1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE SECOND QUARTER ENDED MAY 05, 2001
Commission File Number 0-934
B.B. WALKER COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0581797
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 East Dixie Drive, Asheboro, NC 27203
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 625-1380
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
On June 1, 2001, 1,735,114 shares of the Registrant's voting common stock with a
par value of $1.00 per share were outstanding.
Cover
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) (Audited)
May 05, October 28,
Assets 2001 2000
------ ----------- -----------
Cash $ 1 $ 1
Accounts receivable, less allowance
for doubtful accounts of $549 in
2001 and $495 in 2000 3,224 5,271
Inventories 5,287 6,930
Prepaid expenses 505 550
Property held for sale 889 889
Deferred income tax benefit, current -- 719
---------- ----------
Total current assets 9,906 14,360
Property, plant and equipment, net of
accumulated depreciation and amortization
of $5,525 in 2001 and $6,812 in 2000 818 1,320
Other assets 123 109
---------- ----------
$ 10,847 $ 15,789
========== ==========
(Continued)
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands)
(Unaudited) (Audited)
May 05, October 28,
Liabilities and Shareholders' Equity 2001 2000
------------------------------------ ----------- -----------
Borrowings under finance agreement $ 3,725 $ 5,710
Current portion of long-term obligations 689 2,202
Accounts payable, trade 2,640 3,497
Accrued salaries, wages and bonuses 173 333
Other accounts payable and accrued liabilities 373 552
-------- --------
Total current liabilities 7,600 12,294
-------- --------
Long-term obligations 890 1,158
Minority interests in consolidated subsidiary 31 31
Shareholders' equity:
7% cumulative preferred stock, $100 par value,
1,150 shares authorized, 828 shares issued
and outstanding in 2001 and 2000 83 83
Common stock, $1 par value, 6,000,000 shares
authorized, 1,735,114 shares in 2001 and
1,745,954 in 2000 issued and outstanding 1,735 1,746
Capital in excess of par value 2,706 2,712
Retained (deficit) (2,150) (2,177)
Shareholders' loans (48) (58)
-------- --------
Total shareholders' equity 2,326 2,306
-------- --------
$ 10,847 $ 15,789
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Per Share Data)
(Unaudited) (Unaudited)
Second Quarter Ended Six Months Ended
---------------------------- ---------------------------
May 05, April 29, May 05, April 29,
2001 2000 2001 2000
---------- ----------- --------- ---------
Net sales $ 4,610 $ 6,053 $ 8,951 $ 11,028
Gain on sale of property (Note 7) -- -- 2,041 --
Interest and other income 5 11 12 28
--------- --------- --------- ---------
Total revenues 4,615 6,064 11,004 11,056
--------- --------- --------- ---------
Cost of products sold 3,613 4,229 7,029 7,970
Selling and administrative expenses 1,617 1,675 3,018 3,237
Depreciation and amortization 31 41 62 81
Interest expense 152 235 327 479
--------- --------- --------- ---------
Total costs and expenses 5,413 6,180 10,436 11,767
--------- --------- --------- ---------
Income (loss) before income taxes
and minority interest (798) (116) 568 (711)
Provision for income taxes -- -- 537 --
Minority interest -- -- 1 1
--------- --------- --------- ---------
Net income (loss) (798) (116) 30 (712)
Retained deficit at beginning of quarter (1,350) (997) (2,177) (400)
Dividends on preferred stock (2) (2) (3) (3)
--------- --------- --------- ---------
Retained deficit at end of quarter $ (2,150) $ (1,115) $ (2,150) $ (1,115)
========= ========= ========= =========
Net income (loss) per share:
Basic $ (.46) $ (.07) $ .02 $ (.41)
========= ========= ========= =========
Diluted $ (.46) $ (.07) $ .02 $ (.41)
========= ========= ========= =========
Weighted average common shares outstanding:
Basic 1,735 1,746 1,736 1,746
========= ========= ========= =========
Diluted 1,735 1,746 1,736 1,746
========= ========= ========= =========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended
-------------------------
May 5, April 29,
2001 2000
-------- ---------
Cash Flows From Operating Activities:
Net income (loss) $ 30 $ (712)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 62 81
Gain on sale of fixed assets (2,044) (17)
Deferred income tax expense 719 --
(Increase) decrease in:
Accounts receivable, net 2,047 1,337
Inventories 1,643 823
Prepaid expenses 45 66
Other assets (14) 2
Increase (decrease) in:
Accounts payable, trade (857) (177)
Accrued salaries, wages and bonuses (160) (72)
Other accounts payable and accrued liabilities (179) (50)
-------- --------
Net cash provided by operating activities 1,292 1,281
-------- --------
Cash Flows From Investing Activities:
Capital expenditures -- (2)
Proceeds from disposal of fixed assets 2,484 22
Purchase of property held for sale -- (86)
-------- --------
Net cash provided by (used in)
investing activities 2,484 (66)
-------- --------
Cash Flows From Financing Activities:
Net payments under finance agreement (1,985) (1,020)
Payment on long-term obligations (1,782) (318)
Proceeds from issuance of short-term obligations -- 84
Proceeds from issuance of long-term obligations 1 33
Repurchase of common stock (17) --
Repayments from shareholders, net of borrowings 10 9
Dividends paid on 7% cumulative preferred stock (3) (3)
-------- --------
Net cash used in financing activities (3,776) (1,215)
-------- --------
Net change in cash -- --
Cash at beginning of year 1 1
-------- --------
Cash at end of second quarter $ 1 $ 1
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
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B.B. WALKER COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
A summary of the Company's significant accounting policies is presented on page
9 of its 2000 Annual Report to Shareholders. Users of financial information
presented for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Shareholders when reviewing interim financial results.
In the opinion of management, the accompanying unaudited consolidated finan-
cial statements contain all adjustments necessary for a fair presentation of the
financial results of B.B. Walker Company and Subsidiary (the "Company") for the
interim periods included. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods shown in this report are not
necessarily indicative of the results to be expected for the fiscal year.
The Company's operations are reported on a fifty-two, fifty-three week fiscal
year that ends on the Saturday closest to October 31. The results for the first
six months ended May 5, 2001 includes twenty-seven weeks of operations and April
29, 2000 includes twenty-six weeks of operations. The second quarter of 2001
includes fourteen weeks of operation and the second quarter of 2000 includes
thirteen weeks of operations.
Note 2
Basic earnings per share (EPS) are computed by dividing income (loss) available
to common shareholders by the weighted-average number of common shares
outstanding for the period. In arriving at income (loss) available to common
shareholders, preferred stock dividends of $1,449 were deducted in each quarter
presented. Diluted EPS reflects the potential dilution that could occur if
dilutive securities and other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company.
Note 3
Statement of Financial Accounting Standards ("FAS") No. 130, "Reporting
Comprehensive Income" requires that certain items such as foreign currency
translation adjustments, unrealized gains and losses on certain investments in
debt and equity securities, minimum pension liability adjustments, net gain or
loss on derivative instruments designated and qualifying as cash flow hedging
instruments, and unrealized gains and losses on certain investments in debt
and equity securities be presented as separate components of shareholders'
equity. FAS 130 defines these as items of other comprehensive income and as such
must be reported in a financial statement that is displayed with the same
prominence as other financial statements. At May 5, 2001 and April 29, 2000, the
Company does not have any items of other comprehensive income to report.
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B.B. WALKER COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 4
Long-term obligations consist of the following amounts (in thousands):
(Unaudited) (Audited)
May 05, October 28,
2001 2000
----------- -----------
Notes payable to banks $ 172 $ 1,802
Notes payable to governmental authorities 453 476
Promissory notes payable to shareholders 954 1,082
---------- ----------
1,579 3,360
Less portion payable within one year 689 2,202
---------- ----------
$ 890 $ 1,158
========== ==========
Note 5
Inventories are composed of the following amounts (in thousands):
(Unaudited) (Audited)
May 05, October 28,
2001 2000
----------- -----------
Finished goods $ 3,224 $ 4,418
Work in process 360 510
Raw materials and supplies 1,703 2,002
--------- ---------
$ 5,287 $ 6,930
========= =========
Note 6
The Company's reportable segments are wholesale and retail sales. Whereas
wholesale sales are made to major chain stores, retail stores, and governmental
entities, retail sales are made directly to the public from the Company's two
retail outlets in Asheboro, NC, and Lancaster, PA. The segments are managed
separately because each business unit requires different marketing strategies.
Segment information for the first six months of 2001 and 2000 are as follows:
WHOLESALE RETAIL TOTAL
--------------------------------------------
2001 (in 000s)
--------------------------------------------
Net sales $ 8,265 $ 686 $ 8,951
Cost of sales 6,643 386 7,029
Gross profit 1,622 300 1,922
Gain on sale of property 2,041 0 2,041
Income (loss) before income
taxes and minority interests 641 (73) 568
Depreciation and amortization 62 0 62
WHOLESALE RETAIL TOTAL
--------------------------------------------
2000 (in 000s)
--------------------------------------------
Net sales $ 10,184 $ 844 $ 11,028
Cost of sales 7,473 497 7,970
Gross profit 2,711 347 3,058
Income (loss) before income taxes
and minority interests (663) (48) (711)
Depreciation and amortization 81 0 81
Note 7
On November 8, 2000, the Company sold approximately 15 acres of its real
property located in Asheboro, NC for a cash price of $2,500,000, which purchase
price was determined by arms-length negotiations of the parties. This sale
resulted in a gain of $2,041,000. The sale included a building on this property
in Asheboro, NC, which houses manufacturing operations, warehousing, corporate
offices and a retail store of the Company. A portion of the proceeds from this
property sale was used to pay off certain note balances.
Concurrent with the sale of this property, the Company signed a five-year lease
agreement with the buyer to rent the facility. This lease, as amended, calls for
monthly payment of $27,500. Notice of an intention to terminate the lease by the
Company prior to the expiration of the initial term or any renewal term must be
made in writing ninety days prior to the Company's vacating the premises. At the
expiration of the lease term on November 7, 2005, the Company shall have the
option to extend this lease on a month to month basis with a ninety day notice
to vacate.
Note 8
The Company has significant borrowings under the finance agreement in the
amount of $3,725,000 as of May 5, 2001. The Company is currently operating under
an amendment to the credit agreement which will expire on July 15, 2001. The
Company is currently in discussions with asset-based lenders to replace this
financing. This replacement has not been accomplished. The Company's
continuation as a going concern is dependent upon its ability to successfully
establish the necessary financial arrangements and to comply with the terms
thereof and to restore profitability to the Company. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern. Although no assurance can be given, management
believes that the Company will be able to obtain the necessary financing and
continue operating as a going concern.
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B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The following summarizes the results of operations for the Company for the
second quarter and six months ended May 5, 2001 and April 29, 2000:
Second Six
Quarter Ended Months Ended
May 5, April 29, May 5, April 29,
2001 2000 2001 2000
------ -------- ------ ---------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 78.4% 69.9% 78.5% 72.3%
----- ----- ----- -----
Gross margin 21.6% 30.1% 21.5% 27.7%
Selling and administrative
expenses 35.1% 27.7% 33.7% 29.4%
Depreciation and amortization .6% .7% .7% .7%
Interest expense 3.3% 3.9% 3.7% 4.3%
Gain on sale of property -- -- (22.8)% --
Interest and other income (.1)% (.2)% (.1)% (.2)%
----- ----- ----- -----
Income (loss) before income
taxes and minority interest (17.3)% (2.0)% 6.3% (6.5)%
Provision for income taxes -- -- 6.0% --
Minority interest -- -- -- --
----- ----- ----- -----
Net income (loss) (17.3)% (2.0)% .3% (6.5)%
===== ===== ===== =====
Net Sales
For the second quarter of 2001, the Company's net sales were $4,610,000, or
$1,443,000 (23.8%) lower than net sales of $6,053,000 in the second quarter of
2000. For the six month period ended May 05, 2001, net sales were $8,951,000, a
$2,077,000 (18.8%) decrease from net sales of $11,028,000 in the comparable six
month period ended April 29, 2000. The Company's revenues include sales of
footwear both manufactured and purchased by the Company and sales from the
Company's retail outlets. Footwear wholesaled by the Company, which includes
branded, private label and institutional sales, comprised 93.0% of net sales in
the second quarter of 2001 and 92.5% of net sales in the second quarter of 2000.
Retail sales made up the remaining net sales of 7.0% in 2001 and 7.5% in 2000.
For the comparable six month periods, wholesaled footwear comprised 92.3% of net
sales in 2001 and 91.7% of net sales in 2000. The remaining net sales of 7.7% in
2001 and 8.3% in 2000 were sales from the Company's retail outlets.
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B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
The decrease in net sales can be attributed to two factors. First, our inability
to purchase raw materials and run our factories during the second quarter
because of cash constraints placed on the Company by our bank. Our order
position remains strong and we anticipate sales returning to normal levels when
the financing discussed in Note 8 is completed. Also, during late 2000, a
decision was made to begin importing high end, handmade western product from
Spain along with a line of mid-priced footwear from China. These new
introductions have been well received in the marketplace and should translate
into increased sales in the fall of calendar 2001. Second, import penetration of
approximately 95% into the U.S. footwear market has made it easier for
competitors to enter the work shoe market. This increase in low-priced imports
has caused a dramatic adverse effect on the Company's work/outdoor shipments.
Sales of the Company's branded footwear in the second quarter of 2001 were down
$961,000, or 21.8%, from 2000's second quarter because of the reasons discussed
above. Branded pairs shipped were down 13,054, or 17.0%, in the second quarter
while price per pair was down 5.8%.
Private label sales in the second quarter of 2001 were down $334,000, or 31.0%,
from the second quarter of 2000. The decrease can be attributed to an overall
weaker work/outdoor private label business. Pairs shipped were down 9,107, or
31.5% while price per pair was up .7%. This segment of our business has also
been dramatically affected by imported footwear. In the second quarter, we made
a decision to begin phasing out our business with a major discount retailer due
to our inability to pass along needed price increases.
Sales to institutional customers in the second quarter of 2001 were down
$172,000, or 47.0%, from the second quarter of 2000. Much of this business is
solicited through a formal bidding process with governmental entities, and the
results of this division are impacted by the Company's success in bidding on new
business. Unfortunately, there is an increasing trend toward being underbid by
import suppliers on new institutional business. In January 2001, the Company was
awarded a contract by the Defense Personnel Supply Agency for the production of
6,000 pairs per year for the next three years of a mountain ski boot. The first
order for 4,680 pairs is scheduled to be delivered during the last half of this
fiscal 2001.
Retail sales decreased $108,000, or 23.9%, from the second quarter of the prior
year. The two retail outlets, one in Asheboro, NC and one in Lancaster, PA,
continue to experience increased competition from major discount retailers
surrounding their locations.
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B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
Gross Margin
For the second quarter of 2001 and 2000, the gross margin was 21.6% and 30.1%,
respectively. The Company's gross margin was 21.5% and 27.7% for the first six
months of 2001 and 2000, respectively. This 6.2% decrease from the prior year is
due to lower production than budgeted which has not covered the Company's fixed
costs in manufacturing as well as expected. The gross margin percentage
continues to be impacted by competitive pressure at the retail level which
requires that the Company remain competitive in the pricing and terms offered.
Selling and Administrative Expenses
Selling and administrative expenses were $1,617,000 for the second quarter of
2001 as compared to $1,675,000 for the second quarter of 2000, a decrease of
$58,000. Year-to-date expenses for 2001 and 2000 are $3,018,000 and $3,237,000
respectively. Even though there has been a $219,000 reduction in the first six
months of 2001 over 2000, selling and administrative expenses as a percentage of
sales have increased from 29.4% in 2000 to 33.7% in 2001 since these
relatively-fixed expenses are being compared to year-to-date sales which have
declined 18.8% from the previous year. Management continues to emphasize cost
control and operational efficiency in the selling and administrative areas.
Interest Expense
Interest expense in the second quarter of 2001 was $152,000, or $83,000 lower
than interest expense of $235,000 for the second quarter of 2000. This 35.3%
decrease in interest expense for the second quarter can be attributed to a lower
average balance on outstanding loan advances under the revolving loan agreement
in the second quarter due to lower sales. Also, during the first quarter of
2001, the term loan which was a part of the bank financing agreement was paid in
full with the proceeds from the property sale (see note 7) which significantly
reduced the amount of interest incurred. Other long-term debt carried lower
balances in 2001 when compared to 2000, as the Company continued to amortize the
debt according to each issue's respective terms.
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B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
Depreciation and Amortization
Depreciation and amortization in the second quarter of 2001 was $31,000, or
$10,000 less than 2000 expenses of $41,000. With minimal amounts invested in
fixed assets in recent years, depreciation charges on fixed assets that are
becoming fully depreciated are not being replaced, resulting in lower
depreciation expense.
Benefit from Income Taxes
For the second quarter of both 2001 and 2000, the Company recorded no bene- fit
from income taxes. The Company evaluated the valuation allowance reserved
against its deferred income tax asset at the end of the second quarter and
determined that the net deferred income tax asset was appropriately recorded at
its net realizable value.
Net Income (Loss)
The Company reported a loss of $798,000 in the second quarter of 2001 compared
to a $116,000 loss in the second quarter of 2000. As discussed above, the 23.8%
decrease in net sales from the second quarter of 2000 has adversely affected
gross margins as lower production than budgeted has not covered the Company's
fixed manufacturing costs.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded substantially all of its working capital
and capital expenditure requirements through borrowings under its financing
agreement and other indebtedness. The revolving financing agreement provides
flexibility to the Company as the availability of funds fluctuates with the
seasonal needs of the Company. Generally, the Company's working capital needs
are highest in the fourth fiscal quarter and lowest in the first fiscal quarter.
With its revolving financing agreement, the Company finances its accounts
receivable and inventories, paying interest at a variable rate (prime plus
3.50%, or 11.0%, at May 5, 2001). The Company had outstanding advances of
$3,725,000 at May 5, 2001. The Company continues to rely on the revolving
financing agreement to provide working capital. The revolving financing
agreement as it is currently structured does not provide the necessary liquidity
to fund its daily operations going forward.
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B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
Under the Company's financing agreement with the bank, the amount available to
be drawn is determined by a formula based on certain percentages of eligible
accounts receivable and inventories. The Company signed the eleventh amendment
to the financing agreement on March 30, 2001 which lowered the credit line
available under the agreement to $5,000,000 and extended the maturity date to
May 31, 2001. This amendment also reduced the borrowing base on raw materials
from the previous 50% to a net value of 0% using a phase-out method completed by
May 31, 2001. On May 31, 2001, the Company signed the twelfth amendment to the
credit agreement which lowered the credit line available under the agreement to
$4,000,000 and extended to due date to July 15, 2001.
In addition to the revolving credit facility, the financing agreement also
provided a $3,000,000 term loan bearing interest at the bank's prime rate plus
1.50% (10.5% at January 27, 2001). During the first quarter of 2001, this loan
was paid in full using the proceeds from the property sale as discussed in Note
7.
All advances under the revolving credit facility and the term loan are secured
by all accounts receivable, inventories, machinery and equipment of the Company.
In addition, the bank has a subordinated lien on the Somerset facilities.
The Company made significant upgrades to its equipment and facilities in 1993
and 1994 but has made only minimal capital expenditures during the past six
years. Because of cash flow considerations and restrictions under the financing
agreement, the Company has made capital expenditures only to maintain current
levels of operations during the past six years. Funding for capital
expenditures, other than the acquisition of the Somerset, Pennsylvania facility
in July 1994, has primarily come from the available balance on the financing
agreement and cash from operations.
Net working capital, which consists primarily of accounts receivable and
inventories less current liabilities, was $2,306,000 at May 5, 2001 and
$2,066,000 at October 28, 2000. The ratio of current assets to current
liabilities was 1.30 to 1 at May 5, 2001 compared to 1.17 to 1 at October 28,
2000.
The Company is currently in discussion with an asset based lender to replace the
financing facility. This replacement has not been accomplished. The continued
viability of the Company in its present form is dependent upon, among other
factors, its ability to successfully establish the necessary financing
arrangements and to generate sufficient cash from operations to meet on-going
obligations over a sustained period. Although, no assurance can be given,
management believes that the Company will be able to obtain the necessary
financing to continue operating as a going concern.
11
13
B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
FINANCIAL CONDITION
Accounts Receivable
Accounts receivable were $3,224,000 at May 5, 2001 compared to $5,271,000 at
October 28, 2000. Trade receivables are historically at their highest point at
the end of the fiscal year because of the heavy sales volume related to seasonal
buying by retailers. This 38.8% decrease in accounts receivable is also related
to the 18.8% decrease in year-to-date net sales and continued stronger
collection efforts since a new credit manager took over this department in
mid-February 2000.
Inventories
Inventories were $5,287,000 at May 5, 2001, a decrease of $1,643,000, or 23.7%,
from the inventories of $6,930,000 held at October 28, 2000. Of this decrease,
approximately $1,194,000 is finished goods and $299,000 is raw materials. Work
in process inventory is also down $150,000. The major decreases in inventories
were caused by the cash constraints placed on the Company by our bank resulting
in our plants not being able to run at full capacity.
Borrowings under Finance Agreements
The balance outstanding under the financing agreement was $3,725,000 at May 5,
2001 as compared to $5,710,000 at October 28, 2000, a decrease of $1,985,000, or
34.8%. The decrease can be attributed to the cash applied against the
outstanding balance from collections of accounts receivable which were down
$2,047,000 in the first six months of 2001 and lower inventories.
Sale of Property
On November 8, 2000, the Company sold approximately 15 acres of its real
property located in Asheboro, NC for a cash purchase price of $2,500,000, which
purchase price was determined by arms-length negotiations of the parties. The
sale included a building on this property in Asheboro, NC, which houses
manufacturing operations, warehousing, corporate offices and a retail store of
the Company. A portion of the proceeds from this sale was used to pay off
certain debt.
Concurrent with the sale of this property, the Company signed a five year lease
with the buyer to rent the facility. This lease, as amended, calls for monthly
payments of $27,500. Notice of an intention to terminate the lease by the
Company prior to the expiration of the initial term or any renewal term must be
made in writing ninety days prior to the Company's vacating the premises. At the
expiration of the lease term on November 7, 2005, the Company shall have the
option to extend this lease on a month to month basis with a ninety day notice
to vacate.
Early in the second quarter, the company signed an Offer to Purchase with a
local developer for the sale of its remaining 10 acre tract of land in Asheboro,
NC. The company expects this transaction to be concluded prior to the end of its
third fiscal quarter.
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14
B.B. WALKER COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, Continued
Forward-Looking Statements
The foregoing discussion contains some forward-looking statements about the
Company's financial condition and results of operations, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's judgment only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events and circumstances that arise after the date hereof.
Factors that might cause actual results to differ materially from these
forward-looking statements include (1) the effects of general economic
conditions, (2) the impact of competitive products and pricing in the footwear
industry, (3) failure to achieve anticipated sales results, (4) management's
ability to accurately predict the effect of cost reductions, (5) failure to
establish financing arrangements with a new lender and, management's ability to
accurately predict the adequacy of the Company's financing arrangement to meet
its working capital and capital expenditure requirements, and (6) failure to
consummate the sale of the remaining 10 acres of its Asheboro, North Carolina
property.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because the Company's obligations under the bank credit agreement bear interest
at floating rates, the Company is sensitive to changes in prevailing interest
rates. A 10% increase or decrease in market interest rates would not have a
material impact on earnings during the next fiscal year.
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PART II. OTHER INFORMATION
Item 2. Changes in Securities:
NONE
Item 4. Submission of Matters to a Vote of Security Holders: The Fiftieth
Annual Meeting of the Shareholders of the Company was held on Monday,
March 19, 2001, as set forth in the Notice of Annual Meeting of
Shareholders dated and mailed on February 26, 2001. Of the 1,735,114
shares of common stock issued and outstanding on the record date,
1,300,739 shares or 74.9% of the common stock outstanding were
represented in person or by proxy at the meeting. For the issues
presented to the shareholders for their consideration, the results were
as follows:
1 - The Board of Directors, in accord with the By-laws, established
the number of Directors at six. The shareholders elected the six
persons nominated by them in the proxy statement mailed February
26, 2001. All director nominees had served as directors during the
prior year and all were elected by the shareholders. There were no
other nominations for director presented at the meeting. The six
nominees were elected with results as follows:
Shares Shares Shares Marked
Director For Against Withhold Authority
-------- --------- ------- ------------------
Kent Anderson 1,146,682 -- 154,057
George M. Ball 1,287,926 -- 12,813
Robert L. Donnell, Jr. 1,287,823 -- 12,916
James P. McDermott 1,287,926 -- 12,813
Michael C. Miller 1,294,633 -- 6,106
Edna A. Walker 1,295,436 -- 5,303
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed:
(4)(c)(19)Eleventh Amendment to the Credit Agreement dated
March 30, 2001 between B. B. Walker and Mellon Bank.
(4)(c)(20)Twelfth Amendment to the Credit Agreement dated May
31, 2001 between B. B. Walker and Mellon Bank
(b) Reports on Form 8-K:
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
B.B. Walker Company
Date June 18, 2001 KENT T. ANDERSON
------------- --------------------------------
Chairman of the Board, Chief
Executive Officer and President
Date June 18, 2001 JOYCE C. WALKER
------------- --------------------------------
Chief Accountant
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