1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 29, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.50 PER SHARE
7% CONVERTIBLE SUBORDINATED NOTES DUE 2002
(TITLE OF CLASS)
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 the 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. / X /
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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The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $261,990,920 as of March 31, 1994 (based on the
last reported sales price of the registrant's stock in the over-the-counter
market on such date).
The number of shares outstanding of the registrant's common stock as of March
31, 1994 was 13,819,710.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive proxy statement for the 1994 Annual Meeting
of Stockholders are incorporated by reference in Part III.
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J. BAKER, INC.
FORM 10-K REPORT
YEAR ENDED JANUARY 29, 1994
PART I
DESCRIPTION OF BUSINESS
GENERAL
J. Baker, Inc. ("J. Baker" or the "Company", which term shall include
all subsidiaries of the Company) is engaged in the retail sale of footwear and
apparel. The Company sells footwear through self-service licensed shoe
departments in mass merchandising department stores, through full and
semi-service licensed shoe departments in department and specialty stores, on a
wholesale basis and through its Fayva chain of self-selection family shoe
stores and its Parade of Shoes chain of "one price" women's shoe stores. The
Company is engaged in the retail sale of apparel through its chain of Casual
Male Big & Tall men's stores and through its chain of Work'n Gear work
clothing stores.
On November 19, 1993, the Company acquired 83% of the outstanding
common stock and all of the outstanding preferred stock of Tishkoff
Enterprises, Inc. of Columbus, Ohio ("TEI"), an operator of full-service,
semi-service and self-service licensed shoe departments in department stores,
specialty stores and discount stores. The 83% interest in the outstanding
common stock was acquired from certain TEI stockholders in exchange for 68,197
shares of the Company's common stock (16,769 of which shares are being withheld
from TEI stockholders for up to two years and are available as a set-off to
satisfy any claims of the Company for indemnification that may arise) and the
right to receive payments equal in the aggregate to 8.3% of the consolidated
pre-tax earnings of TEI over a six year period commencing January 29, 1994,
with a maximum aggregate payment of $4,980,000. The acquisition of all of the
outstanding preferred stock of TEI was made for a payment of $650,000 in cash.
On December 13, 1993, the stockholders of TEI approved the merger of JBAK
Acquisition Corp., an Ohio corporation and a wholly owned subsidiary of the
Company, with and into TEI (the "Merger") and TEI became a wholly owned
subsidiary of the Company. In connection with the Merger, the Company paid
cash consideration to the remaining TEI stockholders in the amount of $442,000,
in payment for the remaining 17% interest in TEI common stock. Subsequent to
the Merger, the corporate name of TEI was changed to Shoe Corporation of
America, Inc. ("SCOA"). At January 29, 1994, SCOA operated 188 licensed
footwear departments.
On January 30, 1993, Morse Acquisition, Inc., a wholly-owned
subsidiary of the Company ("Acquisition"), merged with and into Morse Shoe,
Inc. ("Morse") pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of October 22, 1992 (the "Merger Agreement") by and
among the Company, Acquisition and Morse, whereby Morse became a wholly-owned
subsidiary of the Company. Pursuant to the acquisition of Morse, each share of
Morse common stock was exchanged for .17091 of a share of J. Baker common
stock. In connection with the acquisition, approximately 2,767,377 shares of
J. Baker common stock were issuable to Morse stockholders, including holders of
approximately $47 million, or 94%, of Morse convertible debentures which had
been converted into Morse common stock prior to January 30, 1993. During the
year ended January 29, 1994, holders of an additional $2.7 million of Morse
convertible debentures converted their debt into 49,820 shares of J. Baker
common stock. Approximately 6,500 additional shares of J. Baker common stock
are reserved for future issuance upon conversions of the remaining outstanding
Morse convertible debentures. As of January 29, 1994, the Company operated 501
licensed shoe departments and 395 Fayva shoe stores in its Morse subsidiary.
For additional information on the acquisition of Morse, See Note 3 to the
Consolidated Financial Statements.
On December 2, 1992, the Company received a notice of termination from
WearGuard Corporation ("WearGuard") terminating the License and Supply
Agreement dated as of September 25, 1991 by WGS Corporation (a wholly owned
subsidiary of the Company) and WearGuard. On September 25, 1991, the Company
had purchased from WearGuard assets consisting primarily of the inventory and
fixed assets of WearGuard's then existing 29 retail stores. The Company had
also assumed the leases to the 29 retail stores and acquired a license to
operate retail stores under the WearGuard name. Following the termination of
the agreement with WearGuard, the Company's 38
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WearGuard stores changed their name to Work'n Gear stores. On January 29,
1993, WGS Corporation executed an agreement with Todd Uniform Company ("Todd")
of St. Louis, Missouri with respect to the provision by Todd of personalized
uniforms and other work clothing to customers of the Work'n Gear retail
stores. The agreement with Todd was subsequently terminated on July 29, 1993,
subject to certain ongoing purchase commitments, and a new supply agreement
dated as of August 1, 1993 was entered into by WGS Corporation and WearGuard.
Located in eleven states throughout the northeastern United States, the 52 Work
'n Gear stores specialize in providing utility workwear, uniforms and
personalized work clothes, as well as uniforms for laboratory and medical
purposes.
On April 26, 1990, Ames Department Stores, Inc., and related entities
("Ames"), a significant licensor of the Company, filed for protection under
Chapter 11 of the United States Bankruptcy Code. On December 18, 1992, the
Company and Ames executed Amendment No. 2 to the Ames license agreement and the
Company and Ames executed a certain Stipulation which was filed with the United
States Bankruptcy Court for the Southern District of New York and approved on
January 6, 1993, the consummation date of Ames' Plan of Reorganization. The
Stipulation provided that the license agreement between Ames and the Company
shall be modified and amended and the license agreement assumed by Ames.
Further, pursuant to the Stipulation, the Company settled its $13.7 million
pre- petition claim with Ames and, in return, the Company received $5 million
in cash and a promissory note issued by Ames in the amount of $8.7 million
bearing interest at the rate of 6.0% per annum and having a final maturity on
February 1, 1998, subject to repayment in the amounts and on the dates set
forth in such promissory note. The Stipulation further provided for a mortgage
lien on and security interest in the real property and buildings in Rocky Hill,
Connecticut comprising the executive offices of Ames, which mortgage lien and
security interest shall be used as security in repayment of the promissory
note, and which shall be senior to all other liens and security interests
except those granted in favor of certain banks under a credit agreement with
such banks.
INDUSTRY SEGMENTS
The Company is engaged in the sale of footwear and apparel
manufactured by others. Financial information with respect to the Company's
industry segments can be found in Note 14 to the Consolidated Financial
Statements.
PRINCIPAL ACTIVITIES OF THE COMPANY
As previously indicated, the Company is an operator of licensed shoe
departments in mass merchandising and conventional full service department and
specialty stores, a supplier of shoes at wholesale and an operator of "one
price" women's shoe stores in the Company's Parade of Shoes chain and of
self-selection family footwear stores through its Fayva chain. In all of these
operations, the Company emphasizes the sale of quality footwear at
comparatively low prices. The Company operates the Casual Male Big & Tall
chain of stores which sells sportswear to the larger size man and also operates
Work'n Gear retail stores providing rugged, durable work clothing as well as
uniforms for laboratory and medical purposes.
Sales of shoes in the United States are made through various channels
of distribution, including conventional department stores, mass merchandising
department stores and specialty stores. The Company's footwear business is
based in mass merchandising department stores, conventional department and
specialty stores (served by the Company's licensed department and wholesale
operations and its SCOA subsidiary), "one price" specialty stores (the Parade
of Shoes chain), and self-selection family shoe stores (the Fayva chain).
The Company's sales of apparel in the United States are made through
the Casual Male Big & Tall and Work'n Gear retail stores. None of the
Company's sales, whether footwear or apparel, are made directly to customers
located outside of the United States.
The Company's businesses are seasonal, with its largest footwear
volume generated in the Easter, back to school and Christmas seasons. The
Casual Male Big & Tall division does its largest sales volumes in June
(Father's Day) and the Christmas season, and the Work'n Gear stores generate
their largest sales volume during the second half of the fiscal year. Sales
during the second half of each fiscal year have consistently exceeded those
during the first half of the year. Unseasonable weather may affect sales of
shoes and boots as well as of work clothing, especially during the traditional
high-volume periods.
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The Company is required to carry a substantial inventory in order to
provide prompt deliveries to its licensed shoe departments, wholesale
customers, Parade of Shoes, Fayva, Casual Male Big & Tall, and Work'n Gear
stores. Order backlogs, however, are not material to the Company's business.
The inventories needed in the operation of the Company's footwear and apparel
businesses are currently available from a number of domestic and overseas
sources, none of which provide more than eight percent of the Company's
merchandise.
The Company benefits by "most favored nation" provisions in trade
agreements between the United States and certain countries in which the
Company's suppliers are located. From time to time, the United States Congress
has proposed legislation which could result in such provisions being struck
from particular trade agreements, which could, in turn, result in higher costs
to the Company. There has been extensive Congressional debate with respect to
the "most favored nation" provision of the trade agreement between the United
States and China which was renewed for one year in July, 1992 and has since
been extended through July 3, 1994. The failure of this provision to be
renewed will likely result in substantially increased costs to the Company in
the purchase of footwear from China. However, the Company believes that all of
its competitors in the footwear industry will be similarly affected.
FOOTWEAR
Licensed Shoe Department Operations
In a licensed shoe department operation, the store and the Company
enter into a license agreement under which the Company has the exclusive right
to operate a shoe department in the store for a period of years. The
department is operated under the store name in space supplied by the store, and
the store collects payments from customers and credits the Company. The
Company pays the store a license fee, generally a percentage of net sales, for
the right to operate the department and for the use of the space. The license
fee ordinarily covers utilities, janitorial service, cash collection and
handling, packaging and advertising.
In its licensed shoe department operations, the Company sells a wide
variety of family footwear, including men's, women's and children's dress,
casual, athletic and work shoes and slippers. Most of the shoes offered by the
Company in its licensed departments are sold under the Company's trademarks or
on an unbranded basis, although the Company also sells name brand merchandise
at discounted prices in its mass merchandising licensed accounts. Merchandise
sold by the Company's SCOA subsidiary is predominantly in conventional, full
service department stores and includes a strong representation of national
brands complemented by private label merchandise. A small portion of the
licensed department business conducted by SCOA is in mass merchandising and
specialty apparel accounts. The Company's licensed shoe departments in mass
merchandising department stores are operated on a self- service basis, but
those departments operated by SCOA in conventional department and specialty
stores are on a semi-service or full service basis. The Company's personnel
employed in particular departments are responsible for stocking and layout of
shelves, responding to customer inquiries and related administrative tasks.
The Company and its predecessors have operated licensed shoe
departments in mass merchandising department stores for more than thirty years.
The Company's SCOA subsidiary has operated licensed shoe departments in mass
merchandising and conventional department and specialty stores for
approximately eight years. Sales in licensed departments accounted for 46.5%,
49.9% and 58.9% of the Company's total revenue in the years ended January 29,
1994, January 30, 1993 and February 1, 1992, respectively. At January 29,
1994, the Company operated a total of 1,530 licensed shoe departments
(including the 501 departments added in the Morse acquisition and the 188
departments added in the SCOA acquisition) under license agreements with 38
different department and specialty store operators. During fiscal 1994, the
Company opened 200 departments (including the 188 departments added in the SCOA
acquisition) and closed 124, representing a net increase of 76 units for the
year. The Company's licensed departments are located in forty states and in
the District of Columbia.
The Company conducts its licensed department operations under written
agreements for fixed terms. Of the 1,530 licensed shoe departments which the
Company operated at January 29, 1994, 1,174, or 77% are covered by agreements
with terms expiring in less than five years, 49 or 3% are covered by agreements
with terms expiring in five to ten years, and 307, or 20% are covered by
agreements with terms expiring in more than ten years.
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Of the Company's licensed departments at January 29, 1994, 307 were
operated under license with Ames, a major mass merchandising retailer in the
eastern United States. For the fiscal year ended January 29, 1994, Ames
accounted for 11.5% of the Company's total revenues.
At January 29, 1994 the Company also operated 54 departments under
license from Fishers Big Wheel, Inc. ("Fishers"), a discount department store
chain concentrated in Michigan, Ohio and Pennsylvania, 108 departments under
license in the Jamesway discount department store chain ("Jamesway"), which is
concentrated in the mid-Atlantic region of the United States, and 212 licensed
departments in the Rose's Stores, Inc. chain ("Rose's"), which stores are
concentrated in the southeastern region of the United States. Operations under
the agreements with Rose's, Jamesway and Fishers accounted for a total of 10.1%
of the Company's net sales in the year ended January 29, 1994.
On July 8, 1993, July 19, 1993 and September 6, 1993 Fishers, Jamesway
and Rose's, respectively, filed for protection under Chapter 11 of the
Bankruptcy Code. At the time of the bankruptcy filings, the Company had
outstanding accounts receivable of $6.0 million in the aggregate due from
Fishers, Jamesway and Rose's. At January 29, 1994, carried on the balance
sheet in Other Assets are deferred lease acquisition costs of $3.1 million
attributable to the Rose's license agreement. The Company intends to continue
to amortize the deferred lease acquisition costs of the Rose's license
agreement through the license termination date of July 30, 1997, since the
Company believes, based on its assessment of the likelihood and level of
ongoing business with Rose's, that the value of the license agreement supports
the historical carrying cost at January 29, 1994. During the first half of
fiscal 1995, Jamesway and Rose's will close approximately 113 stores. On
January 5, 1994, Fishers received bankruptcy court approval to conduct
liquidation sales in all 54 of its stores. At the completion of the
liquidation sales in the first quarter of fiscal 1995, Fishers ceased business
operations. The Company does not expect these filings under the Bankruptcy
Code, or the aforementioned store closings, to have a material adverse effect
on future earnings. Combined sales in Jamesway and Rose's totaled $77.0
million for the year ended January 29, 1994. Sales in Fishers for the year
ended January 29, 1994 were $15.6 million.
Under bankruptcy law, each licensor has the option of continuing
(assuming) the existing license agreement with the Company or terminating
(rejecting) that agreement. If the license agreement is assumed, the licensor
must cure all defaults under the agreement and the Company is entitled to
collect in full the outstanding past due receivable. Since the respective
commencement dates of the Jamesway and Rose's Chapter 11 cases, the Company has
continued to operate as licensee and has been paid the amounts due to it from
such operations. The Company has no assurance that either agreement will be
assumed or that Jamesway or Rose's will continue in business. Although the
Company believes that rejection of either license agreement or cessation of
Jamesway's or Rose's business is not probable, in the event that either
agreement is rejected, the Company believes that 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 Jamesway and/or Rose's related
assets, will be based on the facts and circumstances at such time.
At January 29, 1994, the Company's Morse subsidiary operated 151
departments under license in the Hills Department Store Company chain
("Hills"), which is concentrated in the Pennsylvania, Ohio and New York
regions, 126 departments under license from Bradlees, Inc. ("Bradlees"), a
chain located primarily in the northeast region of the United States and 117
departments under license from ShopKo Stores ("ShopKo"), a chain located
primarily in the upper mid-west region of the United States. Operations under
the agreements with Hills , Bradlees and ShopKo accounted for a total of 17.8%
of the Company's net sales in the year ended January 29, 1994.
On February 4, 1991, Hills filed for protection under Chapter 11 of
the United States Bankruptcy Code. As of the date of the Hills Chapter 11
filing, Hills owed the Company approximately $4.0 million in outstanding
accounts receivable due under the license agreement. On September 10, 1993,
Hills' First Amended Consolidated Plan of Reorganization ("Hills Plan") was
confirmed by the bankruptcy court. On September 9, 1993, the Company and Hills
filed a joint motion with the bankruptcy court seeking an order rejecting the
license agreement between the parties, approving a revised unsecured claim of
$5.6 million and authorizing the execution of a new license agreement between
Hills and the Company on substantially the same terms as had existed
previously. On October 19, 1993, the
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bankruptcy court approved the order, pursuant to the which the Company
received, during the fourth quarter of fiscal 1994, the following amounts with
respect to its claim: $708,000 in cash, 46,400 shares of Hills common stock,
40,200 shares of Hills preferred stock and a promissory note from Hills in the
amount of $846,000 bearing interest at 10.25% and maturing in 2003. These
amounts represent 85% of the Company's expected distribution under the Hills
Plan. The Company expects Hills to distribute the balance of the expected
distribution during fiscal 1995.
As a result of the SCOA acquisition, 188 licensed footwear departments
have been added to the Company's licensed departments. At January 29, 1994,
SCOA's licensed shoe departments were operating in four major chains: Uptons
Department Stores, Inc. ("Uptons") (with headquarters in Norcross, Georgia),
Younkers, Inc. ("Younkers") (with headquarters in Des Moines, Iowa), Rich's
Department Stores, Inc. ("Rich's") (with headquarters in Salem, Massachusetts)
and Goody's Family Clothing, Inc. ("Goody's") (with headquarters in Knoxville,
Tennessee). SCOA currently manages shoe departments located in twenty-six
states east of the Rocky Mountains and Washington, DC. For the period from
November 20, 1993 through January 29, 1994, SCOA generated sales of $10.0
million.
In January, 1994, Wohl Shoe Company ("Wohl"), a subsidiary of Brown
Group Retail, Inc., and a competitor of SCOA, publicly announced its intention
to discontinue its licensed footwear department operations. Since the Wohl
announcement, the Company has been in active negotiations with several of
Wohl's licensors concerning the operation of footwear departments in their
respective department and specialty store chains. As of the date of this
report, the Company has signed license agreements with two such store chains,
Winkelman's, a women's specialty apparel chain headquartered in Plymouth,
Michigan and Gottschalks, a full service department store chain headquartered
in Fresno, California.
The Company faces competition in the shoe department business at two
levels: (1) for sales to retail customers and (2) for the business of the
department store chains which are its shoe licensors and wholesale customers.
The Company's retail shoe businesses compete with the shoe departments of
department store chains, conventional shoe chains, specialty stores and
independent retailers. The Company's success in its licensed department
operations is substantially dependent upon the success of the department store
chains in which the Company operates licensed departments. Within the
particular market that is served by the mass merchandising department store
chains, the Company believes that the primary competitive factors are the price
and the breadth and suitability of the selection of footwear that is offered.
The Company faces competition from other established shoe department
operators for licenses or wholesale arrangements with mass merchandising and
conventional department store chains. The Company also faces potential
competition from the in-house operational capabilities of its licensors and
wholesale customers. Because of the large scale of many licensing arrangements
and years of commitment that are involved, the Company has observed that
changes in these arrangements do not frequently occur and are more often
initiated by external factors such as mergers or acquisitions involving the
licensors or business terminations by the licensees, rather than by competition
among licensees for the business of a licensor. To the extent that there is
active competition for new business in this area, the Company believes that the
principal factors weighed by a potential licensor or wholesale customer are the
quality of the licensee's operations, as reflected by sales results, and the
price paid to the licensor in the form of the license fee.
The loss of one or more of the foregoing licensors could have a
material adverse effect on the Company.
Due to a general contraction in the retail industry and the filing for
protection under Chapter 11 of the United States Bankruptcy Code by certain of
the Company's licensors, the Company may experience declines in the number of
licensed departments that it operates.
Wholesale Operations
The Company performs the same services for its wholesale customers
that it does for its licensed departments, except that the wholesale customer
operates its shoe departments with personnel which it hires and owns the
footwear inventory which it sells at retail for its own account. The Company
supplies each of its wholesale customers under an exclusive agreement which is
subject to extension or renewal after a period of years specified in the
respective agreements. Shoes are sold to a wholesale customer when shipped
from the Company's distribution center, generally at a fixed percentage of the
retail selling price.
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The Company has been notified by its principal wholesale customer,
Caldor, Inc. ("Caldor") that Caldor is exercising its right to terminate the
agreement between it and the Company. Based upon this notification, the
Company will cease supplying shoes on a wholesale basis to Caldor by the middle
of fiscal 1995. Sales to Caldor in fiscal 1994 were $40.6 million. The
Company believes that the reduction in wholesale revenues in fiscal 1995 and
thereafter will not have a material impact on the Company's future earnings.
In the year ended January 29, 1994, sales to Caldor accounted for 4.4% of the
Company's total revenues.
At January 29, 1994, the Company supplied 149 shoe departments on a
wholesale basis. Sales to wholesale customers accounted for 4.4%, 7.1% and
7.2% of the Company's total revenues in the years ended January 29, 1994,
January 30, 1993 and February 1, 1992, respectively.
Parade of Shoes Operations
The Company's Parade of Shoes chain emphasizes the retail sale of
quality, primarily leather women's shoes on a "one price" basis. The stores
generally occupy 2,000 to 3,000 square feet of retail space located primarily
in suburban strip shopping centers which are typically anchored by a major
supermarket, a regional department store chain or a mass merchandising
retailer. In addition, the Company has also begun a program of opening Parade
of Shoes stores in major metropolitan areas. The stores generally feature from
7,000 to 9,000 items available for selection in a casual, self-service
atmosphere. The stores emphasize items that appeal to women between 18 and 44
years of age and also offer extensive selections oriented toward pre-teens,
teenagers and senior citizens. About 90% of all footwear items are sold at a
single price, currently $19.98, with the balance (except women's boots and
brand name athletic footwear) sold at lower prices.
Sales from Parade of Shoes stores accounted for 9.6%, 14.4% and 12.3%
of the Company's total revenues in the years ended January 29, 1994, January
30, 1993 and February 1, 1992, respectively.
A total of 162 Parade of Shoes stores were in operation in twelve
states in the eastern and midwestern United States and the District of Columbia
on January 29, 1994. During the year, the Company opened thirty stores and
closed four stores. The Company believes that the same competitive factors
that affect its licensed department operations, as well as the availability of
leather and brand name shoes and the general style and quality of merchandise,
are present in the market that is served by the Company's Parade of Shoes
chain. In the case of the Parade of Shoes chain, the Company has had the
advantage of being one of the first established retailers to promote
aggressively the "one price" concept in New England and other regions of the
United States. The Company may experience increased direct competition with
Parade of Shoes based on comparable merchandising approaches in the future.
Fayva Operations
The Fayva shoe chain operates self-selection retail stores which offer
popularly-priced footwear for the entire family. The Fayva stores are located
in major downtown areas, neighborhood locations, strip shopping centers,
suburban shopping centers and malls. The major markets for the Fayva stores
are in the northeastern portion of the United States, Florida, Los Angeles,
Houston and Chicago. The Company operated 395 Fayva stores at January 29,
1994, located in a total of seventeen states.
The retail stores, which average 3,200 square feet, emphasize
convenient self-selection, popular pricing and a broad selection of fashionable
footwear, including men's, women's and children's dress, casual, athletic and
work shoes, slippers and accessories. Although branded athletic footwear is
offered in the Fayva stores, most of the footwear offered by Fayva stores is
sold under Company brand names. Sales in the Fayva chain amounted to 19.5% of
the Company's revenue during the fiscal year ended January 29, 1994.
The principal competition of the Fayva stores includes conventional
shoe chains, the shoe departments of department store chains, specialty stores
and independent retailers. Among such competitors is Payless Shoe Source, a
subsidiary of The May Department Stores Company ("Payless"). With the
announced intention of Payless to expand its operations in the northeastern
portion of the United States and the similar expansion of other competitors,
the Fayva stores will face increased competition for sales to retail customers.
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APPAREL
Casual Male Big & Tall
According to retailer and manufacturer estimates, big (42" waist or
larger) and tall (6'3" or taller) men represent an estimated 10% to 13% of the
adult male population in the United States. The Company believes the clothing
demands of these customers have not been met. The big and tall customer
frequently has difficulty finding an adequate selection of apparel in his size
at department and men's specialty stores. Furthermore, only a limited number
of big and tall specialty stores exist, and these typically have a narrow
selection of current sportswear fashion. The majority of big and tall
specialty stores are operated by companies with less than five units.
Casual Male Big & Tall stores offer brand name and private label
sportswear in a wider variety of styles, colors and fabrics than most other big
and tall retailers. Merchandise is generally priced lower than department
stores and other traditional retailers of big and tall apparel. The Company
started fiscal 1994 with 214 stores and ended the year with 254 stores, having
opened 40 stores. The 254 stores are located in 36 states, predominantly in
the eastern half of the United States.
Beginning with the acquisition of Casual Male on February 3, 1991, the
results of its operations were consolidated with those of the Company. Sales
in the Casual Male Big & Tall stores accounted for 16.1%, 23.0% and 18.7% of
the Company's total revenues for the years ended January 29, 1994, January 30,
1993 and February 1, 1992, respectively.
The Company's Casual Male Big & Tall stores face competition from
department stores, specialty stores, discount stores, mail order companies,
off-price and other retailers who sell big and tall merchandise. There can be
no assurance that other retailers will not adopt purchasing and marketing
concepts similar to those of the Casual Male Big & Tall chain. The Company
believes the fashion and selection of its merchandise, its favorable prices and
its ability to obtain desirable store locations are important factors in
enabling it to compete effectively.
Work'n Gear
Currently located in eleven states throughout the northeastern United
States, the Work'n Gear stores sell utility workwear and footwear which is
generally used by persons engaged in outdoor labor activities. The Work'n
Gear stores also sell laboratory and medical uniforms as well as personalized
uniforms for maintenance and other uses.
Traditional competition for utility workwear has existed in certain
large, full-service department stores, which, increasingly, are discontinuing
this line of apparel. Competition also exists from local Army and Navy stores
but, to the Company's knowledge, no specific specialty store of the Work'n
Gear variety exists on a national basis. Competition in the medical uniform
business of Work'n Gear is found in small storefront vendors of medical and
laboratory uniforms as well as in several larger companies, such as Life
Uniform Stores, Z & H Uniforms and WearGuard Corporation, which sells primarily
through its catalog.
Neither the utility workwear nor the uniform businesses of the Work'n
Gear stores are dependent upon any one supplier for its inventory. The
customer base is the diverse population of working men and women in the United
States, and no specific customer accounts for any substantial portion of the
business.
Sales in the Work'n Gear stores accounted for 3.9%, 5.6% and 2.8% of
the Company's total revenues for the years ended January 29, 1994, January 30,
1993 and February 1, 1992, respectively.
TRADEMARKS
The Company has no patents, franchises or concessions, except for
agreements granting it the right to operate licensed departments. The Company
owns certain trademarks which it uses in its business. The Company does not
consider these trademarks to be materially important to its business.
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9
RESEARCH AND DEVELOPMENT
The Company does not engage in any Company-sponsored research or
customer-sponsored research.
ENVIRONMENT
The Company has not been required to make any material capital
equipment expenditures, or suffered any material effect on its earnings or
competitive position, as a result of compliance with federal, state or local
environmental regulations.
EMPLOYEES
As of January 29, 1994, the Company employed approximately 6,318
persons full-time and 6,950 persons part-time, of whom approximately 4,923
full-time and 6,924 part-time employees were engaged in retail operations at
the store level. Approximately 520 of the Company's full-time and part-time
employees are covered by collective bargaining agreements. The Company
believes that its employee relations are good.
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE OFFICE
---- --- ------
Sherman N. Baker 74 Chairman of the Board
Jerry M. Socol 52 President and Chief Executive Officer
Alan I. Weinstein 51 Senior Executive Vice President, Chief Financial Officer, Chief
Administrative Officer and Secretary
Linda B. Kanner 49 Senior Executive Vice President and Director of Shoe Merchandising and
Operations
Joseph Gajda 46 Executive Vice President and President of the Licensed Department
Division
Donald G. Hall 50 Executive Vice President and President of Parade of Shoes Division
Larry I. Kelley 51 Executive Vice President and President and Chief Executive Officer of The
Casual Male, Inc.
John E. Lattanzio 54 Executive Vice President and President of Fayva
Stuart M. Needleman 46 Executive Vice President and President of Work'n Gear
Dennis B. Tishkoff 51 Executive Vice President and President and Chief Executive Officer of
Shoe Corporation of America, Inc.
Mr. Baker has been the Chairman of the Board of the Company since
March, 1990. From 1970 until March, 1990, Mr. Baker served as Chief Executive
Officer of the Company and its predecessor.
Mr. Socol has been President of the Company since September, 1988 and
Chief Executive Officer of the Company since March, 1990. Prior to joining the
Company in 1988, Mr. Socol was President and Chief Executive Officer of
Filene's Department Stores, a division of the May Department Stores Company,
from May to June, 1988. Mr. Socol was Chairman and Chief Executive Officer of
Filene's Department Stores, a division of Federated Department Stores, Inc.,
from August, 1987 to May, 1988. From January, 1984 to August, 1987, Mr. Socol
was President of Filene's Department Stores.
Mr. Weinstein has held the positions of Senior Executive Vice
President, Chief Financial Officer and Secretary of the Company since July,
1985. He was also appointed Chief Administrative Officer in 1988. Mr.
Weinstein joined the Company's predecessor in 1968 as Assistant Controller and
has held a variety of positions of increasing responsibility in finance and
administration since that time.
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Ms. Kanner has held the positions of Senior Executive Vice President
and Director of Shoe Merchandising and Operations for the Company since April,
1991. Before joining the Company, Ms. Kanner was Executive Vice President of
the Bank of New England from May, 1989 to April, 1991 serving as chief
marketing officer for advertising, sales support and product management
throughout the bank. Ms. Kanner was employed by the Bank of Boston from
November, 1984 to May, 1989, where she was a division executive in charge of
credit card consumer loan and retail product management. Ms. Kanner was also a
member of MasterCard's national marketing strategic advisory committee. Ms.
Kanner is the daughter of Mr. Baker.
Mr. Gajda has held the positions of Executive Vice President of the
Company and President of the Company's Licensed Division since February, 1993.
Prior to its acquisition by the Company, Mr. Gajda held the position of Senior
Vice President of the Morse Leased Division. Mr. Gajda joined Morse in 1986.
Mr. Hall has held the positions of Executive Vice President of the
Company and President of the Company's Parade of Shoes division since October,
1993. Before joining the Company, Mr. Hall was employed by Wohl Shoe Company
from 1966 to September, 1993, where he last held the position of Senior Vice
President.
Mr. Kelley has held the positions of Executive Vice President of the
Company and President and Chief Executive Officer of The Casual Male, Inc.
since June, 1991. Before joining the Company, Mr. Kelley was President of
Weathervane Stores from September, 1988 to May, 1991. From June 1987 to
September, 1988, Mr. Kelley was the President of Brauns Fashion. In November,
1990, Mr. Kelley filed for protection under the United States Bankruptcy Code
as a result of adverse personal real estate investments made prior to his
becoming an executive officer of the Company. In December, 1993, Mr. Kelley
was discharged from all pre-petition debts and obligations and has emerged from
bankruptcy.
Mr. Lattanzio has held the positions of Executive Vice President of
the Company and President of the Company's Fayva division since June, 1993.
Before joining the Company, Mr. Lattanzio was Senior Vice President at Kobacker
Company from 1990 to 1993. Mr. Lattanzio joined Kobacker Company in 1960 and
held a variety of positions including President of the Fashion Division, and
President of Picway Shoes and Patrini Shoes.
Mr. Needleman has held the positions of Executive Vice President of
the Company and President of the Company's Work'n Gear division since October,
1993. From 1989 through October, 1993, Mr Needleman held the position of
Senior Vice President and Director of Operations of The Casual Male, Inc.
Mr. Tishkoff has held the positions of Executive Vice President of the
Company and President of the Company's Shoe Corporation of America, Inc.
subsidiary since November, 1993, when the subsidiary was acquired by the
Company. Before joining the Company, Mr. Tishkoff was Chairman, President and
Chief Executive Officer of Tishkoff Enterprises, Inc. d/b/a Shoe Corporation of
America.
PROPERTIES
The Company's executive, buying and general offices and one of its
footwear distribution centers ("home office") are located in Canton,
Massachusetts. This facility is located at 555 Turnpike Street, Canton,
Massachusetts on 37 acres of land and is owned by the Company. The home office
contains approximately 750,000 square feet of space, including approximately
150,000 square feet of office space.
The Company leases a building at 65 Sprague Street, Readville,
Massachusetts that serves as the administrative offices for Casual Male and
Work'n Gear, and as distribution center for the Casual Male Big & Tall and
Work'n Gear stores. The building contains approximately 75,000 square feet of
office space and approximately 375,000 square feet of warehouse/distribution
space. The lease on this facility expires on May 31, 1999. The Company has
two consecutive five year options to renew the lease.
The Company also leased a facility in Shrewsbury, Massachusetts that
served as the administrative offices for Casual Male and distribution center
for the Casual Male Big & Tall and Work'n Gear stores prior to the
consolidation
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of these operations into the Readville, Massachusetts facility in December,
1993. The lease on this facility expired on March 31, 1994.
The headquarters for the Company's SCOA subsidiary and SCOA's footwear
distribution center is located at 2035 Innis Road, Columbus, Ohio. The
facility is on 17.4 acres of land and is owned by the Company. The building
contains approximately 355,000 square feet, including approximately 18,000
square feet of office space and 337,000 square feet of warehouse/distribution
space.
As of January 29, 1994, the Company had 162 Parade of Shoes stores,
all operating in leased premises ranging from 1,250 to 11,900 square feet, with
average space of approximately 2,400 square feet per store and total space of
approximately 389,000 square feet. The leases run for initial terms of between
three and ten years and average approximately seven years. A majority of the
leases are renewable at the option of the Company for terms of three to five
years.
As of January 29, 1994, the Company operated 254 Casual Male Big &
Tall stores, all in leased premises ranging from 1,875 to 6,900 square feet,
with total space of approximately 854,000 square feet. A majority of the
leases run for initial terms of five years. Most are renewable at the option
of the Company for one or more five year terms.
As of January 29, 1994, the Company operated 52 Work'n Gear stores,
all in leased premises ranging from 3,200 square feet to 6,200 square feet,
with total space of approximately 230,000 square feet. A majority of the
leases run for initial terms of five years. Most are renewable at the option
of the Company for one or more five year terms.
As of January 29, 1994, the Company operated 395 Fayva stores, all in
leased premises ranging from 1,645 to 6,800 square feet, with total space of
approximately 1,252,000 square feet. The leases run for initial terms of
between five and ten years. Approximately one-third are renewable at the
option of the Company for terms of five to ten years.
See "DESCRIPTION OF BUSINESS - Industry Segments, Footwear, Licensed
Shoe Department Operations", for information regarding the Company's licenses
to operate shoe departments in retail stores of its licensors.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings although
the Company is engaged in the following significant litigation:
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
have been filed by the Company seeking to vacate all or part of the verdict
and, subsequent to the entry of judgment, an appeal of certain legal issues is
anticipated.
A complaint was also filed by Susan Maxwell in November, 1992 against
Morse alleging infringement of the patent referred to above. The case is
currently in the discovery phase, and a trial date has not yet been set. The
Company believes that Ms. Maxwell's recovery against Morse, if any, will be
less than her recovery against the Company because the number of allegedly
infringing pairs of shoes is substantially less than those involved in the
Company's case. Further, the Company believes that any recovery may be limited
to the number of pairs allegedly infringing the patent during the time period
after the confirmation of Morse's Chapter 11 Plan of Reorganization on December
20, 1991.
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 fiscal year covered by this report.
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PART II
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") under the symbol "JBAK".
The following table sets forth the high and low last reported sales
prices, as reported by NASDAQ, for the Company's Common Stock for each
quarterly period during the years ended January 29, 1994 and January 30, 1993.
The prices set forth below do not include retail mark-ups, mark-downs or
commissions.
YEAR ENDED JANUARY 29, 1994 HIGH LOW
- - --------------------------- ------- -------
First Quarter $22 1/4 $17 1/8
Second Quarter 23 3/4 19 5/8
Third Quarter 25 3/4 17 3/8
Fourth Quarter 19 1/8 16
YEAR ENDED JANUARY 30, 1993 HIGH LOW
- - --------------------------- ------- -------
First Quarter $15 $12 1/8
Second Quarter 15 1/2 10 5/8
Third Quarter 17 1/2 13 1/2
Fourth Quarter 22 3/4 16 3/4
HOLDERS
The approximate number of holders of record of the Company's Common
Stock as of March 31, 1994 was 535. The Company believes that the actual
number of beneficial owners of the Company's Common Stock is substantially
greater than the stated number of holders of record, because a portion of the
Common Stock outstanding is held in "street name".
DIVIDENDS
On March 2, 1987, the Board of Directors of the Company adopted a
policy of paying quarterly dividends. For each quarter thereafter, the Company
has paid a 1 1/2 cents per share dividend.
The Company's unsecured revolving credit agreement and its senior
subordinated notes agreement limit the amount of cash dividends that may be
paid to stockholders. For additional information see Note 7 of the Notes to
Consolidated Financial Statements.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the Company are
derived from the financial statements that have been audited and reported on by
KPMG Peat Marwick, independent certified public accountants, and are qualified
in their entirety by reference to the more detailed consolidated financial
statements and the independent auditors' report thereon appearing elsewhere on
Form 10-K. J. Baker has acquired a number of specialty retail businesses in
recent years. These acquisitions affect the comparability of the financial
information herein. For further discussions of these acquisitions, see
"DESCRIPTION OF BUSINESS" and Notes 2, 3 and 5 to the Consolidated Financial
Statements.
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
---------------------------------------------------------------
1/29/94 1/30/93 2/01/92 2/02/91 2/03/90
------- ------- ------- ------- -------
INCOME STATEMENT DATA: (53 WEEKS)
- - ---------------------
Net sales $918,878 $532,256 $493,542 $421,442 $399,230
Cost of sales 516,855 313,703 291,945 254,699 238,877
-------- -------- -------- -------- --------
Gross profit 402,023 218,553 201,597 166,743 160,353
Selling, administrative and
general expenses 336,283 174,658 165,711 134,049 123,545
Depreciation and amortization 21,874 14,688 12,709 11,114 7,978
-------- -------- -------- -------- --------
Operating income 43,866 29,207 23,177 21,580 28,830
Interest income 704 80 73 132 165
Interest expense (8,146) (8,211) (10,352) (10,405) (8,930)
-------- -------- -------- -------- --------
Earnings before taxes and
extraordinary item 36,424 21,076 12,898 11,307 20,065
Taxes on earnings 13,113 7,798 4,874 3,916 6,916
-------- -------- -------- -------- --------
Earnings before extraordinary item 23,311 13,278 8,024 7,391 13,149
Extraordinary item, net of income tax benefit - (2,444) - - -
-------- -------- -------- -------- --------
Net earnings $ 23,311 $ 10,834 $ 8,024 $ 7,391 $ 13,149
======== ======== ======== ======== ========
Earnings per common share:
Primary:
Earnings before extraordinary item $ 1.70 $ 1.25 $ .78 $ .73 $ 1.46
Extraordinary item - (.23) - - -
-------- -------- -------- -------- --------
$ 1.70 $ 1.02 $ .78 $ .73 $ 1.46
======== ======== ======== ======== ========
Fully diluted:
Earnings before extraordinary item $ 1.45 $ 1.11 $ .78 $ .73 $ 1.46
Extraordinary item - (.18) - - -
-------- -------- -------- -------- --------
$ 1.45 $ .93 $ .78 $ .73 $ 1.46
======== ======== ======== ======== ========
AS AT
-------------------------------------------------------------
1/29/94 1/30/93 2/01/92 2/02/91 2/03/90
------- ------- ------- ------- -------
BALANCE SHEET DATA:
- - ------------------
Working capital $187,095 $138,385 $ 99,110 $109,582 $ 73,090
Total assets 502,496 431,798 296,704 284,926 237,281
Long-term debt and obligations under
capital leases 154,665 95,864 79,515 97,544 58,395
Stockholders' equity 200,086 172,610 105,012 92,210 85,249
======== ======== ======== ======== ========
Cash dividends declared
per common share $ .06 $ .06 $ .06 $ .06 $ .06
======== ======== ======== ======== ========
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All references herein to fiscal 1994, fiscal 1993 and fiscal 1992
relate to the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively. To the extent that the Company may have incurred increased
costs resulting from inflation, the Company believes that it has been able to
offset these costs through higher revenues. Accordingly, the Company believes
that inflation has had no significant impact on the operations of the Company.
Results of Operations
FISCAL 1994 VERSUS FISCAL 1993
In fiscal 1994, net sales increased by $386.6 million or 72.6% over
net sales in fiscal 1993. This increase was primarily attributable to the
acquisition of Morse Shoe, Inc. on January 30, 1993, which included the
addition of 493 licensed shoe departments (501 at January 29, 1994) and 425
Fayva shoe stores (395 at January 29, 1994), and the acquisition of Shoe
Corporation of America, Inc. on November 19, 1993, which included the addition
of 158 licensed departments (188 at January 29, 1994). Fiscal 1994 sales in
the Morse and SCOA footwear operations were $352.5 million and $10.0 million,
respectively. Sales in the remainder of the Company's footwear operations
decreased by $7.8 million as a result of a decrease in the average number of
retail locations operated during the period, partially offset by an increase in
wholesale footwear sales and a 0.1% increase in comparable retail footwear
store sales. (Comparable retail 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.) Sales in the Company's specialty apparel operations
increased by $32.0 million as a result of an increase of 54 in the number of
Casual Male Big & Tall stores and Work'n Gear stores in operation at the end
of fiscal 1994 over fiscal 1993, and a 3.8% increase in comparable specialty
apparel store sales. (Comparable specialty 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 56.2% of sales in fiscal 1994 as compared to
58.9% in fiscal 1993. This decrease was attributable primarily to a relative
increase in sales in divisions which have lower costs of sales. Cost of sales
in the Company's footwear operations was 57.5% of sales in fiscal 1994 as
compared to 61.7% of sales in fiscal 1993. The decrease in such percentage was
primarily attributable to a lower cost of sales in the newly acquired Fayva
shoe store division as compared to the Company's other shoe divisions, coupled
with an increase in initial markup on merchandise purchases and a decrease in
markdowns as a percentage of sales. Cost of sales in the Company's apparel
operations was 51.3% of sales in fiscal 1994 as compared to 52.1% of sales in
fiscal 1993. An increase in markdowns as a percentage of sales in apparel
operations was offset by an increase in initial markup on merchandise
purchases.
Selling, administrative and general expenses increased $161.6 million
or 92.5% over fiscal 1993, primarily as a result of the acquisition of Morse
Shoe, Inc. on January 30, 1993. As a percentage of sales, selling,
administrative and general expenses were 36.6% in fiscal 1994 as compared to
32.8% in fiscal 1993. This percentage increase was primarily due to a relative
increase in sales in apparel and shoe stores, which have higher selling,
administrative and general expenses as compared to licensed shoe department and
wholesale sales. Selling, administrative and general expenses in the Company's
footwear operations were 36.6% as compared to 32.1% of sales in fiscal 1993.
The increase in such percentage was primarily due to a relative increase in
sales in the Company's shoe stores (primarily from the newly acquired Fayva
shoe store division) versus sales in the Company's licensed/wholesale
departments. Selling, administrative and general expenses in the Company's
apparel operations were 36.6% of sales in fiscal 1994 as compared to 34.5% of
sales in fiscal 1993. The increase in such percentage is primarily due to an
increase in store level expenses. In the above analyses of selling,
administrative and general expenses in the Company's footwear and apparel
operations, fiscal 1993 percentage to sales figures in each of the footwear and
apparel segments were restated to allocate corporate overhead consistent with
the allocation method used in fiscal 1994.
Depreciation and amortization expense increased by $7.2 million in
fiscal 1994 over fiscal 1993 due to an increase in depreciable and amortizable
assets.
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15
As a result of the above described effects, the Company's operating
income increased 50.2% to $43.9 million from $29.2 million in fiscal 1993. As
a percentage of sales, operating income was 4.8% in fiscal 1994 as compared to
5.5% in fiscal 1993.
Net interest expense was $7.4 million in fiscal 1994 as compared to
$8.1 million in fiscal 1993. The Company had higher average levels of
borrowings in fiscal 1994 as compared to fiscal 1993. The interest expense
attributable to the higher levels of borrowings was offset by lower interest
rates on the borrowings and higher interest income, principally earned on the
$8.7 million, 6.0% note receivable due from Ames, which was issued in December,
1992.
Taxes on earnings for fiscal 1994 were $13.1 million, yielding an
effective tax rate of 36.0%, as compared to taxes on earnings before
extraordinary item of $7.8 million, yielding an effective rate of 37.0% in
fiscal 1993.
Net earnings for fiscal 1994 were $23.3 million as compared to
earnings before extraordinary item of $13.3 million in fiscal 1993, an increase
of 75.6%.
The Company does not provide post-retirement benefits other than
pensions as defined under SFAS #106.
FISCAL 1993 VERSUS FISCAL 1992
In fiscal 1993, net sales increased by $38.7 million or 7.8% over net
sales in fiscal 1992. This increase was attributable to an increase of $45.6
million in sales in the Company's specialty apparel operations, partially
offset by a decrease of $6.9 million in sales in the Company's footwear
operations. The increase in sales in the specialty apparel operations was
primarily attributable to having the Work 'n Gear (formerly WearGuard) chain,
which was acquired on September 25, 1991, open for the entire year in fiscal
1993, an increase of 43 in the number of Casual Male Big & Tall stores and Work
'n Gear stores in operation at the end of fiscal 1993 over fiscal 1992, and a
13.9% increase in comparable specialty apparel store sales. The decrease in
sales in the Company's footwear operations was primarily due to a decrease in
the average number of retail licensed shoe department locations operated during
the period. This decrease was partially offset by a 3.4% increase in
comparable retail footwear store sales and an increase in wholesale footwear
sales.
Cost of sales constituted 58.9% of sales in fiscal 1993 as compared to
59.2% in fiscal 1992. This decrease was attributable primarily to an increase
in apparel sales which have a lower cost of sales as compared to footwear
sales, partially offset by an increase in markdowns. The cost of sales for the
footwear and apparel operations was 61.7% and 52.1% in fiscal 1993 as compared
to 61.3% and 51.5% in fiscal 1992, respectively. The increase in cost of sales
in the footwear and apparel divisions is primarily attributable to an increase
in markdowns as a percentage of sales. In the apparel operations, cost of
sales also increased as a result of a relative increase in Work'n Gear sales,
which have a higher cost of sales than Casual Male Big & Tall sales.
Selling, administrative and general expenses increased $8.9 million or
5.4% over fiscal 1992. The increase was primarily due to the newly acquired
specialty apparel operations. As a percentage of sales, selling,
administrative and general expenses were 32.8% in fiscal 1993 as compared to
33.6% in fiscal 1992. The decrease in such percentage was primarily due to a
comparable retail store sales increase which caused fixed selling,
administrative and general expenses to be a lower percentage of sales as
compared to the prior year. As a percentage of sales, selling, administrative
and general expenses were 32.9% and 32.7% in fiscal 1993 as compared to 32.9%
and 35.9% in fiscal 1992 for the footwear and apparel operations, respectively.
As a result of Ames' October 30, 1992 announced closing of 60 stores after
Christmas 1992, the selling, administrative and general expenses for fiscal
1993 include a charge of approximately $3.5 million arising from the write-down
of the carrying value of deferred lease acquisition costs related to the Ames
license agreement. During fiscal 1993, the Company reduced selling,
administrative and general expenses by approximately $3.5 million arising from
the release of rights of software technology which J. Baker had previously
developed for use in its operations.
Depreciation and amortization expense increased by $2.0 million in
fiscal 1993 over fiscal 1992 due to an increase in depreciable and amortizable
assets.
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16
As a result of the above described effects, the Company's operating
income increased 26.0% to $29.2 million from $23.2 million in fiscal 1992. As
a percentage of sales, operating income was 5.5% in fiscal 1993 as compared to
4.7% in fiscal 1992.
Net interest expense was $8.1 million in fiscal 1993 as compared to
$10.3 million in fiscal 1992. The Company had higher average levels of
borrowings in fiscal 1993 as compared to fiscal 1992. The interest expense
attributable to the higher levels of borrowings was offset by lower interest
rates on the borrowings. In June 1992, the Company issued $70 million of 7%
convertible subordinated notes due 2002 and retired the $20 million outstanding
principal amount of its 10.53% senior notes, $27.5 million principal amount of
its 11.21% senior subordinated notes, and a portion of the outstanding bank
indebtedness under its revolving credit facility. As a result of this
transaction, interest expense was reduced by approximately $1.0 million for
fiscal 1993. The Company estimates that its annual interest expense will be
reduced by approximately $1.6 million as a result of this transaction.
Taxes on earnings before extraordinary item for fiscal 1993 were $7.8
million, yielding an effective tax rate of 37.0%, as compared to taxes of $4.9
million, yielding an effective rate of 37.8% in fiscal 1992. The Company
adopted Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, as of February 2, 1992. The impact of adopting Statement 109 was
not material and accordingly, there is no cumulative effect of a change in
accounting method presented in the consolidated statement of earnings for
fiscal 1993.
Earnings before extraordinary item for fiscal 1993 were $13.3 million
as compared to earnings of $8.0 million in fiscal 1992, an increase of 65.5%.
Financial Condition
JANUARY 29, 1994 VERSUS JANUARY 30, 1993
Merchandise inventories at January 29, 1994 were higher than at
January 30, 1993 primarily due to an increase in merchandise inventory in the
Morse footwear operations. At January 30, 1993, Morse's merchandise inventory
levels were unusually low due to buying limitations caused by its
pre-acquisition financial condition and to purchase accounting adjustments to
record inventory at net realizable value. The increase is also due to the
newly acquired SCOA footwear operations and an increase in the number of Parade
of Shoes, Casual Male Big & Tall and Work'n Gear locations in operation at the
end of the fiscal 1994 over fiscal 1993, partially offset by a decrease in the
number of licensed departments (excluding SCOA) and Fayva stores in operation
during the period.
The increase in property, plant and equipment principally consists of
$10.0 million in fixed assets added as a result of the SCOA acquisition. In
addition, increases in fixed assets resulted from the Company incurring capital
expenditures of approximately $24.1 million in fiscal 1994 primarily for the
opening of new stores and the renovation of existing units.
The ratios of accounts payable to merchandise inventory were 38.9% and
47.1% at January 29, 1994 and January 30, 1993, respectively. This decrease is
primarily a result of the Company's decision to reduce the average financing
terms of its foreign purchases, coupled with a return to normal merchandise
inventory levels at January 29, 1994 for the Morse footwear operations from an
unusually low level at January 30, 1993.
Accrued expenses at January 29, 1994 decreased to $24.1 million from
$29.8 million at January 30, 1993, primarily due to the payment of accruals set
up for Morse acquisition-related costs and expenses.
Other liabilities at January 29, 1994 decreased to $12.8 million from
$20.9 million at January 30, 1993, primarily due to certain long-term
liabilities becoming current at January 29, 1994. In addition, other
liabilities decreased due to a $2.4 million payment to former shareholders of
The Casual Male Corporation in satisfaction of the contingent payment
obligation under Casual Male's Plan of Reorganization.
Debt at January 29, 1994 increased to $154.7 million from $95.9
million at January 30, 1993, primarily due to additional borrowings under the
Company's revolving line of credit to fund capital expenditures, merchandise
inventory needs and costs related to the acquisitions of Morse on January 30,
1993 and SCOA on November 19, 1993.
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Liquidity and Capital Resources
The Company has a $215 million revolving credit facility on an
unsecured basis with Shawmut Bank, N.A., The First National Bank of Boston,
Fleet Bank of Massachusetts, N.A., Citizens Savings Bank, National Westminster
Bank USA, The Yasuda Trust and Banking Company, LTD., Fuji Bank, Limited and
Standard Chartered Bank (the "Banks"). The aggregate commitment amount will be
reduced by $10 million on each December 29th of 1994 and 1995. 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 credit facility became effective on November 19,
1993, replacing a $200 million revolving credit facility, and was established
to handle the Company's increased financial needs created by the acquisition of
SCOA. This facility expires in June, 1996. As of January 29, 1994, the
Company had outstanding obligations under the revolving credit facility of
$164.7 million, consisting of loans, obligations under bankers' acceptances and
letters of credit.
In June, 1992 the Company issued $70 million of 7% convertible
subordinated notes due 2002. The notes are convertible at a conversion price
of $16.125 per share, subject to adjustment in certain events. The Company
used the net proceeds to repay all of the $20 million outstanding principal
amount of its 10.53% senior term notes, $27.5 million principal amount of its
11.21% senior subordinated notes, and a portion of outstanding bank
indebtedness under its unsecured revolving credit facility. In connection with
repayment of the senior term notes and senior subordinated notes, the Company
paid redemption premiums totalling approximately $2.0 million.
The Company expects to open approximately 50 Casual Male Big & Tall
stores, 50 Parade of Shoes stores and 10 Work'n Gear stores in fiscal 1995.
The Company believes that amounts available under its revolving credit
facility, along with internally generated funds, will be sufficient to meets
its current operating and capital requirements under ordinary circumstances
through the end of the current fiscal year.
The Company is currently in negotiation with several department and
specialty store chains concerning the operation, by the Company's SCOA
subsidiary, of licensed footwear departments in their respective chains. These
business opportunities arose as a result of Wohl Shoe Company's January 1994
announcement of its intent to discontinue its licensed footwear operations.
The Company will be able to finance, with its current credit facility, the
operations and acquisition costs of inventory and fixtures in the two store
chains it has signed agreements with as of the date of this report. The
Company expects that it will need, and consequently is negotiating with the
Banks, to increase the amount available under the Company's revolving credit
facility in order to finance the operations and acquisition costs of the
anticipated additional business opportunities created by Wohl Shoe Company's
aforementioned announcement.
17
18
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
J. BAKER, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
----
Independent Auditors' Report 19
Consolidated balance sheets as of January 29, 1994 and January 30, 1993 20
Consolidated statements of earnings for the years ended January 29, 1994, 21
January 30, 1993 and February 1, 1992
Consolidated statements of stockholders' equity for the years ended 22
January 29, 1994, January 30, 1993 and February 1, 1992
Consolidated statements of cash flows for the years ended January 29, 1994, 23
January 30, 1993 and February 1, 1992
Notes to consolidated financial statements 24
All schedules have been omitted as they are inapplicable or not required, or the
information has been included in the consolidated financial statements or in the
notes thereto.
18
19
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
J. Baker, Inc.:
We have audited the accompanying consolidated balance sheets of J. Baker, Inc.
and subsidiaries as of January 29, 1994 and January 30, 1993, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended January 29, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of J. Baker, Inc. and
subsidiaries at January 29, 1994 and January 30, 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended January 29, 1994 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick
Boston, Massachusetts
March 11, 1994
19
20
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994 AND JANUARY 30, 1993
ASSETS 1994 1993
---- ----
Current assets:
Cash and cash equivalents $ 3,584,032 $ 6,385,467
Accounts receivable:
Trade 27,984,534 25,148,030
Other 3,919,156 4,871,725
------------ ------------
31,903,690 30,019,755
------------ ------------
Merchandise inventories 278,220,413 227,244,088
Prepaid expenses 6,672,008 5,291,168
Deferred income taxes 1,664,475 9,821,336
------------ ------------
Total current assets 322,044,618 278,761,814
------------ ------------
Property, plant and equipment, at cost:
Land and buildings 24,114,820 17,313,600
Furniture, fixtures and equipment 87,993,608 74,762,354
Leasehold improvements 32,715,145 21,228,496
------------ ------------
144,823,573 113,304,450
Less accumulated depreciation and amortization 39,256,180 30,179,795
------------ ------------
Net property, plant and equipment 105,567,393 83,124,655
------------ ------------
Deferred income taxes 1,210,000 -
Other assets 73,674,470 69,911,719
------------ ------------
$502,496,481 $431,798,188
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,636,300 $ 2,530,000
Accounts payable 108,262,923 106,931,079
Accrued expenses 24,050,766 29,812,430
Income taxes payable - 1,103,628
------------ ------------
Total current liabilities 134,949,989 140,377,137
------------ ------------
Deferred income taxes - 2,079,970
Other liabilities 12,794,652 20,866,336
Long-term debt, net of current portion 77,000,000 15,538,600
Senior subordinated debt 7,312,366 7,265,830
Convertible subordinated debt 70,353,000 73,060,000
Stockholders' equity:
Common stock, par value $.50 per share, authorized 40,000,000 shares,
13,792,647 shares issued and outstanding in 1994 (13,474,165 in 1993) 6,896,324 6,737,083
Preferred stock, par value $1.00 per share, authorized 2,000,000 shares
(none issued and outstanding) - -
Additional paid-in capital 114,654,417 109,827,161
Retained earnings 78,535,733 56,046,071
------------ ------------
Total stockholders' equity 200,086,474 172,610,315
------------ ------------
$502,496,481 $431,798,188
============ ============
See accompanying notes to consolidated financial statements.
20
21
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
1994 1993 1992
---- ---- ----
Net sales $918,877,733 $532,255,720 $493,542,243
Cost of sales 516,854,748 313,703,053 291,945,409
------------ ------------ ------------
Gross profit 402,022,985 218,552,667 201,596,834
Selling, administrative and general expenses 336,283,342 174,658,273 165,711,095
Depreciation and amortization 21,873,610 14,687,737 12,708,790
------------ ------------ ------------
Operating income 43,866,033 29,206,657 23,176,949
Interest income 703,778 80,291 72,724
Interest expense (8,145,769) (8,211,336) (10,351,782)
------------ ------------ ------------
Earnings before taxes and extraordinary item 36,424,042 21,075,612 12,897,891
Taxes on earnings 13,113,000 7,798,000 4,874,000
------------ ------------ ------------
Earnings before extraordinary item 23,311,042 13,277,612 8,023,891
Extraordinary item, net of income tax benefit - (2,443,953) -
------------ ------------ ------------
Net earnings $ 23,311,042 $ 10,833,659 $ 8,023,891
============ ============ ============
Earnings per common share:
Primary:
Earnings before extraordinary item $ 1.70 $ 1.25 $ .78
Extraordinary item - (.23) -
------------ ------------ ------------
$ 1.70 $ 1.02 $ .78
============ ============ ============
Fully diluted:
Earnings before extraordinary item $ 1.45 $ 1.11 $ .78
Extraordinary item - (.18) -
------------ ------------ ------------
$ 1.45 $ .93 $ .78
============ ============ ============
Number of shares used to compute
earnings per common share:
Primary 13,674,553 10,655,498 10,345,361
============ ============ ============
Fully diluted 18,286,267 13,774,071 10,345,361
============ ============ ============
See accompanying notes to consolidated financial statements.
21
22
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ --------------- ------------- ------------ --------------
Balance, February 2, 1991 10,189,311 $5,094,656 $48,662,456 $38,452,887 $92,209,999
Net income for the year ended
February 1, 1992 - - - 8,023,891 8,023,891
Shares issued in connection with
acquisition of Work 'n Gear Stores 415,723 207,862 5,047,007 - 5,254,869
Exercise of stock options 21,039 10,519 137,666 - 148,185
Dividends paid ($.06 per share) - - - (624,511) (624,511)
---------- ----------- ------------ ----------- ------------
Balance, February 1, 1992 10,626,073 5,313,037 53,847,129 45,852,267 105,012,433
Net income for the year ended
January 30, 1993 - - - 10,833,659 10,833,659
Shares issued in connection with
acquisition of Morse Shoe, Inc. 2,767,377 1,383,688 55,458,236 - 56,841,924
Exercise of stock options 80,823 40,412 522,821 - 563,233
Retirement of stock (108) (54) (1,025) - (1,079)
Dividends paid ($.06 per share) - - - (639,855) (639,855)
---------- ----------- ------------ ----------- ------------
Balance, January 30, 1993 13,474,165 6,737,083 109,827,161 56,046,071 172,610,315
---------- ----------- ------------ ----------- ------------
Net income for the year ended
January 29, 1994 - - - 23,311,042 23,311,042
Shares issued in connection with
acquisition of Shoe Corporation
of America, Inc. 51,428 25,714 944,990 - 970,704
Exercise of stock options 129,232 64,616 1,089,955 - 1,154,571
Shares purchased by former Casual
Male stockholders 88,044 44,022 1,793,922 - 1,837,944
Conversion of convertible debt 49,820 24,910 998,392 - 1,023,302
Retirement of stock (42) (21) (3) - (24)
Dividends paid ($.06 per share) - - - (821,380) (821,380)
---------- ----------- ------------ ----------- ------------
Balance, January 29, 1994 13,792,647 $6,896,324 $114,654,417 $78,535,733 $200,086,474
========== ========== ============ =========== ============
See accompanying notes to consolidated financial statements
22
23
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
1994 1993 1992
---- ---- ----
Cash flows from operating activities:
Net earnings $ 23,311,042 $ 10,833,659 $ 8,023,891
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 14,161,472 9,363,699 8,813,554
Deferred charges, intangible assets and
deferred financing costs 7,758,674 5,365,311 4,066,060
Deferred income taxes 9,886,000 581,634 2,223,000
Write-down of other assets - 3,470,355 -
Extraordinary item not utilizing cash - 1,734,953 -
Change in:
Accounts receivable (427,878) 685,966 (2,397,730)
Merchandise inventories (52,930,182) (8,162,842) (2,380,033)
Prepaid expenses (2,109,595) (489,190) 46,437
Accounts payable (5,463,796) 5,313,770 19,071,025
Accrued expenses (12,878,976) 250,119 (602,627)
Income taxes payable (1,796,559) 1,235,562 (257,910)
Other liabilities (7,451,093) (44,369) (10,336)
------------ ------------ ------------
Net cash provided by (used in)
operating activities (27,940,891) 30,138,627 36,595,331
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures for:
Furniture and fixtures (24,115,405) (11,197,966) (5,475,494)
Other assets (2,480,695) (7,782,742) (12,781,632)
Net cash paid in acquisition of Shoe Corp. of America (2,698,507) - -
Net cash paid in acquisition of Casual Male - (300,000) (1,070,825)
Additional amount paid in connection with
acquisition of Work 'n Gear stores - (230,987) -
Net cash acquired in acquisition of Morse Shoe, Inc. - 1,596,487 -
------------ ------------ ------------
Net cash used in investing activities (29,294,607) (17,915,208) (19,327,951)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of convertible subordinated debt - 70,000,000 -
Repayment of senior debt - (25,000,000) -
Repayment of senior subordinated debt - (27,500,000) -
Proceeds from (repayment of) other long term debt 52,262,950 (25,800,000) (20,200,000)
Proceeds from issuance of common stock, net of retirements 2,992,493 562,154 148,186
Payment of dividends (821,380) (639,855) (624,511)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 54,434,063 (8,377,701) (20,676,325)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (2,801,435) 3,845,718 (3,408,945)
Cash and cash equivalents at beginning of year 6,385,467 2,539,749 5,948,694
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,584,032 $ 6,385,467 $ 2,539,749
============ ============ ============
See accompanying notes to consolidated financial statements
23
24
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year
The Company follows a 52 - 53 week fiscal year ending on the Saturday
nearest January 31.
Fair Value of Financial Instruments
The carrying amount of cash, cash equivalents, trade receivables and trade
payables approximate fair value because of the short maturity of these
financial instruments. The fair value of the Company's long-term
instruments is estimated based on market values for similar instruments.
At January 29, 1994, the difference between the carrying value of long-term
instruments and their estimated fair value is not material.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with maturities of
three months or less and are stated at cost which approximates market. The
Company's cash management program utilizes zero balance accounts.
Accordingly, all book overdraft balances have been reclassified to accounts
payable.
Merchandise Inventories
Merchandise inventories, which consist entirely of finished goods, are
valued at the lower of cost or market, principally by the retail inventory
method.
Depreciation and Amortization of Property, Plant and Equipment
Depreciation and amortization of the Company's property, plant an equipment
are provided on the straight-line method over the following periods:
Furniture and fixtures 7 years
Machinery and equipment 7 years
Leasehold improvements 10 years
Building, building improvements and
land improvements 40 years
Maintenance and repairs are charged to expense as incurred. Major renewals
or replacements are capitalized. When properties are retired or otherwise
disposed of, the asset and related reserve account are relieved and the
resulting gain or loss, if any, is credited or charged to earnings.
Earnings Per Common Share
Earnings per common share of the Company is based on the weighted average
number of shares of common stock outstanding during the applicable period.
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 for the periods ended January 29, 1994 and
January 30, 1993 is based on the weighted average number of shares of common
stock outstanding during such periods. Included in this calculation is the
dilutive effect of common stock issuable under the 7% convertible
subordinated notes due 2002, stock options and warrants.
Revenue Recognition
The Company recognizes revenue at the time of sale in its retail stores and
at the time of shipment in its wholesale division.
24
25
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
Commencing on February 2, 1992, deferred taxes are provided for using the
asset and liability method for temporary differences between financial and
tax reporting.
(2) ACQUISITION OF SHOE CORPORATION OF AMERICA, INC.
On November 19, 1993, the Company acquired 83% of the outstanding common stock
and all of the outstanding preferred stock of Tishkoff Enterprises, Inc. of
Columbus, Ohio ("TEI"), an operator of full-service, semi-service and self-
service licensed shoe departments in department stores, specialty stores and
discount stores. The 83% interest in the outstanding common stock was acquired
from certain TEI stockholders in exchange for 68,197 shares of the Company's
common stock (16,769 of which shares are being withheld from TEI stockholders
for up to two years and are available as a set-off to satisfy any claims of the
Company for indemnification that may arise) and the right to receive payments
equal in the aggregate to 8.3% of the consolidated pre-tax earnings of TEI over
a six year period commencing January 29, 1994, with a maximum aggregate payment
of $4,980,000. The acquisition of all of the outstanding preferred stock of
TEI was made for a payment of $650,000 in cash. On December 13, 1993, the
stockholders of TEI approved the merger of JBAK Acquisition Corp., an Ohio
corporation and a wholly owned subsidiary of the Company, with and into TEI
(the "Merger") and TEI became a wholly owned subsidiary of the Company. In
connection with the Merger, the Company paid cash consideration to the
remaining TEI stockholders in the amount of $442,000, in payment for the
remaining 17% interest in TEI common stock. Subsequent to the Merger, the
corporate name of TEI was changed to Shoe Corporation of America, Inc. ("SCOA").
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations of SCOA are included in the consolidated
statements of earnings since the date of acquisition. The purchase price of
$3,822,000, which includes $500,000 of direct costs associated with the Merger,
was allocated to the assets and liabilities of SCOA based on their respective
fair values at November 19, 1993, as set forth below:
Total purchase price $3,822,000
Less:
Book value of SCOA at November 19, 1993 $ (914,000)
Adjustments to reflect fair value of net assets:
Merchandise inventories (3,500,000)
Property, plant and equipment 7,760,000
Deferred income taxes 800,000
Other assets (245,000)
Other liabilities (1,037,000) (2,864,000)
---------- ----------
Excess of cost over net assets acquired $ 958,000
==========
The excess of cost over net assets acquired is included in other assets and is
being amortized on a straight line basis over twenty years.
For the period from November 20, 1993 through January 29, 1994, SCOA generated
sales of $10 million. At January 29, 1994, SCOA operated 188 licensed footwear
departments.
(3) ACQUISITION OF MORSE SHOE, INC.
On January 30, 1993, Morse Acquisition, Inc., a wholly-owned subsidiary of the
Company ("Acquisition"), merged with and into Morse Shoe, Inc. ("Morse")
pursuant to an Amended and Restated Agreement and Plan of Reorganization dated
as of October 22, 1992 (the "Merger Agreement") by and
25
26
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
among the Company, Acquisition and Morse, whereby Morse became a wholly-owned
subsidiary of the Company. Pursuant to the acquisition of Morse, each share of
Morse common stock was exchanged for .17091 of a share of J. Baker common
stock. In connection with the acquisition, approximately 2,767,377 shares of
J. Baker common stock were issuable to Morse stockholders, including holders of
approximately $47 million, or 94%, of Morse convertible debentures which had
been converted into Morse common stock prior to January 30, 1993. During the
year ended January 29, 1994, holders of an additional $2.7 million of Morse
convertible debentures converted their debt into 49,820 shares of J. Baker
common stock. Approximately 6,500 additional shares of J. Baker common stock
are reserved for future issuance upon conversions of the remaining outstanding
Morse convertible debentures.
As of January 29, 1994, the Company operated 501 licensed shoe departments and
395 Fayva shoe stores in its Morse subsidiary.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations are included in the consolidated
statements of earnings since the date of acquisition. At January 30, 1993, the
purchase price of $58,942,000, which includes $2,100,000 of direct costs
associated with the acquisition, was allocated to the assets and liabilities of
Morse based on their respective fair values. During the current fiscal year,
the Company completed its analysis of the allocation of the purchase price and
adjusted downward the preliminary estimate of the fair value of the acquired
net assets by $6,500,000 as follows:
Adjustments to reflect fair value of net assets:
Merchandise inventories $(9,309,000)
Accrued expenses (4,300,000)
Deferred income taxes 4,220,000
Other assets 2,389,000
Other liabilities 500,000
-----------
Excess of cost over net assets acquired $(6,500,000)
===========
As a result, the excess of cost over net assets acquired is included in Other
Assets and is being amortized on a straight line basis over twenty years.
Morse has filed a breach of contract lawsuit against a former wholesale
customer. There can be no assurance of what amount the Company will realize as
a result of this lawsuit.
The following unaudited pro forma operating results assume the Morse
acquisition occurred as of the beginning of the respective years presented
after giving effect to certain pro forma adjustments. In addition, for
comparability purposes, the pro forma operating results for the years ended
January 30, 1993 and February 1, 1992 exclude Morse's reorganization costs.
YEAR ENDED YEAR ENDED
JANUARY 30, 1993 FEBRUARY 1, 1992
----------------------------------------------------------- ----------------
Net sales $894,723,000 $892,664,000
Operating income 42,031,000 35,193,000
Earnings before extraordinary item 19,852,000 12,721,000
Net earnings 17,408,000 12,721,000
Earnings per common share:
Primary:
Earnings before extraordinary item $1.48 $0.97
Net earnings $1.30 $0.97
Fully diluted:
Earnings before extraordinary item $1.32 $0.97
Net earnings $1.17 $0.97
26
27
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually would
have resulted had the combination been in effect on the dates indicated, or
which may result in the future.
(4) BANKRUPTCY FILING OF LICENSORS
On April 26, 1990, Ames Department Stores, Inc., and related entities ("Ames"),
a significant licensor of the Company (see Notes 6 and 13), filed for
protection under Chapter 11 of the United States Bankruptcy Code. On December
18, 1992, the Company and Ames executed Amendment No. 2 to the Ames license
agreement and the Company and Ames executed a certain Stipulation which was
filed with the United States Bankruptcy Court for the Southern District of New
York and approved on January 6, 1993, the consummation date of Ames' Plan of
Reorganization. The Stipulation provided that the license agreement between
Ames and the Company shall be modified and amended and the license agreement
assumed by Ames. Further, pursuant to the Stipulation, the Company settled its
$13.7 million pre-petition claim with Ames and, in return, the Company received
$5 million in cash and a promissory note issued by Ames in the amount of $8.7
million bearing interest at the rate of 6.0% per annum and having a final
maturity on February 1, 1998, subject to repayment in the amounts and on the
dates set forth in such promissory note. The Stipulation further provided for
a mortgage lien on and security interest in the real property and buildings in
Rocky Hill, Connecticut comprising the executive offices of Ames, which
mortgage lien and security interest shall be used as security in repayment of
the promissory note, and which shall be senior to all other liens and security
interests except those granted in favor of certain banks under a credit
agreement with such banks.
Carried on the balance sheet at January 29, 1994 in Other Assets (see Note 6)
are deferred lease acquisition costs of $22.2 million attributable to the Ames
license agreement, which expires in 2009, subject to earlier termination upon
failure to meet certain operating requirements. This balance reflects a
non-cash write-down during the third quarter of fiscal 1993 resulting in a
pre-tax charge to earnings of approximately $3.5 million as a result of Ames'
October 30, 1992 announcement to close 60 additional stores. The Company
intends to continue to amortize the deferred lease acquisition costs of the
Ames license agreement over the remaining term of the license agreement, since
the Company believes, based on its assessment of the likelihood and level of
ongoing business with Ames, that the value of the license agreement supports
the historical carrying cost at January 29, 1994. Any closing by Ames of
additional stores will likely reduce the value of the Ames license agreement to
a level below the current carrying value of the deferred lease acquisition
costs. This would result in a further non-cash write-down of the asset, which
would be reflected in the Company's earnings. The amount of the write-down
would depend on the Company's historical sales volume in the closed stores.
On July 8, 1993, July 19, 1993 and September 6, 1993 Fishers Big Wheel
Department Stores ("Fishers"), Jamesway Corporation ("Jamesway") and Rose's
Stores, Inc. ("Rose's"), respectively, licensors of the Company, filed for
protection under Chapter 11 of the Bankruptcy Code. At the time of the
bankruptcy filings, the Company had outstanding accounts receivable of $6.0
million in the aggregate due from Fishers, Jamesway and Rose's. At January 29,
1994, carried on the balance sheet in Other Assets are deferred lease
acquisition costs of $3.1 million attributable to the Rose's license agreement.
The Company intends to continue to amortize the deferred lease acquisition
costs of the Rose's license agreement through the license termination date of
July 30, 1997, since the Company believes, based on its assessment of the
likelihood and level of ongoing business with Rose's, that the value of the
license agreement supports the historical carrying cost at January 29, 1994.
Jamesway and Rose's have announced that they will close approximately 113
stores during the first half of fiscal 1995. On January 5, 1994, Fishers
received bankruptcy court approval to conduct liquidation sales in all 54 of
its stores and
27
28
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to cease business operations at the completion of the liquidation sales. The
Company does not expect these filings under the Bankruptcy Code, or the
aforementioned store closings, to have a material adverse effect on
future earnings. Combined sales in Jamesway and Rose's totaled $77.0 million
for the year ended January 29, 1994. Sales in Fishers for the year ended
January 29, 1994 were $15.6 million.
Under bankruptcy law, each licensor has the option of continuing (assuming) the
existing license agreement with the Company or terminating (rejecting) that
agreement. If the license agreement is assumed, the licensor must cure all
defaults under the agreement and the Company is entitled to collect in full the
outstanding past due receivable. Since the respective commencement dates of
the Jamesway and Rose's Chapter 11 cases, the Company has continued to operate
as licensee and has been paid the amounts due to it from such operations. The
Company has no assurance that either agreement will be assumed or that Jamesway
or Rose's will continue in business. Although the Company believes that
rejection of either license agreement or cessation of Jamesway's or Rose's
business is not probable, in the event that either agreement is rejected, the
Company believes that 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 Jamesway and/or Rose's related assets, will be based on the
facts and circumstances at such time.
(5) ACQUISITIONS OF APPAREL BUSINESSES
The Casual Male
On February 2, 1991, the Company acquired Casual Male pursuant to Casual
Male's Plan of Reorganization under Chapter 11 of the United States Bankruptcy
Code. At January 29, 1994, Casual Male operated 254 Big & Tall men's specialty
stores located predominantly in the eastern half of the United States.
Former Casual Male stockholders who elected to receive a contingent payment
right in lieu of $.25 per common share, up to a maximum of $1,000 per
stockholder, were entitled to receive a percentage of the net earnings of
Casual Male for the seven year period ending January 30, 1998, with a maximum
aggregate payment of $5.0 million (the "Contingent Payment"). On April 12,
1993 the Contingent Payment Agreement was amended to provide that participants
in the Contingent Payment would instead receive an aggregate of $2.4 million
immediately in satisfaction of the obligation of the Company to make the
Contingent Payment. The excess of net assets over the cost of the acquired
business has been reduced by the $2.4 million Contingent Payment, and the
balance is being amortized on a straight line basis over fifteen years.
Work'n Gear Stores
On September 25, 1991, the Company purchased from WearGuard Corporation
approximately $5.3 million in assets for 415,723 shares of the Company's common
stock. During the fiscal year ended January 30, 1993, pursuant to the terms of
the transaction, the Company was required to pay additional cash consideration
of $230,987 to WearGuard Corporation as the amount by which the average price
at which WearGuard Corporation sold its acquired shares during a 90 day period
ended February 25, 1992 was less than $12.64 per share. The acquired assets
consisted primarily of the inventory and fixed assets of WearGuard's then
existing 29 retail stores. The Company also assumed the leases to the 29
retail stores and acquired a license to operate retail stores under the
WearGuard name.
On December 2, 1992, the Company received a notice of termination from
WearGuard terminating the License and Supply Agreement dated as of September
25, 1991 by and between WGS Corporation (a wholly owned subsidiary of the
Company) and WearGuard. Following the termination of this License and Supply
Agreement, the Company's then 38 WearGuard stores changed their name to Work'n
Gear stores. Subsequently, in August, 1993, the Company executed a new supply
agreement with WearGuard, but continues to use the Work'n Gear name for its
stores.
28
29
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Located in eleven states throughout the northeastern United States, the Work'n
Gear stores specialize in providing utility workwear, uniforms and personalized
work clothes. At January 29, 1994, the Company operated 52 Work'n Gear stores.
(6) OTHER ASSETS
Other assets at January 29, 1994 and January 30, 1993 were comprised of:
1994 1993
---- ----
Deferred lease acquisition costs $ 42,976,198 $ 42,759,610
Systems development costs 20,847,605 20,847,605
Notes receivable 9,546,000 8,700,000
Excess of cost over net assets acquired 7,457,561 -
Restricted cash 3,455,357 3,646,900
Leasehold interests 1,255,000 1,255,000
Cash surrender value of officers' life insurance, net 474,128 579,208
Other intangible assets and deferred charges 8,790,493 5,726,387
------------ ------------
94,802,342 83,514,710
Less accumulated amortization 21,127,872 13,602,991
------------ ------------
$ 73,674,470 $ 69,911,719
============ ============
Deferred lease acquisition costs consist primarily of payments made in
connection with the acquisition of license agreements and are being amortized
over the terms of the respective license agreements (see Note 4). Systems
development costs are being amortized on a straight line basis over eight
years. The notes receivable consists of an $8.7 million, 6.0% note from Ames
maturing on February 1, 1998 (see Note 4), and an $846,000, 10.25% note
maturing on September 30, 2003. The excess of cost over net assets acquired is
a result of the acquisitions of Morse (see Note 3) and SCOA (see Note 2) and is
being amortized over twenty years. Restricted cash represents amounts held in a
trust account for the benefit of current and future Trade Note holders (see
Note 7). The leasehold interests are being amortized over the terms of the
related leases. Other intangible assets and deferred charges consist primarily
of costs incurred for store openings and the issuance of debt and are being
amortized over periods of three to ten years.
During fiscal 1993, the Company released rights of software technology which the
Company had previously developed for use in its operations, reducing selling,
administrative and general expenses by $3.5 million.
29
30
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) DEBT
Long-Term Debt
Long-term debt at January 29, 1994 and January 30, 1993 was comprised of:
1994 1993
---- ----
Loans under revolving credit facility $77,000,000 $12,975,600
Trade notes 2,636,300 5,093,000
----------- -----------
79,636,300 18,068,600
Less current portion 2,636,300 2,530,000
----------- -----------
$77,000,000 $15,538,600
=========== ===========
The Company has a $215 million revolving credit facility on an secured basis
with Shawmut Bank, N.A., The First National Bank of Boston, Fleet Bank of
Massachusetts, N.A., Citizens Savings Bank, National Westminster Bank USA, The
Yasuda Trust and Banking Company, LTD., Fuji Bank, Limited and Standard
Chartered Bank (the "Banks"). The aggregate commitment amount will be reduced
by $10 million on each December 29th of 1994 and 1995. Borrowings under the
revolving credit facility can, at the discretion of the Company, be in the form
of any combination of loans, bankers' acceptances and letters of credit. Loans
under the revolving credit facility bear interest, at the Company's discretion,
at Shawmut Bank, N.A.'s corporate base rate plus one-half percent (6.5% at
January 29, 1994) or at the London Interbank Offered Rate (LIBOR) plus three
percent. This facility expires in June, 1996. At January 29, 1994, the
Company had $50.3 million available for borrowing under this facility.
The trade notes represent Series B and C Trade Notes issued by Morse to
unsecured pre-petition trade creditors of Morse. Series B Trade Notes matured
on January 3, 1994. Series C Trade Notes mature beginning in 1994. The
Company is disputing certain unsecured pre-petition trade claims filed and
estimates that its liability with respect to such disputed claims will not
exceed $2.6 million. Such amount is included in accrued expenses and other
liabilities in the consolidated balance sheets. The Company has deposited cash
in a restricted bank account controlled by the Trade Note trustee (see Note 6).
When disputed claims are settled, the restricted cash will be used to pay
amounts due pursuant to Morse's Plan of Reorganization.
Senior Subordinated Debt
In June 1989, the Company issued $35 million of senior subordinated notes with
detachable warrants which enable the holders to purchase 600,000 shares of the
Company's common stock at a price of $20 per share, subject to adjustments. At
January 29, 1994, the detachable warrants enable holders to purchase
approximately 640,000 shares at $18.80 per share. Subject to certain
conditions, the Company may repurchase all, but not less than all, of the
outstanding warrants for 150% of the then per share warrant exercise price.
The amount of the senior subordinated notes of $7,312,366 at January 29, 1994
($7,265,830 at January 30, 1993) are presented net of $187,634 ($234,170 at
January 30, 1993), which reflects the unaccreted portion of the $1,710,000
value originally assigned to the detachable warrants. The value of the warrants
was recorded as additional paid-in capital and is being accreted using the
effective interest method. The senior subordinated debt was reduced by $27.5
million in June 1992 with proceeds from the $70 million 7% convertible
subordinated notes referred to below. The senior subordinated notes are due in
installments of $1.5 million per year beginning in May 1995 with a final
payment in May 1999. Interest, at 11.21%, is payable semiannually.
30
31
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Subordinated Debt
Convertible subordinated debt at January 29, 1994 and January 30, 1993 was
comprised of:
1994 1993
---- ----
7% convertible subordinated notes $70,000,000 $70,000,000
Convertible debentures 353,000 3,060,000
----------- -----------
$70,353,000 $73,060,000
=========== ===========
In June 1992, the Company issued $70 million of 7% convertible subordinated
notes due 2002. The notes are convertible into common stock at a conversion
price of $16.125 per share, subject to adjustment in certain events. The
Company used the net proceeds to repay all of the $20 million outstanding
principal amount of its senior term notes, $27.5 million principal amount of its
senior subordinated notes, and a portion of outstanding bank indebtedness under
its unsecured revolving credit facility. As a result of the early payment of
the senior notes and the senior subordinated notes, the Company had an
extraordinary charge against earnings of $2,444,000, net of income tax benefits
of $1,262,000, in the fiscal year ended January 30, 1993. This charge reflects
the write-off of the unaccreted portion of the value assigned to certain
detachable warrants issued in connection with the senior subordinated notes, the
write-off of deferred debt issuance costs and the payment of redemption
premiums.
Prior to the acquisition of Morse, 94% of the Morse convertible debentures
converted into Morse common stock. During the year ended January 29, 1994,
holders of $2.7 million of additional Morse convertible debentures converted
their debt into 49,820 shares of J. Baker common stock. The remaining balance
of $353,000 convertible debentures accrue no interest until January 15, 1997,
at which time the rate will be 8%, and no principal will be payable until
January 15, 2002. The debt is subject, under certain circumstances, to
mandatory conversion. Approximately 6,500 shares of J. Baker common stock are
reserved for any future conversions of the remaining Morse convertible
debentures.
The Company's revolving credit facility and senior subordinated notes contain
various covenants and restrictive provisions, including restrictions on the
incurrence of additional indebtedness and liens, the payment of dividends and
the maintenance of specified financial ratios, minimum levels of working capital
and other financial criteria. At January 29, 1994, the Company was in
compliance with such covenants.
The Company is restricted, under various debt agreements, from paying cash
dividends unless tangible net worth exceeds certain required levels. As defined
by the most restrictive of those agreements, minimum tangible net worth,
as so defined, was $187 million at January 29, 1994. At January 29, 1994, the
Company's tangible net worth, as so defined, was approximately $217 million.
Scheduled principal repayments of long-term debt, senior subordinated notes and
convertible subordinated debt for the next five fiscal years and thereafter are
as follows:
FISCAL YEAR
ENDING JANUARY
- - --------------
1995 $2,636,300
1996 1,500,000
1997 78,500,000
1998 1,500,000
1999 1,500,000
Thereafter 71,853,000
31
32
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) TAXES ON EARNINGS
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement
109 a change from the deferred method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company adopted Statement 109 as of February 2, 1992. The impact of
adopting Statement 109 was not material, and accordingly, there is no
cumulative effect of a change in accounting method presented in the consolidated
statement of earnings for the year ended January 30, 1993.
Total income tax expense (benefit) for the years ended January 9, 1994, January
30, 1993 and February 1, 1992 was allocated as follows:
1994 1993 1992
------ ------ ------
Income from continuing operations $13,113,000 $ 7,798,000 $ 4,874,000
Extraordinary item - (1,262,000) -
----------- ----------- -----------
$13,113,000 $ 6,536,000 $ 4,874,000
=========== =========== ===========
Income tax expense attributable to income from continuing operations consists
of:
Current Deferred Total
------- -------- -----
Year ended January 29, 1994:
Federal $ 1,773,000 $ 9,827,000 $11,600,000
State and city 1,454,000 59,000 1,513,000
----------- ----------- -----------
$ 3,227,000 $ 9,886,000 $13,113,000
=========== =========== ===========
Year ended January 30, 1993:
Federal $ 4,869,000 $ 1,621,000 $ 6,490,000
State and city 1,487,000 (179,000) 1,308,000
----------- ----------- -----------
$ 6,356,000 $ 1,442,000 $ 7,798,000
=========== =========== ===========
Year ended February 1, 1992:
Federal $ 1,636,000 $ 2,223,000 $ 3,859,000
State and city 1,015,000 - 1,015,000
----------- ----------- -----------
$ 2,651,000 $ 2,223,000 $ 4,874,000
=========== =========== ===========
The following is a reconciliation between the statutory federal income tax
rate and the Company's effective rate for the years ended January 29, 1994,
January 30, 1993 and February 1, 1992:
1994 1993 1992
---- ---- ----
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of federal
income tax benefit 1.5% 4.1% 5.2%
Jobs tax credits (1.4%) (0.3%) (0.9%)
Increase in beginning of year
balance of the valuation
allowance for deferred tax assets 5.7% - -
Change in Federal tax rate (1.2%) - -
Other (3.6%) (0.8%) (0.5%)
------- ------- -------
36.0% 37.0% 37.8%
======= ======= =======
32
33
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended February 1, 1992, deferred tax expense results from timing
differences in the recognition of income and expense for income tax and
financial reporting purposes. The sources and tax effects of those timing
differences are presented below:
1992
----
Difference between book and tax
depreciation and amortization $ 597,491
Differences in book and tax costs
of acquired businesses 3,400,075
Difference between statutory tax
rate and alternative minimum tax rate (1,771,670)
Other (2,896)
-----------
$ 2,223,000
===========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at January 29, 1994 and
January 30, 1993 are presented below:
1994 1993
---- ----
Deferred tax assets:
Accounts receivable, principally due to greater
acquired tax bases $ 1,146,330 $ 1,070,446
Inventory, principally due to additional costs
capitalized for tax purposes and greater
acquired tax bases 6,326,527 5,603,390
Intangible assets 96,827 7,180
Other assets 2,437,061 332,437
Nondeductible accruals and reserves 10,535,696 7,441,313
Other liabilities - 739,941
Operating loss and credit carryforwards 21,818,686 25,257,900
---------- ----------
Total gross deferred tax assets 42,361,127 40,452,607
Less valuation allowance (15,914,000) (12,300,000)
----------- -----------
Net deferred tax assets 26,447,127 28,152,607
----------- -----------
Deferred tax liabilities:
Fixed assets, principally due to accelerated tax
depreciation and lesser acquired tax bases (12,727,639) (7,538,737)
Intangible assets, principally due to
lesser acquired tax bases (7,226,244) (7,085,334)
Other liabilities (3,618,769) (5,787,170)
----------- -----------
Total gross deferred tax liabilities (23,572,652) (20,411,241)
----------- -----------
Net deferred tax asset $ 2,874,475 $ 7,741,366
=========== ===========
33
34
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At January 29, 1994 and January 30, 1993, the net deferred tax asset consisted
of the following:
1994 1993
---- ----
Deferred tax asset - current $ 1,664,475 $ 9,821,336
Deferred tax asset - noncurrent 1,210,000 -
Deferred tax liability - noncurrent - (2,079,970)
------------ ------------
$ 2,874,475 $ 7,741,366
============ ============
The valuation allowance for deferred tax assets as of January 30, 1993 was
$12.3 million. The net change in the total valuation allowance for the year
ended January 29, 1994 was an increase of $3.6 million.
At January 29, 1994, the Company has net operating loss arryforwards for
federal income tax purposes of approximately $50.5 million, which are
principally the net operating loss carryforwards acquired in the merger with
Morse. Under federal income tax rules, Morse's net operating loss
carryforwards may only be utilized to offset its own future taxable income and
are subject also to an annual limitation of approximately $3.4 million. The
Company also has alternative minimum tax credit carryforwards of approximately
$4.1 million available to reduce future regular federal income taxes, if any,
over an indefinite period.
(9) PENSION AND PROFIT SHARING PLANS
The Company has a noncontributory pension plan which covers substantially all
non-union employees and is administered by Trustees who are officers of the
Company. As of January 1, 1994, SCOA employees are eligible to participate in
the Company's pension plan.
The following table sets forth the Plan's funded status at January 29, 1994 and
January 30, 1993:
1994 1993
---- ----
Actuarial present value of benefit obligations:
Vested $ 6,397,000 $ 5,534,000
Nonvested 392,000 261,000
----------- -----------
Total accumulated benefit obligations $ 6,789,000 $ 5,795,000
=========== ===========
Plan assets at fair value $ 9,251,000 $ 8,592,000
Actuarial present value of projected benefit
obligations (11,207,000) (9,053,000)
----------- -----------
Deficiency of plan assets over
projected benefit obligations (1,956,000) (461,000)
Unrecognized prior service cost (benefit) (98,000) 522,000
Unrecognized net transitional liability 1,342,000 1,463,000
Unrecognized net actuarial gain (683,000) (2,082,000)
----------- -----------
Accrued pension cost $(1,395,000) $ (558,000)
=========== ===========
Assumptions used to develop the Plan's funded status were discount rate (7.5%
in 1994, 8.5% in 1993) and increase in compensation levels (5% in 1994, 6% in
1993).
34
35
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net pension cost for the years ended January 29, 1994, January 30, 1993 and
February 1, 1992 included the following components:
1994 1993 1992
---- ---- ----
Service cost - benefits earned
during the year $ 767,000 $ 657,000 $ 541,000
Interest cost on projected
benefit obligation 869,000 730,000 664,000
Actual return on plan assets (763,000) (623,000) (1,212,000)
Net amortization and deferral 234,000 104,000 719,000
---------- ---------- ----------
Net pension cost $1,107,000 $ 868,000 $ 712,000
========== ========== ==========
Assumptions used to develop the net periodic pension cost were discount rate
(8.5%), expected long-term return on assets (8.5%) and increase in compensation
levels (6.0%).
In December 1993, the Board of Directors of the Company established a
Supplemental Retirement plan to provide benefits attributable to compensation in
excess of $150,000, but less than $242,280. The Supplemental Retirement plan is
not effective until fiscal 1995.
In January 1992, the Company implemented a qualified 401(k) profit sharing plan
available to full-time employees who meet the plan's eligibility requirements.
Under the 401(k) plan, the Company matches 50% of the qualified employee's
contribution up to 3% of the employee's salary. The total cost of the matching
contribution was $1,033,000 and $448,000 for the years ended January 29, 1994
and January 30, 1993, respectively. In connection with the acquisition of
Morse, on January 30, 1993 the Company merged Morse's 401(k) plan into the
Company's 401(k) plan.
The Company has established incentive bonus plans for certain executives and
employees. The bonus calculations are based on the achievement of certain
profit levels, as defined in the plans. For the years ended January 29, 1994,
January 30, 1993, February 1, 1992, $1,025,000, $1,643,000 and $0, respectively,
was provided for bonuses under the plans.
The Company does not provide post-retirement benefits other than pensions as
defined under SFAS #106.
(10) STOCK OPTIONS
The Amended and Restated 1985 Stock Option Plan provides for the issuance of
incentive and non-qualified stock options to key employees at an option
price of not less than 100% of the fair market value of a share on the date of
grant of the option. Under this plan, there are 289,570 shares of common stock
available for grant at January 29, 1994. In addition, the Company has granted
stock options which are not part of the plan. Options become exercisable either
ratably over four years or upon grant, at the discretion of the Board of
Directors, and expire ten years from the date of grant.
The 1992 Directors' Stock Option Plan provides for the automatic grant of an
option to purchase 2,500 shares of the Company's common stock upon initial
election to the Board of Directors and, in addition, at the close of business on
the fifth business day following the Company's annual meeting of stockholders.
Options under the Directors Plan are granted at a price equal to the closing
price of the Company's common stock on the date of grant. They are exercisable
in full as of the date of grant and expire ten years from the date of grant.
Under this plan, there are 70,000 shares of common stock available for grant at
January 29, 1994.
35
36
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Data with respect to stock options granted is as follows:
1985 PLAN AND DIRECTORS' STOCK
OPTION PLAN NON-PLAN
--------------------------- -----------------------
SHARES PRICE RANGE SHARES PRICE RANGE
------ ----------- ------ -----------
February 2, 1991, options outstanding 239,534 $ .95 - 17.00 38,750 $ .01 - 16.63
Granted 316,200 4.88 - 9.50 50,000 6.75
Exercised (8,539) .95 - 10.17 (12,500) .01 - 5.00
Cancelled (50,295) .95 - 17.00 (3,750) 6.00
------- ------------- -------- ------------
February 1, 1992, options outstanding 496,900 .95 - 17.00 72,500 .01 - 16.63
Granted 150,300 10.88 - 17.38 2,500 12.00
Exercised (68,323) .95 - 17.00 (12,500) .01 - 5.00
Cancelled (8,700) 4.88 - 16.63 - -
------- ------------- --------- --------------
January 30, 1993, options outstanding 570,177 .95 - 17.38 62,500 6.75 - 16.63
Granted 452,500 16.50 - 23.75 - -
Exercised (129,232) .95 - 17.00 - -
Cancelled (71,025) 4.88 - 21.75 - -
------- ------------- --------- --------------
January 29, 1994, options outstanding 822,420 $ .95 - 23.75 62,500 $6.75 - 16.63
======= ============= ======= ============
Exercisable at January 29, 1994 239,295 $ .95 - 22.38 62,500 $6.75 - 16.63
======= ============= ======= ============
(11) COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company operates mainly from leased premises under license agreements
generally requiring payment of annual rentals contingent upon sales. The
Company leases its computers, vehicles and certain of its offices and warehouse
facilities, in addition to its retail stores.
At January 29, 1994, minimum rental commitments under operating leases are as
follows:
FISCAL YEAR
ENDING JANUARY NET MINIMUM RENTALS MINIMUM SUB-RENTALS
-------------- ------------------- -------------------
(IN THOUSANDS)
1995 $ 47,743 $ 356
1996 41,244 338
1997 34,400 89
1998 27,541 88
1999 19,850 81
Thereafter 36,141 190
------- ------
$206,919 $1,142
======= =====
36
37
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rent expense for the years ended January 29, 1994, January 30, 1993 and
February 1, 1992 was as follows:
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
Minimum rentals $ 46,012 $ 19,984 $ 16,649
Contingent rentals 78,694 49,107 53,742
------- ------- -------
124,706 69,091 70,391
Less sublease rentals 332 293 273
-------- -------- --------
Net rentals $124,374 $ 68,798 $ 70,118
======= ======= =======
Other Commitments and Contingent Liabilities
The Company has employment agreements with certain of its officers under which
it is committed to pay an aggregate of approximately $3.3 million through
November 1995.
The Company also has consulting agreements under which it is required to pay
an aggregate of approximately $1.8 million through 2001.
The Company was contingently liable under letters of credit amounting to
approximately $35.0 million at January 29, 1994.
On November 10, 1993, a federal jury in Minneapolis, MN returned a verdict
assessing royalties of $1,550,000, and additional damages of $1,500,000 against
the Company in a patent infringement suit brought by Susan Maxwell with respect
to a device used to connect pairs of shoes. Certain post trial motions have
been filed by the Company seeking to vacate all or part of the verdict and,
subsequent to the entry of judgment, an appeal of certain legal issues is
anticipated.
(12) STOCKHOLDERS' EQUITY
The Board of Directors of the Company is authorized by vote or votes, from time
to time adopted, to provide for the issuance of referred Stock in one or more
series and to fix and state the voting powers, designations, preferences and
relative participating, optional or other special rights of the shares of each
series and the qualifications, limitations and restrictions thereof.
(13) PRINCIPAL LICENSOR
Sales in licensed departments operated under the Ames Agreement accounted for
11.5%, 22.9% and 29.3% of the Company's net sales in the years ended January
29, 1994, January 30, 1993 and February 1, 1992, respectively.
37
38
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) SEGMENT INFORMATION
The Company is a specialty retailer conducting business through tores in two
business segments; footwear and apparel. Information about operations for each
of these segments is summarized as follows:
YEAR ENDED
--------------------------------------------------------
JANUARY 29, 1994 JANUARY 30, 1993 FEBRUARY 1, 1992
---------------- ---------------- ----------------
($ in thousands)
FOOTWEAR
Net sales $734,827 $380,243 $387,104
Operating profit 43,382 17,460 16,514
Identifiable assets 396,958 341,407 245,656
Depreciation and amortization 15,075 10,951 11,005
Additions to property, equipment and
leasehold improvements 13,814 2,786 1,610
APPAREL
Net sales $184,051 $152,013 $106,438
Operating profit 23,802 22,438 16,060
Identifiable assets 65,842 48,844 28,014
Depreciation and amortization 2,373 714 (85)
Additions to property, equipment and
leasehold improvements 8,654 6,832 3,634
CONSOLIDATED
Net sales $918,878 $532,256 $493,542
Operating profit before general
corporate expense 67,184 39,898 32,574
General corporate expense (23,318) (10,691) (9,397)
Interest expense, net (7,442) (8,131) (10,279)
Earnings before income taxes $ 36,424 $ 21,076 $ 12,898
Identifiable assets $462,800 $390,251 $273,670
Corporate assets 39,696 41,547 23,034
Total assets $502,496 $431,798 $296,704
Depreciation and amortization $ 21,874 $ 14,688 $ 12,709
Additions to property, equipment and
leasehold improvements $ 24,115 $ 11,198 $ 5,475
38
39
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended January 29, 1994
Net sales $ 193,388 $ 232,529 $ 224,421 $ 268,540 $ 918,878
Gross profit 87,765 100,850 100,057 113,351 402,023
Net earnings $ 2,483 $ 6,385 $ 6,486 $ 7,957 $ 23,311
========== ========== ========== ========== ==========
Earnings per common share:
Primary $ .18 $ .47 $ .48 $ .57 $ 1.70
========== ========== ========= ========= ==========
Fully diluted $ .18 $ .39 $ .40 $ .48 $ 1.45
========== ========== ========= ========= ==========
Year ended January 30, 1993
Net sales $ 109,383 $ 133,479 $ 137,129 $ 152,265 $ 532,256
Gross profit 45,867 54,737 55,962 61,987 218,553
Earnings before extraordinary item 1,551 3,192 3,620 4,914 13,278
Net earnings $ 1,551 $ 748 $ 3,620 $ 4,914 $ 10,834
========== ========== ========== ========== ==========
Earnings per common share:
Primary:
Earnings before extraordinary item $ .15 $ .30 $ .34 $ .46 $ 1.25
Extraordinary item - (.23) - - (.23)
---------- ---------- ---------- ---------- ----------
$ .15 $ .07 $ .34 $ .46 $ 1.02
========== ========== ========== ========== ==========
Fully diluted:
Earnings before extraordinary item $ .15 $ .28 $ .30 $ .38 $ 1.11
Extraordinary item - (.18) - - (.18)
---------- ---------- ---------- ---------- ----------
$ .15 $ .10 $ .30 $ .38 $ .93
========== ========== ========== ========== ==========
(16) ADVERTISING COSTS
The Company incurred advertising costs of $16.5 million, $5.1 million and $5.0
million in the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
(17) SUPPLEMENTAL SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
1994 1993 1992
---- ---- ----
Cash paid for interest $ 6,799,091 $ 8,884,947 $ 10,211,349
Cash paid for income taxes $ 5,022,668 $ 4,718,757 $ 5,368,560
============ ============= =============
Non-cash investing activities:
Common stock issued for certain
assets of Work'n Gear Stores
(see Note 5) $ 5,254,869
=============
Common stock issued in connection
with the acquisition of Morse
Shoe, Inc. (see Note 3) $ 56,841,924
=============
Common stock issued in connection
with the acquisition of Shoe
Corporation of America (see Note 2) $ 970,704
============
Non-cash financing activities:
Conversion of subordinated debt (see Note 3) $ 2,707,000
============
Note receivable (see Notes 4 and 6) $ 846,000 $ 8,700,000
============ =============
39
40
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing in the Proxy Statement under the captions
"ELECTION OF DIRECTORS", "Information About Board of Directors and Committees",
"Executive Compensation" and "Employment Arrangements" is incorporated herein
by this reference.
EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the caption
"Executive Compensation", "Employment Arrangements" and "Information About
Board of Directors and Committees" is incorporated herein by this reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the Proxy Statement under the caption
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is
incorporated herein by this reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions" is incorporated herein by this
reference.
PART IV
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1,2. The financial statements, notes thereto, and independent auditors'
report listed in the Index to Consolidated Financial Statements
set forth in Item 8.
3. The Exhibits listed in the Exhibit Index.
(b) None.
40
41
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.
--------------
(Registrant)
By /s/Sherman N. Baker By /s/Jerry M. Socol
---------------------- ---------------------------------
Sherman N. Baker Jerry M. Socol
Chairman of the Board President and Chief
Executive Officer
By /s/Philip G. Rosenberg By /s/Alan I. Weinstein
---------------------- ---------------------------------
Philip G. Rosenberg Alan I. Weinstein
Executive Vice President Senior Executive Vice President
and Principal Accounting Officer and Principal Financial Officer
April 27, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/Sherman N. Baker /s/Ervin Cruce
- - --------------------------------- ------------------------------
Sherman N. Baker, Director Ervin Cruce, Director
/s/J. Christopher Clifford /s/Thomas H. Lee
- - --------------------------------- ------------------------------
J. Christopher Clifford, Director Thomas H. Lee, Director
/s/David Pulver /s/Melvin M. Rosenblatt
- - --------------------------------- ------------------------------
David Pulver, Director Melvin M. Rosenblatt, Director
/s/Stanley Simon /s/Jerry M. Socol
- - --------------------------------- ------------------------------
Stanley Simon, Director Jerry M. Socol, Director
All as of April 27, 1994
41
42
EXHIBITS
Filed with
Annual Report on Form 10-K
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Year Ended January 29, 1994
42
43
EXHIBIT INDEX
EXHIBIT PAGE NO.
3. ARTICLES OF ORGANIZATION AND BY-LAWS
(.01) Amended and Restated Articles of Organization of the Company, as filed with the *
Secretary of the Commonwealth of Massachusetts on September 26, 1990 (filed as
Exhibit 3.01 to the Company's Form 10-K Report for the year ended February 2,
1991).
(.02) By-Laws of the Company, as amended by the Board of Directors on *
September 11, 1990 (filed as Exhibit 19.01 to the Company's Form 10-Q
Report for the quarter ended November 3, 1990).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
(.01) Senior Notes and Senior Subordinated Notes with Stock Purchase Warrants *
dated May 1, 1989 (filed as Exhibit 4.01 to the Company's Form 10-Q Report
for the quarter ended July 29, 1989).
(.02) Indenture dated as of June 12, 1992 by and between J. Baker, Inc. and The First *
National Bank of Boston as Trustee with respect to 7% Convertible Subordinated
Notes due 2002 (filed as Exhibit 4.08 to the Company's Form 10-Q Report
for the quarter ended August 1, 1992).
(.03) Revolving Credit and Loan Agreement by and among JBI, Inc., et al., *
and Shawmut Bank, et al., dated as of February 1, 1993 (filed as Exhibit 4.03
to the Company's Form 10-K Report for the year ended January 30, 1993).
(.04) Guarantee Agreement dated as of February 1, 1993, between J. Baker, Inc., *
Shawmut Bank, N.A., and subsidiaries of J. Baker, Inc. (filed as Exhibit
4.09 to the Company's Form 10-K Report for the year ended January 30, 1993).
(.05) Security Agreement dated as of February 1, 1993, between JBI, Inc., J. Baker, *
Inc., and Shawmut Bank, N.A. (filed as Exhibit 4.10 to the Company's Form 10-K
Report for the year ended January 30, 1993).
(.06) Stock Pledge Agreement dated as of February 1, 1993 by and between JBI, Inc., *
J. Baker, Inc., Shawmut Bank, N.A., and subsidiaries of J. Baker, Inc.
(filed as Exhibit 4.11 to the Company's Form 10-K Report for the year ended
January 30, 1993).
(.07) Indenture dated as of January 15, 1992 by and between Morse Shoe, Inc. and *
State Street Bank and Trust Company as Trustee with respect to
Convertible Subordinated Debentures due 2002 (filed as Exhibit 4.12 to the
Company's Form 10-K Report for the year ended January 30, 1993).
(.08) Indenture dated as of January 15, 1992 by and between Morse Shoe, Inc. and *
Bankers Trust Company as Trustee with respect to Subordinated Notes (filed as
Exhibit 4.13 to the Company's Form 10-K Report for the year ended January 30, 1993).
<FN>
* Incorporated herein by reference
44
EXHIBIT PAGE NO.
(.09) First Supplemental Indenture (dated as of January 28, 1993) to the Indenture *
(dated January 15, 1992) under which Convertible Subordinated Debentures Due 2002
were issued by Morse Shoe, Inc. (filed as Exhibit 4.01 to the Company's Form 10-Q
Report for the quarter ended May 1, 1993).
(.10) First Supplemental Indenture (dated as of July 26, 1993) to the Indenture (dated *
January 15, 1992) under which Subordinated Notes were issued by Morse Shoe, Inc.
(filed as Exhibit 4.01 to the Company's Form 10-Q Report for the quarter ended
July 31, 1993).
(.11) First Amendment and Waiver Agreement by and among JBI, Inc., J. Baker, Inc, and *
Shawmut Bank, N.A., et al, dated as of November 19, 1993 (filed as Exhibit 4.01 to
the Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.12) Assumption Agreement by Tishkoff Enterprises, Inc. dated as of November 19, 1993 *
(filed as Exhibit 4.02 to the Company's Form 10-Q Report for the quarter ended
October 30, 1993).
(.13) First Amendment to Pledge Agreement by and among JBI, Inc., J. Baker, Inc. and *
Shawmut Bank, N.A., et al, dated as of November 19, 1993 (filed as Exhibit 4.03 to
the Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.14) Second Amendment to Pledge Agreement by and among JBI, Inc., J. Baker, Inc. and **
Shawmut Bank, N.A., et al, dated as of December 30, 1993, attached.
(.15) Assumption Agreement by Shoe Corporation of America, Inc. dated as of **
December 30, 1993, attached.
10. MATERIAL CONTRACTS
(.01) License Agreement between Ames Department Stores, Inc., et al and JBI Holding *
Company, Inc. (filed as Exhibit 10.01 to the Company's Form 10-K Report
for the year ended January 30, 1988).
(.02) Agreement between JBI Holding Company, Inc. and JBI, Inc. re: Assignment of *
Ames License Agreement (filed as Exhibit 10.02 to the Company's Form 10-K
Report for the year ended January 30, 1988).
(.03) Amendment No. 1 dated April 29, 1989 to Agreement between Ames Department *
Stores, Inc. and JBI Holding Company, Inc. (filed as Exhibit 10.04 to the
Company's Form 10-Q Report for the quarter ended April 29, 1989).
(.04) Amendment No. 2 dated December 18, 1992, to Agreement between Ames *
Department Stores, Inc. and JBI Holding Company, Inc. (filed as Exhibit 10.04
to the Company's Form 10-K Report for the year ended January 30, 1993).
(.05) Guaranty and Indemnity Agreement dated April 28, 1989 between J. Baker, Inc. and *
Ames Department Stores, Inc. (filed as Exhibit 10.05 to the Company's Form 10-Q
Report for the quarter ended April 29, 1989).
(.06) Amended Cash Incentive Compensation Plan (filed as Exhibit 19.01 to the Company's *
Form 10-Q Report for the quarter ended August 3, 1991).
<FN>
*Incorporated herein by reference
**Included herein
45
EXHIBIT PAGE NO.
(.07) J. Baker Senior Executive Performance Stock Incentive Plan (filed as Exhibit 10.10 *
to the Company's Form 10-K Report for the year ended February 3, 1990).
(.08) Plan of Reorganization of The Casual Male Corporation dated November 1, 1990 *
as revised November 20, 1990 (filed as Exhibit 2.01 to the Company's Form 10-Q
Report for the quarter ended November 3, 1990).
(.09) Executive Employment Agreement dated March 25, 1993 between Sherman N. *
Baker and J. Baker, Inc. (filed as Exhibit 10.01 to the Company's Form
10-Q Report for the quarter ended July 31, 1993).
(.10) Executive Employment Agreement dated March 25, 1993 between Alan I. *
Weinstein and J. Baker, Inc. (filed as Exhibit 10.04 to the Company's
Form 10-Q Report for the quarter ended July 31, 1993).
(.11) Executive Employment Agreement dated March 25, 1993 between Jerry M. **
Socol and J. Baker, Inc., attached.
(.12) Executive Employment Agreement dated March 25, 1993 between Linda B. Kanner *
and J. Baker, Inc. (filed as Exhibit 10.05 to the Company's Form 10-Q Report
for the quarter ended July 31, 1993).
(.13) Executive Employment Agreement dated March 25, 1993 between Larry I. Kelley *
and J. Baker, Inc. (filed as Exhibit 10.06 to the Company's Form 10-Q Report
for the quarter ended July 31, 1993).
(.14) Promissory Note of Larry I. Kelley dated June 3, 1991 (filed as Exhibit *
10.33 to the Company's Form 10-K Report for the year ended February 1, 1992).
(.15) Promissory Note of Larry I. Kelley dated February 2, 1993, attached. **
(.16) Promissory Note of Larry I. Kelley dated April 30, 1993, attached. **
(.17) Executive Employment Agreement dated as of March 25, 1993 between Joseph Gajda *
and J. Baker, Inc. (filed as Exhibit 10.07 to the Company's Form 10-Q Report for
the quarter ended July 31, 1993).
(.18) Executive Employment Agreement dated as of June 1, 1993 between John E. Lattanzio *
and J. Baker, Inc, (filed as Exhibit 10.01 to the Company's Form 10-Q report for the
quarter ended October 30, 1993).
(.19) Executive Employment Agreement dated as of October 18, 1993 between *
Donald G. Hall and J. Baker, Inc. (filed as Exhibit 10.02 to the Company's
Form 10-Q Report for the quarter ended October 30, 1993).
(.20) Executive Employment Agreement dated as of November 1, 1993 between Stuart M. *
Needleman and J. Baker, Inc. (filed as Exhibit 10.03 to the Company's Form 10-Q
Report for the quarter ended October 30, 1993).
<FN>
*Incorporated herein by reference
**Included herein
46
EXHIBIT PAGE NO.
(.21) Executive Employment Agreement dated as of November 19, 1993 between Dennis B. *
Tishkoff and J. Baker, Inc. (filed as Exhibit 10.04 to the Company's Form 10-Q
Report for the quarter ended October 30, 1993).
(.22) J. Baker, Inc. Amended and Restated 1985 Stock Option Plan (filed as Exhibit 19.02 *
to the Company's Form 10-Q Report for the quarter ended August 1, 1992).
(.23) J. Baker, Inc. 1994 Equity Incentive Plan dated as of March 29, 1994, attached. **
(.24) J. Baker, Inc. 1992 Directors Stock Option Plan dated as of April 13, 1992 (filed as *
Exhibit 19.03 to the Company's Form 10-Q Report for the quarter ended August 1, 1992).
(.25) Stock Option Agreements between Jerry M. Socol and J. Baker, Inc. (filed as *
Exhibit 10.12 to the Company's Form 10-K Report for the year ended
January 28, 1989).
(.26) Mortgage and Security Agreement dated as of December 30, 1992 by and *
between JBI Holding Company, Inc. and Ames Department Stores, Inc., (filed
as Exhibit 10.22 to the Company's Form 10-K Report for the year ended
January 30, 1993).
(.27) Promissory Note dated as of December 30, 1992 made by Ames Department Stores, *
Inc. in favor of JBI Holding Company, Inc. (filed as Exhibit 4.14 to the Company's
Form 10-K Report for the year ended January 30, 1993).
(.28) Stock Purchase Agreement by and among J. Baker, Inc. and Tishkoff Enterprises, Inc. *
and certain stockholders of Tishkoff Enterprises, Inc. dated November 19, 1993 (filed
as Exhibit 2.01 to the Company's Form 10-Q Report dated October 30, 1993).
(.29) Agreement and Plan of Reorganization by and among J. Baker, Inc., Morse *
Acquisition, Inc. and Morse Shoe, Inc. dated October 22, 1992, as amended by Letter
Amendments dated December 7, 1992 and December 10, 1992 (filed as Exhibits 2.01-2.03
to the Company's Form 10-Q Report dated October 31, 1992).
(.30) Agreement of Merger among J. Baker, Inc., JBAK Acquisition Corp. and Tishkoff **
Enterprises, Inc. dated December 3, 1993, attached.
11. STATEMENT RE: COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE, attached. **
12. STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES, attached. **
21. SUBSIDIARIES OF THE REGISTRANT, attached. **
23. CONSENT OF KPMG PEAT MARWICK, attached. **
<FN>
*Incorporated herein by reference
**Included herein