, 1999, the Company acquired substantially all of the assets of the
Repp Ltd. Big & Tall and Repp Ltd. by Mail divisions of Edison Brothers Stores,
Inc. ("Edison"). Edison is currently operating as a debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code, as amended. The all cash
purchase price of $31.7 million, subject to adjustment, was for the acquisition
of 175 United States and Canadian Repp Ltd. Big & Tall retail locations and the
Repp Ltd. by Mail catalog business. The Company immediately sold Repp's Canadian
operation to Grafton-Fraser, Inc., a Canadian men's retailer, and commenced the
closing of 31 stores. The Company will operate the remaining 128 retail stores
in the United States and the Repp Ltd. by Mail catalog through a new subsidiary,
JBI Apparel, Inc. The transaction was financed primarily through (a) a new $20
million credit facility and a $5 million term loan provided to JBI Apparel, Inc.
by BankBoston Retail Finance Inc. and Back Bay Capital Funding llc,
respectively, (b) the issuance by JBI Apparel, Inc. of $10 million of senior
subordinated notes to a group of investors, which included investment funds
affiliated with Donaldson, Lufkin & Jenrette, Inc. (the "Investor Group"), and
(c) the sale of the Canadian operations and the liquidation of the inventories
in the 31 closing stores. In connection with the $10 million financing provided
by the Investor Group, J. Baker issued 5-year warrants enabling holders to
purchase 1,200,000 shares of the Company's common stock at $5.00 per share. The
remaining 128 Repp Ltd. retail stores and the Repp Ltd. by Mail catalog, which
will continue to operate under the Repp Ltd. Big & Tall trade name, generated
approximately $100 million in sales for the fiscal year ended January 30, 1999.
4] The Company is a specialty retailer conducting business through retail
stores in two business segments: apparel and footwear. The Company's chief
operating decision maker, the Chief Executive Officer, evaluates the performance
of the Company's segments based on operating profit and cash flow. Operating
profit includes all revenues and direct expenses attributable to the segment and
excludes certain expenses that are managed outside the segment, primarily
general corporate expenses. General corporate expenses are comprised primarily
of administrative functions, such as management, finance, information systems
and human resources.
Net sales and operating profits for each of the Company's business
segments are set forth below. There are no material inter-segment revenues.
Quarter Ended
-----------------------------------
May 1, 1999 May 2, 1998
----------- -----------
($ in thousands)
Apparel
Net sales $ 74,198 $ 72,000
Operating profit 7,013 5,882
Footwear
Net sales $ 54,995 $ 54,637
Operating profit 3,618 3,461
Consolidated
Net sales $129,193 $126,637
Operating profit before general
corporate expense 10,631 9,343
General corporate expense (5,620) (4,900)
Interest expense, net (3,479) (3,597)
Earnings before income taxes $ 1,532 $ 846
5] On November 12, 1998 Ames Department Stores, Inc. ("Ames") entered into an
agreement for the acquisition of Hills Stores Company ("Hills"). The Company has
operated licensed footwear departments in each of Ames' and Hills' stores
pursuant to license agreements with each such entity. On December 31, 1998, Ames
acquired control of Hills through its acquisition of substantially more than a
majority of Hills' outstanding common stock and convertible preferred stock and
notes. In March, 1999 Ames consummated the merger of Hills into a subsidiary of
Ames.
At the time of the acquisition, Hills operated 155 discount department
stores in twelve states. In February, 1999, Ames began a program to remodel and
convert 150 of the acquired Hills stores to Ames stores in three sequential
phases of approximately 50 stores each. Upon the completion of the remodeling
and conversion process, all such stores will be incorporated into the Company's
license agreement with Ames on the same terms and conditions as presently exist.
The first stage of remodeling, involving 50 stores, has been completed and the
remodeled stores opened on April 22, 1999. The second stage, involving 54
stores, is scheduled to be completed in July, 1999 and the final stage,
involving 46 stores, is scheduled to be completed in September, 1999. During
these three stages of store closings, the Company has participated in
liquidation sales of its footwear inventory in each store. The first and second
stages of liquidation sales ended on February 22, 1999 and May 21, 1999,
respectively, and the third stage is scheduled to be completed on July 26, 1999.
The Company's sales in the combined Ames and Hills chains for the quarter ended
May 1, 1999 were $30.0 million.
6] 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. On April 13, 1998,
Bradlees filed its Joint Plan of Reorganization and Disclosure Statement (the
"Plan") with the United States Bankruptcy Court for the Southern District of New
York, which, as amended, was confirmed on November 18, 1998. The Plan became
effective on February 2, 1999 (the "Effective Date"), the Company's license
agreement with Bradlees was
amended and assumed and the reorganized Bradlees emerged from bankruptcy.
Pursuant to the amended agreement, ten days after the Effective Date Bradlees
made a cash distribution to the Company in the amount of $360,000 and shall pay
the unpaid balance of the Company's pre-petition claim in thirty-six equal
monthly installments, which commenced on March 1, 1999, with interest payable on
the unpaid balance outstanding commencing with the seventh monthly payment. As
provided in the amended licensed agreement, upon the occurrence of certain
events, the entire unpaid balance of the Company's claim shall be paid within 30
days after such occurrence, without penalty or interest. The Company's sales in
the Bradlees chain for the quarter ended May 1, 1999 were $9.6 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
STATEMENTS MADE OR INCORPORATED INTO THIS QUARTERLY REPORT INCLUDE A NUMBER OF
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934.
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING
THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE" AND WORDS OF
SIMILAR IMPORT, WHICH EXPRESS MANAGEMENT'S BELIEF, EXPECTATION OR INTENT
REGARDING THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES ARE
DESCRIBED IN THE SECTION ENTITLED "CERTAIN FACTORS THAT MAY AFFECT FUTURE
RESULTS" FOUND ON PAGE 12 OF THIS QUARTERLY REPORT.
All references herein to fiscal 2000 and fiscal 1999 relate to the years ending
January 29, 2000 and January 30, 1999, respectively.
Results of Operations
First Quarter Fiscal 2000 versus First Quarter Fiscal 1999
The Company's net sales increased by $2.6 million to $129.2 million in
the first quarter of fiscal 2000 from $126.6 million in the first quarter of
fiscal 1999, primarily due to an increase in sales in the Company's apparel
businesses. Sales in the Company's apparel operations increased by $2.2 million
to $74.2 million primarily due to a 3.7% 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). Sales in the Company's footwear operations increased by $358,000 to
$55.0 million, primarily due to a 4.4% increase in comparable retail footwear
store sales (comparable retail footwear store sales increases/decreases are
based upon comparisons of weekly sales volume in licensed footwear departments
which were open in corresponding weeks of the two comparison periods). Such
increase was partially offset by a $2.0 million decrease in net sales due to the
closing of a group of former Hills locations for a portion of the first quarter
of fiscal 2000 for remodeling prior to their reopening as Ames stores. For
additional information on the closing, remodeling and conversion of the former
Hills stores to Ames stores, see Note 5 on page 6.
The Company's cost of sales constituted 53.4% of sales in the first
quarter of fiscal 2000 as compared to 53.9% of sales in the first quarter of
fiscal 1999. Cost of sales in the Company's apparel operations was 50.8% of
sales in the first quarter of fiscal 2000 as compared to 51.4% of sales in the
first quarter of fiscal 1999. The decrease in such percentage was primarily
attributable to lower markdowns as a percentage of sales and a higher initial
markup on merchandise purchases. Cost of sales in the Company's footwear
operations was 56.9% of sales in the first quarter of fiscal 2000, as compared
to 57.3% of sales in the first quarter of fiscal 1999. The decrease in such
percentage was primarily attributable to a higher initial markup on merchandise
purchases, partially offset by higher markdowns as a percentage of sales.
Selling, administrative and general expenses increased $938,000, or
1.8%, to $51.7 million in the first quarter of fiscal 2000 from $50.8 million in
the first quarter of fiscal 1999. As a percentage of sales, selling,
administrative and general expenses were 40.0% of sales in the first quarter of
fiscal 2000, as compared to 40.1% of sales in the first quarter of fiscal 1999.
Selling, administrative and general expenses in the Company's apparel operations
were 41.2% of sales in the first quarter of fiscal 2000 as compared to 41.7% of
sales in the first quarter of fiscal 1999. This decrease was primarily due to
the increase in comparable apparel store sales. Selling, administrative and
general expenses in the Company's footwear operations were 38.5% of sales in the
first quarter of fiscal 2000 as compared to 38.0% of sales in the first quarter
of fiscal 1999. This increase was primarily due to an increase in store level
expenses.
Depreciation and amortization expense increased by $391,000 to $3.5
million in the first quarter of fiscal 2000 from $3.1 million in the first
quarter of fiscal 1999, primarily due to an increase in depreciable and
amortizable assets.
As a result of the above, the Company's operating income increased to
$5.0 million in the first quarter of fiscal 2000 from $4.4 million in the first
quarter of fiscal 1999. As a percentage of sales, operating income was 3.9% in
the first quarter of fiscal 2000 as compared to 3.5% in the first quarter of
fiscal 1999.
Net interest expense decreased by $119,000 to $3.5 million in the first
quarter of fiscal 2000 from $3.6 million in the first quarter of fiscal 1999,
primarily due to lower interest rates on bank borrowings and lower average
levels of bank borrowings in the first quarter of fiscal 2000 versus the first
quarter of fiscal 1999.
Taxes on earnings for the first quarter of fiscal 2000 were $552,000,
yielding an effective tax rate of 36.0%, as compared to taxes on earnings of
$330,000, yielding an effective tax rate of 39.0%, in the first quarter of
fiscal 1999. The tax rate for fiscal 2000 is consistent with that utilized for
the entire fiscal year 1999.
Net earnings for the first quarter of fiscal 2000 were $980,000, as
compared to net earnings of $516,000 in the first quarter of fiscal 1999, an
increase of 89.8%.
Financial Condition
May 1, 1999 versus January 30, 1999
The increase in accounts receivable at May 1, 1999 from January 30,
1999 was primarily due to an increase in trade receivables due to seasonal
factors, licensed footwear department sales in April being higher than licensed
footwear department sales in January.
The increase in merchandise inventories at May 1, 1999 from January 30,
1999 was primarily due to a seasonal increase in the average inventory level per
location.
The decrease in accounts payable at May 1, 1999 from January 30, 1999
was primarily due to a decrease in in-transit inventory. The ratio of accounts
payable to merchandise inventory was 28.6% at May 1, 1999, as compared to 34.0%
at January 30, 1999 and 28.2% at May 2, 1998.
The increase in long-term debt, net of current portion, at May 1, 1999
from January 30, 1999 was primarily due to additional bank borrowings to meet
seasonal working capital needs and to fund capital expenditures.
Liquidity and Capital Resources
The Company has separate revolving credit facilities, which are
guaranteed by J. Baker, Inc., to finance its combined Casual Male and Work 'n
Gear apparel business (the "Apparel Credit Facility") and its footwear business
(the "Footwear Credit Facility"). The Apparel Credit Facility is an $85 million
revolving credit facility with Fleet National Bank, BankBoston, N.A., The Chase
Manhattan Bank, Imperial Bank, USTrust, Wainwright Bank & Trust Company and Bank
Polska Kasa Opieki S.A. The Apparel Credit Facility is secured by all the
capital stock of The Casual Male, Inc. and four other subsidiaries of the
Company. The aggregate commitment under the Apparel Credit Facility will
automatically reduce by $10 million on December 31, 1999. Borrowings under the
Apparel Credit Facility bear interest at variable rates and can be in the form
of loans, bankers' acceptances and letters of credit. This facility expires May
31, 2000.
The Footwear Credit Facility is a $50 million revolving credit
facility, secured by substantially all the assets of JBI, Inc. and Morse Shoe,
Inc., with BankBoston Retail Finance Inc. and Fleet National Bank. Aggregate
borrowings available under the Footwear Credit Facility are limited to an amount
determined by a formula based on
various percentages of eligible inventory and accounts receivable. Borrowings
under the Footwear Credit Facility bear interest at variable rates and can be in
the form of loans or letters of credit. This facility expires May 31, 2001.
As of May 1, 1999, the Company had aggregate borrowings outstanding
under its Apparel Credit Facility and its Footwear Credit Facility totaling
$68.0 million and $44.9 million, respectively, consisting of loans and
obligations under letters of credit.
In May, 1999, a new subsidiary of the Company, JBI Apparel, Inc.,
acquired the Repp Ltd. Big & Tall retail store business operated in the United
States and the Repp Ltd. by Mail catalog. The purchase price and working capital
needs of the Repp business are being financed primarily through (a) a new credit
facility provided to JBI Apparel, Inc. by BankBoston Retail Finance Inc.
("BBRF") and Back Bay Capital Funding llc, respectively, and (b) senior
subordinated notes and warrants issued to a group of investors, which included
investment funds affiliated with Donaldson, Lufkin and Jenrette, Inc. (the
"Investor Group").
Effective May 21, 1999, a combination $20 million revolving line of
credit and $5 million term loan facility (the "JBI Apparel Credit Facility") was
established with BBRF and Back Bay Capital llc, respectively. The JBI Apparel
Credit Facility is secured by substantially all of the assets of JBI Apparel,
Inc. and guaranteed by the Company's JBI, Inc. and Morse Shoe, Inc.
subsidiaries. These guarantees are secured by liens (which are junior to those
securing the Footwear Credit Facility) on substantially all the assets of JBI,
Inc. and Morse Shoe, Inc. Aggregate borrowings are limited to an amount
determined by a formula based on various percentages of eligible inventory and
accounts receivable. Borrowings under the $20 million revolving line of credit
bear interest at variable rates and may be in the form of loans or letters of
credit. Borrowings under the term loan bear interest at 19% per year. The JBI
Apparel Credit Facility expires on May 31, 2001.
Also effective on May 21, 1999, the Investor Group provided $10 million
to JBI Apparel, Inc. through the issuance of 13% Senior Subordinated Notes.
Detachable warrants were issued in connection with the 13% Senior Subordinated
Notes, which enable the holders to purchase 1,200,000 shares of J. Baker, Inc.
common stock at $5.00 per share. The 13% Senior Subordinated Notes mature on
December 31, 2001, and the warrants expire on May 21, 2004.
Net cash used in operating activities for the first quarter of fiscal
2000 was $19.2 million, as compared to net cash used in operating activities of
$12.3 million in the first quarter of fiscal 1999. The $6.9 million change was
primarily due to an increase in net accounts receivable in fiscal 2000 versus a
decrease in net accounts receivable in fiscal 1999, which was primarily due to
the receipt of litigation settlement proceeds in the first quarter of fiscal
1999.
Net cash used in investing activities for the first quarter of fiscal
2000 was $2.1 million, as compared to net cash used in investing activities of
$1.1 million in the first quarter of fiscal 1999. The $1.0 million change was
primarily due to the receipt of $888,000 in proceeds from the sales of the
footwear businesses in the first quarter of fiscal 2000 versus receipt of $2.9
million in sales proceeds in the first quarter of fiscal 1999. This decrease was
partially offset by lower capital expenditures in the first quarter of fiscal
2000 than the first quarter of fiscal 1999.
Net cash provided by financing activities for the first quarter of
fiscal 2000 was $19.0 million, as compared to net cash provided by financing
activities of $10.5 million in the first quarter of fiscal 1999. The $8.5
million change was primarily due to the net borrowing of $19.2 million under the
Company's revolving lines of credit during the first quarter of fiscal 2000
versus the net borrowing of $12.4 million during the first quarter of fiscal
1999.
The Company invested $3.0 million and $3.5 million in capital
expenditures during the first quarters of fiscal 2000 and fiscal 1999,
respectively. The Company's capital expenditures generally relate to new store
and licensed footwear department openings and remodeling of existing stores and
departments, coupled with expenditures for general corporate purposes.
Following is a table showing actual and planned store openings by
division for fiscal 2000:
Actual Openings Planned Openings Total
First Quarter Second through Fourth Actual/Planned
Division Fiscal 2000 Quarters Fiscal 2000 Openings
-------- ----------- -------------------- --------
Casual Male 2 4 6
Work 'n Gear - - -
JBI Footwear 2 3 5
Repp Ltd. Big &Tall - 10 10
Offsetting the above actual and planned store openings, the Company
closed 1 Casual Male store, 2 Work 'n Gear stores and 3 JBI Footwear departments
during the first quarter of fiscal 2000. The Company has plans to close
approximately an additional 8 Casual Male stores during the second through
fourth quarters of fiscal 2000. These numbers do not reflect the closing and
reopening of the approximately 150 Hills/Ames stores during fiscal 2000, nor do
they reflect the 128 stores which were acquired as a result of the Repp
acquisition.
The Company believes amounts available under its revolving credit
facilities, along with other potential sources of funds and cash flows from
operations, will be sufficient to meet its operating and capital requirements
for the foreseeable future. From time to time, the Company evaluates potential
acquisition candidates in pursuit of strategic initiatives and growth goals in
its niche apparel markets. Financing of potential acquisitions will be
determined based on the financial condition of the Company at the time of such
acquisitions, and may include borrowings under current or new commercial credit
facilities or the issuance of publicly issued or privately placed debt or equity
securities.
Year 2000 Compliance
The statements in this section include "Year 2000 Readiness Disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
The Company is faced with "Year 2000" remediation issues. Many computer
programs were written with a two-digit date field, which, if not made Year 2000
compliant, will be unable to correctly process date information on or after
January 1, 2000.
The Company's State of Readiness
The Company established a Year 2000 committee comprised of senior
management of the Company and also engaged an independent consulting firm to
assist in remediation of the Company's Year 2000 issues. The Company evaluated
its internal computer systems and while the data processing systems were found
to be impacted to some extent, Year 2000 issues were found to be most
significant in connection with various mainframe computer programs. In fiscal
1997, the Company developed a plan to address Year 2000 issues as they related
to the mainframe computer programs and began the process of converting such
computer programs to be Year 2000 compliant. During fiscal 1999, the Company
completed the conversion of its three primary mainframe computer programs to be
Year 2000 compliant.
During fiscal 1999, the Company undertook an inventory of its
non-information technology systems. Such inventory is substantially complete
and, where appropriate, the Company has made contingency plans in order to
minimize any adverse effect Year 2000 issues may have on such non-information
technology systems.
During fiscal 1999, the Company communicated with and completed a
compilation of detailed information regarding its key business partners and
major suppliers to determine to what extent the Company may be vulnerable to
third party Year 2000 issues. Although the Company does not currently anticipate
it will experience any material business interruptions or shipment delays from
its key business partners and major suppliers due to Year 2000 issues, at this
time, the Company is unable to estimate the nature or extent of any potential
adverse impact resulting from the failure of its key business partners and major
suppliers to achieve Year 2000 compliance.
The Company is not dependent on a single source for any products or
services. In the event a third party is unable to provide material products or
services to the Company due to a Year 2000 computer systems failure, the Company
believes it has adequate alternate sources for such products or services. If
alternate sources are used, there can be no guarantee that similar or identical
products or services would be available on the same terms and conditions or that
the Company would not experience some adverse effect as a result of switching to
such alternate sources.
Costs to Address the Year 2000
The Company's total Year 2000 expenditures are estimated to be
approximately $4.0 million, of which approximately $2.0 million are for
incremental costs, and are being funded through operating cash flows. Certain
other non-Year 2000 computer system projects were deferred in order to ensure
completion of the Company's Year 2000 compliance efforts. Although management
believes deferring such projects has not had a material adverse effect on the
Company's operations, it expects these projects, when implemented, will
positively impact future results. The Company is expensing all costs associated
with Year 2000 computer system changes as the costs are incurred. To date, the
Company has expended approximately $3.7 million on Year 2000 projects.
Risk Analysis
Similar to most large business enterprises, the Company is dependent
upon its own internal computer technology and relies upon timely performance by
its key business partners and major suppliers. Although the full consequences
are not known, the failure of either the Company's systems or those of material
third parties to conform to the Year 2000, as noted above, could impair the
Company's ability to deliver product to its stores in a timely fashion, which
could result in potential lost sales opportunities and additional expenses. The
Company's Year 2000 project seeks to identify and minimize this risk and
includes testing of internally generated systems and purchased hardware and
software to ensure, to the extent feasible, all such systems will function
before and after the year 2000.
Contingency Plans
The Company has developed contingency plans, which will attempt to
minimize disruption to the Company's operations in the event of Year 2000
computer systems failures. While no assurances can be given, because of the
Company's extensive efforts to formulate and carry out an effective Year 2000
program, the Company believes its program will be completed on a timely basis
and should effectively minimize disruption to the Company's operations due to
Year 2000 issues.
Certain Factors That May Affect Future Results
The Company cautions that any forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) contained in
this Form 10-Q or made by management of the Company involve risks and
uncertainties and are subject to change based on various important factors.
Company management may also make written or oral forward-looking statements in
other documents it files with the SEC, in its annual report to stockholders, in
press releases and other written materials, and in oral statements made by
officers, directors or employees of the Company. You should not rely on
forward-looking statements, because they involve known and unknown risks,
uncertainties and other factors, some of which are beyond the control of the
Company. The following factors, among others, in some cases have affected and in
the future could affect the Company's financial performance and actual results,
and could cause actual results, performance or achievements of the Company for
fiscal 2000 and beyond to differ materially from those expressed or implied in
any such forward-looking statements: changes in consumer spending patterns,
consumer preferences and overall economic conditions, availability of credit,
interest rates, the impact of competition and pricing, the weather, the
financial condition of the retailers in whose stores the Company operates
licensed footwear departments, changes in existing or potential duties, tariffs
or quotas, availability of suitable store locations on appropriate terms,
ability to hire and train associates and costs, timing and effectiveness of Year
2000 conversion. You should carefully review and consider all of these factors
and should be aware there may be other factors that could cause these
differences. These forward-looking statements were based on information, plans
and estimates at the date of this report, and the Company does not promise to
update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
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.
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 Chief Executive
Officer
Date: Canton, Massachusetts
June 14, 1999
By:/s/Philip Rosenberg
Philip Rosenberg
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: Canton, Massachusetts
June 14 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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EXHIBITS
Filed with
Quarterly Report on Form 10-Q
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Quarter ended May 1, 1999
EXHIBIT INDEX
Exhibit Page No.
04. Instruments Defining the Rights of Security Holders, Including Indentures
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[.01] Securities Purchase Agreement by and among J. Baker, Inc., *
JBI, Inc, and JBI Apparel, Inc. as Guarantor, and DLJ Fund
Investment Partners II, L.P. and others (the "Investor Group"), as
Purchasers, dated as of May 19, 1999, attached.
[.02] Form of 13% Senior Subordinated Note dated as of May 21, 1999, *
attached.
[.03] Form of Warrant, dated as of May 21, 1999, attached. *
[.04] Guaranty by JBI, Inc. in favor of the Investor Group, *
dated as of May 21, 1999, attached.
[.05] Registration Rights Agreement by and among J. Baker, Inc., *
JBI, Inc. and JBI Apparel, Inc. and the Investor Group,
dated as of May 21, 1999, attached.
10. Material Contracts
[.01] Asset Purchase Agreement by and among J. Baker, Inc. as *
Purchaser and Edison Brothers, Stores, Inc., Edison Brothers
Apparel Stores, Inc. and Repp Ltd. Big & Tall as Sellers,
dated as of April 30, 1999, attached.
[.02] Loan and Security Agreement by and among JBI, Apparel, Inc. *
and BankBoston Retail Finance, Inc. and Back Bay Capital
Funding llc, dated as of May 21, 1999, attached.
[.03] Fourth Amendment to Loan and Security Agreement between *
JBI, Inc, Morse Shoe, Inc. and JBI Holding Company, Inc.,
and BankBoston Retail Finance Inc. and Fleet National Bank,
dated as of May 21, 1999, attached.
11. Computation of Net Earnings Per Common Share, attached. *
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27. Financial Data Schedule *
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* Included herein