-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RnaTaiW1/AXShBIe6cJuH7K/VuD0JXwRepIkz3IDU1Q7Q5+Dx3Z/jtQd7OqN+lyd 7oaMgoPRbCJvngtOyHKAdA== 0000792570-97-000011.txt : 19970918 0000792570-97-000011.hdr.sgml : 19970918 ACCESSION NUMBER: 0000792570-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970915 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAKER J INC CENTRAL INDEX KEY: 0000792570 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661] IRS NUMBER: 042866591 STATE OF INCORPORATION: MA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14681 FILM NUMBER: 97680326 BUSINESS ADDRESS: STREET 1: 555 TURNPIKE ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 6178289300 MAIL ADDRESS: STREET 1: P O BOX 231 CITY: HYDE PARK STATE: MA ZIP: 02136 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 2, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file Number 0-14681 J. BAKER, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2866591 (State of Incorporation) (I.R.S. Employer Identification Number) 555 Turnpike Street, Canton, Massachusetts 02021 (Address of principal executive offices) (781) 828-9300 (Registrant's telephone number, including area code) The registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to filing such reports for the past 90 days. YES [X] NO The number of shares outstanding of the registrant's common stock as of August 2, 1997, was 13,914,300. 1 J. BAKER, INC. AND SUBSIDIARIES Consolidated Balance Sheets August 2, 1997 (unaudited) and February 1, 1997 August 2, February 1, Assets 1997 1997 ------ -------- ------- Current assets: Cash and cash equivalents $ 1,711,896 $ 3,969,116 Accounts receivable: Trade, net 14,459,203 14,771,734 Other 1,532,264 1,737,786 ---------- ---------- 15,991,467 16,509,520 ---------- ---------- Merchandise inventories 164,268,910 146,045,496 Prepaid expenses 9,649,621 6,031,033 Deferred income taxes 36,159,000 37,548,000 Assets held for sale - 62,255,582 ------------ ----------- Total current assets 227,780,894 272,358,747 ----------- ----------- Property, plant and equipment, at cost: Land and buildings 19,340,925 19,340,925 Furniture, fixtures and equipment 77,245,839 74,244,548 Leasehold improvements 24,280,284 23,100,973 ----------- ----------- 120,867,048 116,686,446 Less accumulated depreciation and amortization 45,734,247 40,032,801 ----------- ----------- Net property, plant and equipment 75,132,801 76,653,645 ----------- ----------- Deferred income taxes 26,199,000 26,199,000 Other assets, at cost, less accumulated amortization 12,367,151 7,309,411 ----------- ----------- $341,479,846 $382,520,803 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 2,035,817 $ 2,012,327 Accounts payable 48,720,653 57,006,085 Accrued expenses 11,365,859 29,837,310 Income taxes payable 1,198,881 1,380,664 ----------- ----------- Total current liabilities 63,321,210 90,236,386 ----------- ----------- Other liabilities 3,180,149 6,203,073 Long-term debt, net of current portion 129,225,814 140,787,673 Senior subordinated debt 1,470,761 2,951,411 Convertible subordinated debt 70,353,000 70,353,000 Stockholders' equity 73,928,912 71,989,260 ----------- ----------- $341,479,846 $382,520,803 =========== ===========
See accompanying notes to consolidated financial statements. 2 J. BAKER, INC. AND SUBSIDIARIES Consolidated Statements of Earnings For the quarters ended August 2, 1997 and August 3, 1996 (Unaudited) Quarter Quarter Ended Ended August 2, 1997 August 3, 1996 -------------- -------------- Sales $143,929,357 $231,805,391 Cost of sales 80,139,384 130,378,579 ----------- ----------- Gross profit 63,789,973 101,426,812 Selling, administrative and general expenses 53,926,913 88,310,932 Depreciation and amortization 3,500,451 7,454,120 ---------- ---------- Operating income 6,362,609 5,661,760 Net interest expense 3,242,501 3,224,038 ----------- ----------- Earnings before income taxes 3,120,108 2,437,722 Income tax expense 1,216,000 952,000 ----------- ----------- Net earnings $ 1,904,108 $ 1,485,722 =========== =========== Net earnings per common share: Primary $ 0.14 $ 0.11 ============ ============ Fully diluted $ 0.14 $ 0.11 ============ ============ Number of shares used to compute net earnings per common share: Primary 13,912,934 13,891,265 =========== =========== Fully diluted 13,970,527 13,928,732 =========== =========== Dividends declared per share $ 0.015 $ 0.015 ============ ============
See accompanying notes to consolidated financial statements. 3 J. BAKER, INC. AND SUBSIDIARIES Consolidated Statements of Earnings For the six months ended August 2, 1997 and August 3, 1996 (Unaudited) August 2, 1997 August 3, 1996 -------------- -------------- Sales $281,279,618 $427,335,600 Cost of sales 155,491,836 235,287,939 ----------- ----------- Gross profit 125,787,782 192,047,661 Selling, administrative and general expenses 109,621,742 167,595,023 Depreciation and amortization 6,153,844 14,662,623 ---------- ---------- Operating income 10,012,196 9,790,015 Net interest expense 6,450,077 6,001,733 ----------- ----------- Earnings before income taxes 3,562,119 3,788,282 Income tax expense 1,389,000 1,477,000 ----------- ----------- Net earnings $ 2,173,119 $ 2,311,282 =========== =========== Net earnings per common share: Primary $ 0.16 $ 0.17 ============ ============ Fully diluted $ 0.16 $ 0.17 ============ ============ Number of shares used to compute net earnings per common share: Primary 13,902,952 13,882,729 =========== =========== Fully diluted 13,959,598 13,903,376 =========== =========== Dividends declared per share $ 0.030 $ 0.030 ============ ============
See accompanying notes to consolidated financial statements. 4 J. BAKER, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the six months ended August 2, 1997 and August 3, 1996 (Unaudited) August 2, 1997 August 3, 1996 -------------- -------------- Cash flows from operating activities: Net earnings $ 2,173,119 $ 2,311,282 Adjustments to reconcile net earnings to cash used in operating activities: Depreciation and amortization: Fixed assets 5,701,470 10,054,455 Deferred charges, intangible assets and deferred financing costs 471,724 4,627,518 Deferred income taxes 1,389,000 1,520,370 Change in: Accounts receivable (931,947) (5,443,623) Merchandise inventories (25,112,428) (24,276,016) Prepaid expenses (3,618,588) (4,035,130) Accounts payable (8,285,432) (9,293,968) Accrued expenses (16,671,451) (10,856,406) Income taxes payable/receivable (181,783) 7,236,732 Other liabilities 36,908 111,558 ------------ ----------- Net cash used in operating activities (45,029,408) (28,043,228) ------------ ----------- Cash flows from investing activities: Capital expenditures for: Property, plant and equipment (4,180,626) (10,450,045) Other assets (1,313,109) (15,660) Payments received on notes receivable 1,450,000 2,438,000 ----------- ----------- Net cash used in investing activities (4,043,735) (8,027,705) ----------- ----------- Cash flows from financing activities: Repayment of senior debt (1,500,000) (1,500,000) Proceeds (repayment) of other long-term debt (11,287,947) 37,000,000 Repayment of mortgage payable (250,422) - Payment of mortgage escrow, net (47,076) - Proceeds from sales of footwear businesses 60,134,835 - Proceeds from issuance of common stock 183,646 210,887 Payment of dividends (417,113) (416,566) ----------- ----------- Net cash provided by financing activities 46,815,923 35,294,321 ----------- ----------- Net decrease in cash (2,257,220) (776,612) Cash and cash equivalents at beginning of year 3,969,116 3,287,141 ----------- ----------- Cash and cash equivalents at end of period $ 1,711,896 $ 2,510,529 ========== ========== Supplemental disclosure of cash flow information Cash paid (received) for: Interest $ 3,342,945 $5,888,750 Income taxes 181,783 2,997,370 Income taxes refunded - (8,315,483) =========== ===========
See accompanying notes to consolidated financial statements 5 J. BAKER, INC. AND SUBSIDIARIES NOTES 1] The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for a fair presentation of the Company's financial position and results of operations. The results for the interim periods are not necessarily indicative of results that may be expected for the entire fiscal year. 2] Primary earnings per share is based on the weighted average number of shares of Common Stock outstanding during such period. Stock options and warrants are excluded from the calculation since they have less than a 3% dilutive effect. Fully diluted earnings per share is based on the weighted average number of shares of Common Stock outstanding during such period. Included in this calculation is the dilutive effect of stock options and warrants. The Common Stock issuable under the 7% convertible subordinated notes was not included in the calculation for the quarters and six months ended August 2, 1997 and August 3, 1996 because its effect would be antidilutive. 3] During the fourth quarter of fiscal 1997, the Company recorded a restructuring charge related to its footwear operations. In connection with the restructuring, the Company has reduced its investment in its Licensed Discount footwear division, and, in March, 1997, the Company completed the sales of its Shoe Corporation of America ("SCOA") and Parade of Shoes businesses. On March 5, 1997, the Company announced that it had sold its SCOA division to an entity formed by CHB Capital Partners of Denver, Colorado along with Dennis B. Tishkoff, President of SCOA, and certain members of SCOA management. Net cash proceeds from the transaction of approximately $40.1 million were used to pay down the Company's bank debt. Sales in the Company's SCOA division totaled $0 and $44.5 million for the quarters ended August 2, 1997 and August 3, 1996, respectively, and $9.5 million and $89.2 million for the six months ended August 2, 1997 and August 3, 1996, respectively. On March 10, 1997, the Company completed the sale of its Parade of Shoes division to Payless ShoeSource, Inc. of Topeka, Kansas. Net cash proceeds from the transaction of approximately $20 million were used to pay down the Company's bank debt. Sales in the Company's Parade of Shoes division totaled $0 and $38.1 million for the quarters ended August 2, 1997 and August 3, 1996, respectively, and $8.2 million and $65.8 million for the six months ended August 2, 1997 and August 3, 1996, respectively. 4] On May 30, 1997, the Company replaced its $145 million credit facility by obtaining two separate revolving credit facilities, both of which are guaranteed by J. Baker, Inc. One facility, which finances the Company's apparel businesses, is a $100 million revolving credit facility with Fleet National Bank, BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel Credit Facility"). The Apparel Credit Facility is secured by all of the capital stock of The Casual Male, Inc. and three other subsidiaries of the Company. The aggregate commitment under the Apparel Credit Facility will be automatically reduced by $10 million, $12.5 million and $12.5 million on December 31, 1997, December 31, 1998 and December 31, 1999, respectively. Borrowings under the Apparel Credit Facility bear interest at variable rates and can be in the form of loans, bankers' acceptances and letters of credit. This facility expires on May 31, 2000. To finance its Licensed Discount footwear business, the Company obtained a $55 million revolving credit facility, secured by substantially all of the assets of the Licensed Discount division, with GBFC, Inc. and Fleet National Bank (the "Footwear Credit Facility"). The aggregate commitment under the Footwear Credit Facility was reduced by $5 million on June 30, 1997. Aggregate borrowings under the Footwear Credit Facility are limited to an amount determined by a formula based on various percentages of eligible inventory and accounts receivable. Borrowings under the Footwear Credit Facility bear interest at variable rates and can be in the form of loans or letters of credit. This facility expires on May 31, 2000. 6 5] On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. At the time of the bankruptcy filing, the Company had outstanding accounts receivable of approximately $1.8 million due from Bradlees. Under bankruptcy law, Bradlees has the option of assuming the existing license agreement with the Company or rejecting that agreement. If the license agreement is assumed, Bradlees must cure all defaults under the agreement and the Company will collect in full the outstanding past due receivable. The Company has no assurance that the agreement will be assumed or that Bradlees will continue in business. Although the Company believes that the rejection of the license agreement or the cessation of Bradlees' business is not probable, in the event that the agreement is rejected or Bradlees does not continue in business, the Company believes it will have a substantial claim for damages. If such a claim is necessary, the amount realized by the Company, relative to the carrying values of the Company's Bradlees-related assets, will be based on the relevant facts and circumstances. The Company does not expect this filing under the Bankruptcy Code to have a material adverse effect on future earnings. The Company's sales in the Bradlees chain for the quarter and six months ended August 2, 1997 were $14.1 million and $23.5 million, respectively. 6] On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. Jamesway liquidated its inventory, fixed assets and real estate and ceased operation of its business in all of its 90 stores. The Company participated in Jamesway's going out of business sales and liquidated substantially all of its footwear inventory in the 90 Jamesway stores during the going out of business sales. At the time of the bankruptcy filing, the Company had outstanding accounts receivable of approximately $1.4 million due from Jamesway. Because Jamesway ceased operation of its business, the Company's license agreement was rejected. The Company has negotiated a settlement of the amount of its claim with Jamesway, which has been approved by the Bankruptcy Court. The Jamesway plan of liquidation was confirmed on June 6, 1997, and the Company received a partial distribution of the amount owed to the Company under the settlement during the second quarter of fiscal 1998. In August, 1997, the Company received a fee from a third party by assigning its rights to any future distributions from Jamesway. 7] On November 10, 1993, the United States District Court for the District of Minnesota returned a jury verdict assessing royalty damages 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 patent for a system used to connect pairs of shoes. The jury verdict was based on a finding that three different shoe connection systems used by the Company infringed Ms. Maxwell's patent. Post trial motions for treble damages, attorney's fees and injunctive relief were granted on March 10, 1995. The Company appealed the judgment. On June 11, 1996, the United States Court of Appeals for the Federal Circuit reversed in part and affirmed in part and vacated the award of treble damages, attorney's fees and injunctive relief. The appellate court's ruling was based on its holding that as a matter of law two of the three shoe connection systems used by the Company did not infringe the patent. A request by Ms. Maxwell for a rehearing en banc was denied by an order dated August 28, 1996. Ms. Maxwell petitioned the United States Supreme Court for a writ of certiorari, which petition was denied on March 17, 1997. The case has been remanded to the trial court for a redetermination of damages consistent with the opinion of the appellate court. The issues for trial on remand include a determination of what, if anything, is a reasonable royalty for the one shoe connection system that was not subject to the reversal by the Court of Appeals, how many pairs of shoes having the patented system did the Company sell, and whether the Company's sale of shoes having the patented system, after actual notice of the patent and while the Company was changing to the two systems found to be non-infringing, constitutes willful infringement in which event damages payable by the Company may at the discretion of the Court be doubled or trebled. The trial on remand commenced on September 8, 1997 and is expected to conclude by the end of September, 1997. A complaint was also filed by Ms. Maxwell in November, 1992 against Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement of the patent referred to above. The trial has been stayed pending the outcome of the aforementioned trial. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. All references herein to fiscal 1998 and fiscal 1997 relate to the years ending January 31, 1998 and February 1, 1997, respectively. Results of Operations FIRST SIX MONTHS OF FISCAL 1998 VERSUS FIRST SIX MONTHS OF FISCAL 1997 The Company's net sales decreased by $146.0 million to $281.3 million in the first six months of fiscal 1998 from $427.3 million in the first six months of fiscal 1997, primarily due to the disposition of the Company's SCOA and Parade of Shoes businesses in March, 1997. Sales in the Company's apparel operations increased by $8.0 million primarily due to an increase in the number of Casual Male Big & Tall stores in operation during the first six months of fiscal 1998 as compared to the first six months of fiscal 1997 and a 1.0% increase in comparable apparel store sales. (Comparable apparel store sales increases/decreases are based upon comparisons of weekly sales volume in Casual Male Big & Tall stores and Work 'n Gear stores which were open in corresponding weeks of the relevant comparison periods.) Excluding net sales produced by the Company's SCOA and Parade of Shoes businesses of $17.7 million in the first six months of fiscal 1998 and $155.0 million in the first six months of fiscal 1997, sales produced by the Company's Licensed Discount shoe department operations decreased by $16.8 million to $128.2 million in the first six months of fiscal 1998 from $145.0 million in the first six months of fiscal 1997. This decrease was primarily due to a reduction in the number of Licensed Discount shoe departments in operation during the first six months of fiscal 1998 as compared to the first six months of fiscal 1997 and a 3.0% decrease in comparable retail footwear store sales. (Comparable retail footwear store sales increases/decreases are based upon comparisons of weekly sales volume in Licensed Discount shoe departments which were open in corresponding weeks of the relevant comparison periods.) The Company's cost of sales constituted 55.3% of sales in the first six months of fiscal 1998 as compared to 55.1% of sales in the first six months of fiscal 1997. Cost of sales in the Company's apparel operations was 52.4% of sales in the first six months of fiscal 1998 as compared to 50.8% of sales in the first six months of fiscal 1997. The increase in such percentage was primarily attributable to higher markdowns as a percentage of sales and a lower initial markup on merchandise purchases. Cost of sales in the Company's footwear operations was 57.9% of sales in the first six months of fiscal 1998 as compared to 56.9% of sales in the first six months of fiscal 1997. The increase in such percentage, which was partially offset by a change in the Company's method of financing its foreign merchandise purchases with bank borrowings in the first six months of fiscal 1998 versus the use of bankers' acceptances in the first six months of fiscal 1997, was primarily due to the increased proportion of Licensed Discount shoe department sales to total footwear sales in the first six months of fiscal 1998 versus the first six months of fiscal 1997. As a percentage of sales, Licensed Discount shoe department sales have a higher cost of sales than the aggregate cost of sales in the divested SCOA and Parade of Shoes businesses. Selling, administrative and general expenses decreased $58.0 million, or 34.6%, to $109.6 million in the first six months of fiscal 1998 from $167.6 million in the first six months of fiscal 1997 primarily due to the disposition of the Company's SCOA and Parade of Shoes businesses in March, 1997 and the downsizing of the Company's Licensed Discount shoe division and its administrative areas and facilities, coupled with the benefit realized from the curtailment of the Company's defined benefit pension plan in the first six months of fiscal 1998. As a percentage of sales, selling, administrative and general expenses were 39.0% of sales in the first six months of fiscal 1998 as compared to 39.2% of sales in the first six months of fiscal 1997. Selling, administrative and general expenses in the Company's apparel operations were 41.3% of sales in the first six months of fiscal 1998 as compared to 43.5% of sales in the first six months of fiscal 1997. This decrease was primarily due to a lower corporate overhead allocation, resulting from a portion of corporate overhead costs for the first six months of fiscal 1998 being allocated to the Company's divested SCOA and Parade of Shoes businesses. Selling, administrative and general expenses in the Company's footwear operations were 36.8% of sales in the first six months of fiscal 1998 as compared to 37.4% of sales in the first six months of fiscal 1997. This decrease was primarily due to the increased proportion of Licensed Discount shoe department sales to total footwear sales in the first six months of 8 fiscal 1998 versus the first six months of fiscal 1997. The Company's Licensed Discount shoe division has lower selling, administrative and general expenses as a percentage of sales than the aggregate selling, administrative and general expenses as a percentage of sales in the divested SCOA and Parade of Shoes businesses. Depreciation and amortization expense decreased by $8.5 million in the first six months of fiscal 1998 as compared to the first six months of fiscal 1997 primarily due to the write-off of certain fixed and intangible assets in the fourth quarter of fiscal 1997 related to the overall restructuring of the Company's footwear businesses. This decrease was partially offset by capital expenditures for depreciable and amortizable assets. As a result of the above described effects, the Company's operating income increased by 2.3% to $10.0 million in the first six months of fiscal 1998 from $9.8 million in the first six months of fiscal 1997. As a percentage of sales, operating income was 3.6% in the first six months of fiscal 1998 as compared to 2.3% in the first six months of fiscal 1997. Net interest expense increased $448,000 to $6.5 million in the first six months of fiscal 1998 from $6.0 million in the first six months of fiscal 1997 primarily due to a change in the Company's method of financing foreign merchandise purchases with bank borrowings in the first six months of fiscal 1998 versus the use of bankers' acceptances in the first six months of fiscal 1997, partially offset by lower levels of bank borrowings in the first six months of fiscal 1998. Taxes on earnings for the first six months of fiscal 1998 were $1.4 million as compared to taxes of $1.5 million in the first six months of fiscal 1997, yielding an effective tax rate of 39.0% in each case. Net earnings for the first six months of fiscal 1998 were $2.2 million, as compared to net earnings of $2.3 million in the first six months of fiscal 1997, a decrease of 6.0%. SECOND QUARTER OF FISCAL 1998 VERSUS SECOND QUARTER OF FISCAL 1997 The Company's net sales decreased by $87.9 million to $143.9 million in the second quarter of fiscal 1998 from $231.8 million in the second quarter of fiscal 1997. Sales in the Company's apparel operations increased by $4.3 million primarily due to an increase in the number of Casual Male Big & Tall stores in operation during the second quarter of fiscal 1998 as compared to the second quarter of fiscal 1997 and a 1.6% increase in comparable apparel store sales. Excluding net sales produced by the Company's SCOA and Parade of Shoes businesses of $82.6 million in the second quarter of fiscal 1997, sales produced by the Company's Licensed Discount shoe department operations decreased by $9.6 million to $74.6 million in the second quarter of fiscal 1998 from $84.2 million in the second quarter of fiscal 1997. This decrease was primarily due to a reduction in the number of Licensed Discount shoe departments in operation during the second quarter of fiscal 1998 as compared to the second quarter of fiscal 1997 and a 3.0% decrease in comparable retail footwear store sales. The Company's cost of sales constituted 55.7% of sales in the second quarter of fiscal 1998 as compared to 56.2% of sales in the second quarter of fiscal 1997. Cost of sales in the Company's apparel operations was 52.1% of sales in the second quarter of fiscal 1998 as compared to 51.0% of sales in the second quarter of fiscal 1997. The increase in such percentage was primarily attributable to higher markdowns as a percentage of sales and a lower initial markup on merchandise purchases. Cost of sales in the Company's footwear operations was 59.0% of sales in the second quarter of fiscal 1998 as compared to 58.3% of sales in the second quarter of fiscal 1997. The increase in such percentage, which was partially offset by a change in the Company's method of financing its foreign merchandise purchases with bank borrowings in the second quarter of fiscal 1998 versus the use of bankers' acceptances in the second quarter of fiscal 1997, was primarily due to higher markdowns as a percentage of sales and a lower initial markup on merchandise purchases in the Company's Licensed Discount shoe division, coupled with an increased proportion of Licensed Discount shoe department sales to total footwear sales in the second quarter of fiscal 1998 versus the second quarter of fiscal 1997. As a percentage of sales, Licensed Discount shoe department sales have a higher cost of sales than the aggregate cost of sales in the divested SCOA and Parade of Shoes businesses. 9 Selling, administrative and general expenses decreased $34.4 million, or 38.9%, to $53.9 million in the second quarter of fiscal 1998 from $88.3 million in the second quarter of fiscal 1997 primarily due to the disposition of the Company's SCOA and Parade of Shoes businesses in March, 1997 and the downsizing of the Company's Licensed Discount shoe division and its administrative areas and facilities. As a percentage of sales, selling, administrative and general expenses were 37.5% of sales in the second quarter of fiscal 1998 as compared to 38.1% of sales in the second quarter of fiscal 1997. Selling, administrative and general expenses in the Company's apparel operations were 41.4% of sales in the second quarter of fiscal 1998 as compared to 44.2% of sales in the second quarter of fiscal 1997. This decrease was primarily due to a lower corporate overhead allocation and the increase in comparable apparel store sales. Selling, administrative and general expenses in the Company's footwear operations were 33.8% of sales in the second quarter of fiscal 1998 as compared to 35.7% of sales in the second quarter of fiscal 1997. This decrease was primarily due to the increased proportion of Licensed Discount shoe department sales to total footwear sales in the second quarter of fiscal 1998 versus the second quarter of fiscal 1997. The Company's Licensed Discount shoe division has lower selling, administrative and general expenses as a percentage of sales than the aggregate selling, administrative and general expenses as a percentage of sales in the divested SCOA and Parade of Shoes businesses. Depreciation and amortization expense decreased by $4.0 million in the second quarter of fiscal 1998 as compared to the second quarter of fiscal 1997 primarily due to the write-off of certain fixed and intangible assets in the fourth quarter of fiscal 1997 related to the overall restructuring of the Company's footwear businesses. This decrease was partially offset by capital expenditures for depreciable and amortizable assets. As a result of the above described effects, the Company's operating income increased by 12.4% to $6.4 million in the second quarter of fiscal 1998 from $5.7 million in the second quarter of fiscal 1997. As a percentage of sales, operating income was 4.4% in the second quarter of fiscal 1998 as compared to 2.4% in the second quarter of fiscal 1997. Net interest expense increased $18,000 to $3.2 million in the second quarter of fiscal 1998 from $3.2 million in the second quarter of fiscal 1997 primarily due to a change in the Company's method of financing foreign merchandise purchases with bank borrowings in the second quarter of fiscal 1998 versus the use of bankers' acceptances in the second quarter of fiscal 1997, partially offset by lower levels of bank borrowings in the second quarter of fiscal 1998. Taxes on earnings for the second quarter of fiscal 1998 were $1.2 million, yielding an effective tax rate of 39.0%, as compared to taxes of $952,000, yielding an effective tax rate of 39.1%, in the second quarter of fiscal 1997. Net earnings for the second quarter of fiscal 1998 were $1.9 million, as compared to net earnings of $1.5 million in the second quarter of fiscal 1997, an increase of 28.2%. Financial Condition AUGUST 2, 1997 VERSUS FEBRUARY 1, 1997 The increase in merchandise inventories at August 2, 1997 from February 1, 1997 was primarily due to a seasonal increase in the average inventory level per location. The decrease in assets held for sale at August 2, 1997 from February 1, 1997 was due to the receipt of the cash proceeds from the divestitures of the Company's SCOA and Parade of Shoes businesses in March, 1997. The increase in other assets at August 2, 1997 from February 1, 1997 was primarily the result of the establishment of escrow accounts related to the divestitures of the Company's SCOA and Parade of Shoes businesses. The decrease in accounts payable at August 2, 1997 from February 1, 1997 was primarily due to an increase in direct import merchandise purchases, which are paid for sooner than domestic merchandise purchases, coupled 10 with the Company's decision to eliminate bankers' acceptance financing of foreign merchandise purchases in its footwear operations. The ratio of accounts payable to merchandise inventory was 29.7% at August 2, 1997, as compared to 39.0% at February 1, 1997. The decrease in accrued expenses at August 2, 1997 from February 1, 1997 was primarily due to payments of costs related to the restructuring of the Company's footwear operations, including the sales of the Company's SCOA and Parade of Shoes businesses, and the downsizing and restructuring of its Licensed Discount shoe division and the Company's administrative areas and facilities. The decrease in other liabilities at August 2, 1997 from February 1, 1997 was due to payment of $3.0 million to former stockholders of SCOA in order to satisfy a contractual contingent payment obligation, based on earnings, to such former SCOA stockholders. The decrease in long-term debt, net of current portion, at August 2, 1997 from February 1, 1997 was due to the repayment of the Company's bank debt with the net cash proceeds from the sales of the Company's SCOA and Parade of Shoes businesses. The decrease was partially offset by additional borrowings to meet seasonal working capital needs and to fund capital expenditures. Liquidity and Capital Resources In the first six months of fiscal 1998, the Company's primary sources of capital to finance its cash needs were the proceeds received on the sales of the Company's SCOA and Parade of Shoes businesses, and borrowings under bank credit facilities. On May 30, 1997, the Company replaced its $145 million credit facility by obtaining two separate revolving credit facilities, both of which are guaranteed by J. Baker, Inc. One facility, which finances the Company's apparel businesses, is a $100 million revolving credit facility with Fleet National Bank, BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel Credit Facility"). The Apparel Credit Facility is secured by all of the capital stock of The Casual Male, Inc. and three other subsidiaries of the Company. The aggregate commitment under the Apparel Credit Facility will be automatically reduced by $10 million, $12.5 million and $12.5 million on December 31, 1997, December 31, 1998 and December 31, 1999, respectively. Borrowings under the Apparel Credit Facility bear interest at variable rates and can be in the form of loans, bankers' acceptances and letters of credit. This facility expires on May 31, 2000. To finance its Licensed Discount footwear business, the Company obtained a $55 million revolving credit facility, secured by substantially all of the assets of the Licensed Discount division, with GBFC, Inc. and Fleet National Bank (the "Footwear Credit Facility"). The aggregate commitment under the Footwear Credit Facility was reduced by $5 million on June 30, 1997. Aggregate borrowings under the Footwear Credit Facility are limited to an amount determined by a formula based on various percentages of eligible inventory and accounts receivable. Borrowings under the Footwear Credit Facility bear interest at variable rates and can be in the form of loans or letters of credit. This facility expires on May 31, 2000. As of August 2, 1997, the Company had aggregate borrowings outstanding under its Apparel Credit Facility and its Footwear Credit Facility totaling $84.1 million and $42.0 million, respectively, consisting of loans and obligations under letters of credit. Net cash used in operating activities for the first six months of fiscal 1998 was $45.0 million compared to $28.0 million for the first six months of fiscal 1997. The $17.0 million increase was due primarily to expenditures related to the footwear restructuring and the receipt of an $8.3 million federal income tax refund in the first six months of fiscal 1997. Net cash provided by financing activities for the first six months of fiscal 1998 was $46.8 million compared to $35.3 million for the first six months of fiscal 1997. The $11.5 million increase was primarily attributable to the receipt of $60.1 million in proceeds from the sales of the Company's SCOA and Parade of Shoes businesses, offset by repayments of debt of $13.0 million in the first six months of fiscal 1998, as compared to the receipt of 11 $35.5 million in net proceeds of debt in the first six months of fiscal 1997. The Company invested $4.2 million and $10.5 million in capital expenditures during the first six months of fiscal years 1998 and 1997, respectively, which generally related to new store and licensed shoe department openings and the remodeling of existing stores and departments, coupled with expenditures for general corporate purposes. The Company expects to spend approximately an additional $4.0 million to $6.0 million in capital expenditures in the last six months of fiscal 1998, and expects that its total budgeted capital expenditures for fiscal 1999 will be approximately $10.0 million to $12.0 million. Such estimates of future expenditures reflect costs expected to be incurred for new and remodeled stores and licensed shoe departments, and for general corporate purposes. Following is a table showing actual and planned store openings by division for fiscal 1998: Actual Openings Planned Openings Total First - Second Third - Fourth Actual/Planned Division Quarters of Fiscal 1998 Quarters of Fiscal 1998 Openings -------- ----------------------- ----------------------- -------- Casual Male 20 15 35 Work 'n Gear 0 2 2 Licensed Discount 9 2 11
Offsetting the above actual and planned store openings, the Company closed 4 Casual Male stores, 1 Work 'n Gear store and 83 Licensed Discount shoe departments during the first six months of fiscal 1998. The Company has plans to close approximately an additional 2 Casual Male stores, 1 Work 'n Gear store and 4 Licensed Discount shoe departments during the second half of fiscal 1998. The Company believes that amounts available under its revolving credit facilities, along with other potential sources of funds and cash flows from operations, will be sufficient to meet its foreseeable operating and capital requirements through the end of the current fiscal year. From time to time, the Company evaluates potential acquisition candidates in pursuit of strategic initiatives and growth goals in its niche apparel markets. Financing of potential acquisitions will be determined based on the financial condition of the Company at the time of such acquisitions, and may include borrowings under current or new commercial credit facilities or the issuance of publicly issued or privately placed debt or equity securities. This Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements and may fluctuate between operating periods. The information on store openings and closings reflects management's current plans and should not be interpreted as an assurance of actual future developments. The actual number of store openings and closings will depend on the availability of attractively priced sites for openings of apparel stores, the ability of the Company to negotiate leases on favorable terms, operating results of each site and the actions of the Company's licensors. 12 PART II - OTHER INFORMATION Item 1. Legal proceedings ----------------- On November 10, 1993, the United States District Court for the District of Minnesota returned a jury verdict assessing royalty damages 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 patent for a system used to connect pairs of shoes. The jury verdict was based on a finding that three different shoe connection systems used by the Company infringed Ms. Maxwell's patent. Post trial motions for treble damages, attorney's fees and injunctive relief were granted on March 10, 1995. The Company appealed the judgment. On June 11, 1996, the United States Court of Appeals for the Federal Circuit reversed in part and affirmed in part and vacated the award of treble damages, attorney's fees and injunctive relief. The appellate court's ruling was based on its holding that as a matter of law two of the three shoe connection systems used by the Company did not infringe the patent. A request by Ms. Maxwell for a rehearing en banc was denied by an order dated August 28, 1996. Ms. Maxwell petitioned the United States Supreme Court for a writ of certiorari, which petition was denied on March 17, 1997. The case has been remanded to the trial court for a redetermination of damages consistent with the opinion of the appellate court. The issues for trial on remand include a determination of what, if anything, is a reasonable royalty for the one shoe connection system that was not subject to the reversal by the Court of Appeals, how many pairs of shoes having the patented system did the Company sell, and whether the Company's sale of shoes having the patented system, after actual notice of the patent and while the Company was changing to the two systems found to be non-infringing, constitutes willful infringement in which event damages payable by the Company may at the discretion of the Court be doubled or trebled. The trial on remand commenced on September 8, 1997 and is expected to conclude by the end of September, 1997. A complaint was also filed by Ms. Maxwell in November, 1992 against Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement of the patent referred to above. The trial has been stayed pending the outcome of the aforementioned trial. The Company is unable to predict the ultimate outcome of these cases or the likely monetary exposure to the Company. However, a determination adverse to the Company in such proceedings could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is also involved in various claims and lawsuits incidental to its business. The Company does not believe that these claims and lawsuits in the aggregate will have a material adverse effect on the Company's business, financial condition and results of operations. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The registrant's annual meeting of stockholders was held on June 10, 1997 (the "Meeting"). (b) Ms. Nancy Ryan and Mr. Douglas J. Kahn were elected Class II directors at the Meeting for a three year term. The term of office for the following directors continued after the Meeting: Sherman N. Baker, J. Christopher Clifford, Ervin D. Cruce, David Pulver, Melvin M. Rosenblatt and Alan I. Weinstein. (c) The stockholders voted on the ratification of the selection of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending January 31, 1998. 13 The following votes were cast at the Meeting with respect to each nominee for Class II director: Total vote for Total vote withheld each director from each director --------------- ------------------- Douglas J. Kahn 12,338,346 109,625 Nancy Ryan 12,338,446 109,525
The following votes were cast at the Meeting with respect to the ratification of auditors: For: 12,352,339 Against: 11,205 Abstain: 84,427 Item 6. Exhibits and Reports on Form 8-K --------------------------------- (a) The Exhibits in the Exhibit Index are filed as part of this report. (b) No reports on Form 8-K were filed by the registrant during the quarter for which this report is filed. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. J. BAKER, INC. By:/s/Alan I. Weinstein Alan I. Weinstein President and Chief Executive Officer Date: Canton, Massachusetts September 15, 1997 By:/s/Philip Rosenberg Philip Rosenberg Executive Vice President, Chief Financial Officer and Treasurer Date: Canton, Massachusetts September 15, 1997 15 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------- EXHIBITS Filed with Quarterly Report on Form 10-Q of J. BAKER, INC. 555 Turnpike Street Canton, MA 02021 For the Quarter ended August 2, 1997 16 EXHIBIT INDEX Exhibit Page No. 10. Material Contracts (.01) Executive Employment Agreement dated as of April 1, 1997 * between James D. Lee and J. Baker, Inc. (.02) Executive Employment Agreement dated as of June 5, 1997 * between Roger J. Osborne and J. Baker, Inc. 11. Computation of Primary and Fully Diluted Earnings Per Share, attached. * 27. Financial Data Schedule **
* Included herein ** This exhibit has been filed with the Securities and Exchange Commission as part of J. Baker, Inc.'s electronic submission of this Form 10-Q under EDGAR filing requirements. It has not been included herein. EX-10 2 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.01 EXECUTIVE EMPLOYMENT AGREEMENT This Agreement is dated as of April 1, 1997 by and between James D. Lee (the "Employee") and J. BAKER, INC., a Massachusetts corporation together with any subsidiaries of the Company (the "Company"). WHEREAS, the Employee and the Company desire to set forth in writing the terms and conditions of the Employee's employment agreement with the Company from the date hereof; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Employment. Under and subject to the terms and conditions set forth herein, the Company hereby agrees to employ the Employee during the Term (as defined in Section 6 hereof) as its Executive Vice President and President of its Licensed Discount Footwear division and/or in such other senior executive management position(s) with the Company, or any parent or subsidiary of the Company, as the Board of Directors of the Company (the "Board") may determine from time to time, and the Employee hereby accepts such employment. 2. Duties. The Employee agrees, during the Term and any extension of the Term, faithfully to perform for the Company, such duties as may be assigned to him from time to time by the Company. The Employee further agrees to devote his entire business time, attention and energies exclusively to such employment and to conform to the rules, regulations, instructions, personnel practices and policies of the Company and its subsidiaries, as existing and amended from time to time. The Employee may be required to relocate his principal residence only to an area in which the Company or a subsidiary of the Company has or determines to have significant operations. 3. Compensation. (a) Base Salary. The Company shall pay the Employee during the Term an annual base salary of not less than $275,000, payable no less often than monthly, in equal installments. (b) Cash Incentive Compensation. In addition to his annual base salary as determined pursuant to Section 3(a), the Company shall pay to the Employee a one time bonus payment equal to $65,000 on December 31, 1998 provided the Employee is still employed by the Company on such date. During the Term, the Employee shall also be paid such amounts, if any, to which the Employee is entitled, as an officer of the Company, under the Company's Cash Incentive Plan (the "Incentive Plan"), as from time to time such Incentive Plan may be 1 amended, participating at award opportunity level C, with a "target" level of incentive compensation of forty percent (40%) of base salary. 4. Other Benefits. (a) Fringe Benefits. The Employee shall be entitled to participate in all benefit programs that the Company establishes and makes available to management generally and in any event shall be entitled to receive benefits at least substantially comparable to those provided pursuant to the present practices of the Company and its subsidiaries. (b) Paid Vacations. The Employee shall be entitled to an annual paid vacation of three weeks in each calendar year, to be taken at such time or times as the Employee and the Company shall mutually agree, provided, however, that no more than two weeks shall be taken during any three month period unless otherwise agreed upon by the Company's Chief Executive Officer. 5. Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other business expenses incurred or paid by the Employee in performing his duties under this Agreement upon presentation by the Employee of expense statements or vouchers and such other supporting information as the Company may from time to time request, provided, however, that the amount available for such expenses may be fixed in advance by the Board after consultation with the Employee. The Company shall also pay or reimburse the reasonable relocation expenses of the Employee (consistent with the present policies of the Company) in connection with a relocation of the Employee's principal residence outside of the greater Boston area required by the Company pursuant to Section 2 hereof. 6. Effective Date and Term. This Agreement shall become effective as of the date hereof and the Employee's employment under this Agreement shall commence on such date and, unless sooner terminated as provided herein or extended, shall continue for a term (the "Term") ending on April 1, 1999. The Employee and the Company have obligations hereunder extending past the Term. 7. Noncompetition. (a) During the Employee's employment under this Agreement or otherwise and for a period of two years after the date of termination of such employment (the "Termination Date"), the Employee will not, without the express written consent of the Company, anywhere in the United States or any territory or possession thereof or in any foreign country in which the Company was active as of the Termination Date: (i) compete with the Company or any other entity directly or indirectly controlled by the Company (each an "Affiliate"), in the Company's Business (as defined in Section 7(c) hereof); or (ii) otherwise interfere with, disrupt or attempt 2 to interfere with or disrupt the relationship between the Company or an Affiliate and any person or business that was a customer, supplier, lessor, licensor, manufacturer, contractor, designer or employee of the Company or such Affiliate on the Termination Date or within two years prior to the Termination Date. (b) The term "compete" as used in this Section 7 means directly or indirectly, or by association with any entity or business, either as a proprietor, partner, employee, agent, consultant, director, officer, shareholder (provided that the Employee may make passive investments in competitive enterprises the shares of which are listed on a national securities exchange if the Employee at no time owns directly or indirectly more than 2% of the outstanding equity ownership of such enterprise) or in any other capacity or manner (i) to solicit, hire, purchase from, sell to, rent from, or otherwise conduct business related to the Company's Business with any party that is a customer or supplier of the Company or an Affiliate or (ii) operate any retail store or leased footwear department ("Leased Department") which sells products related to the Company's Business (as defined in Section 7(c) hereof). (c) The term "Company's Business" as used in this Section 7 means the operation of any of the following specialty retail businesses, as a principal business unit, either alone or in combination: (i) Leased Departments in discount or mass merchandising department stores; (ii) retail stores offering casual clothing for "Big and Tall" men; or (iii) retail stores offering primarily work related clothing and uniforms for medical and laboratory purposes or the mail order catalog sales thereof. The term shall also include any additional specialty retail businesses which the Company may acquire subsequent to the date hereof and which are operated as principal business units of the Company on the Termination Date. (d) The term "supplier" as used in this Section 7 shall mean any party or affiliate of a party from which, on the Termination Date or within two years prior to the Termination Date, the Company or an Affiliate purchased products sold by the Company or an Affiliate or was in contact or actively planning to contact in connection with the purchase of products sold by the Company or an Affiliate on or before the Termination Date or which the Company or an Affiliate was contemplating the sale of at some time after the Termination Date. (e) The term "customer" as used in this Section 7 shall mean any party or affiliate of a party, that on the Termination Date or within two years prior to the Termination Date, was a wholesale vendee or prospective wholesale vendee of the Company or an Affiliate or in connection with whose business the Company or an Affiliate operated a Leased Department, a retail store for the sale of casual clothing for "Big and Tall" men, work related clothing and uniforms for medical and laboratory purposes or any other specialty retail business which the Company operated as a principal business unit on the Termination Date, had contacted in connection with the potential operation of such businesses within two years prior to the Termination Date or which the Company or an Affiliate was actively planning to contact in connection with the potential operation of any such businesses on the Termination Date. 3 8. Confidential Information. The Employee will never use for his own advantage or disclose any proprietary or confidential information relating to the business operations or properties of the Company, any Affiliate or any of their respective customers, suppliers, landlords, licensors or licensees. Upon termination of the Employee's employment, the Employee will surrender and deliver to the Company all documents and information of every kind relating to or connected with the Company and Affiliates and their respective businesses, customers, suppliers, landlords, licensors and licensees. 9. Termination. (a) Death. In any event of the death of the Employee during the Term, his employment shall terminate and the Company shall pay to the Employee's surviving spouse, or to the Employee's estate if their is no surviving spouse, (i) the Employee's base salary for one year from the date of death, and (ii) amounts under the Incentive Plan, if any, payable with respect to the fiscal year in which his death occurs which otherwise would have been paid to the Employee on the basis of the results for such fiscal year, prorated to the date of his death. Upon the death of the Employee, the rights of the Employee's surviving spouse or estate hereunder, as the case may be, shall be limited solely to the benefits set forth in this Section 9(a). (b) Disability. In the event that the Employee shall become disabled (as hereinafter defined) during the Term, the Company shall have the right to terminate the Employee's employment upon written notice, provided, however, that in such event the Company shall (i) continue to pay the Employee's base salary for one year from the date such termination occurs, and (ii) pay to the Employee amounts under the Incentive Plan, if any, which otherwise would have been paid to the Employee on the basis of the results for the fiscal year in which such termination occurs, prorated to the date of such termination. For purposes of this Agreement, the Employee shall be considered disabled on the date when any physical or mental illness or other incapacity shall, in the judgment of a majority of the members of the Board, after consulting with or being advised by one or more physicians (it being understood that one of such physicians may be the Employee's physician but that the Board shall not be bound by his views), have prevented the performance in a manner reasonably satisfactory to the Company of the Employees duties under this Agreement for a period of six consecutive months. (c) For Cause. The Company may by notice terminate the Employee's employment at any time for cause, which shall mean (i) failure by the Employee to cure a material breach of this Agreement within 15 days after written notice thereof by the Company, (ii) the continuation after notice by the Company of willful misconduct by the Employee in the performance of the Employee's duties hereunder or (iii) the commission by the Employee of an act constituting a felony. In such event all obligations of the Company hereunder shall thereupon terminate, including the obligation to pay any amounts under the Incentive Plan with respect to the fiscal year in which such termination occurs, but the Employee shall be entitled 4 to receive any accrued salary and other amounts under the Incentive Plan accrued with respect to any prior fiscal years. (d) Without Cause. During the Term hereof and prior to any Change of Control of the Company, the Company may terminate this Agreement at any time without cause. In such event, the Company shall pay to the Employee, in accordance with the Company's regular pay intervals for its senior executives, (A) an amount equal to the greater of (i) the amount of Base Salary the Employee would have received through the last day of the Term or (ii) one (1) year of Base Salary, and (B) the amount, if any, of the bonus payment described in Section 3(b) hereof, if such amount shall not have been paid as of the date of the Employee's termination and (C) the amount of incentive compensation, if any, which shall be subject to award to the Employee pursuant to the terms of the Incentive Plan for a completed full fiscal year but which shall not have been paid to the Employee as of the date of the Employee's termination. (e) Change of Control/Change of Management. (i) In the event the Employee's employment with the Company is terminated (A) by the Company or (B) by the Employee for "good reason" within three (3) years after a Change in Control of the Company occurring during the Term hereof (regardless of whether such Employee's termination occurs after the expiration of the Term), or (ii) in the event the Employee's employment is terminated (C) by the Company (except if such termination is for "cause" as defined in subparagraph 9(c) hereof) or (D) by the Employee for "good reason" within three (3) years after the employment of Mr. Weinstein with the Company has terminated during the Term hereof for any reason including, without limitation, dismissal, resignation, retirement, death or termination for any other reason, then, in such event, the Company shall pay to the Employee an amount, in cash, (the "Severance Payment") equal to (A) the greater of (i) the amount of Base Salary the Employee would have received through the last day of the Term or (ii) one (1) year of Base Salary, (B) the amount, if any, of the bonus payment described in Section 3(b) hereof, if such amount shall not have been paid as of the date of the Employee's termination. In the event the Employee's employment with the Company is terminated as a result of the Company's decision, during the Term hereof, (regardless of whether such Employee's termination occurs after the expiration of the Term) to either sell the Licensed Discount Division in its entirety as a going concern, or to discontinue operation of the Licensed Discount Division and to liquidate the Division's licenses, inventory and fixed assets, then, in such event, the Company shall pay to the Employee a single lump sum payment equal to (A) the greater of (i) the amount of Base Salary the Employee would have received through the last day of the Term or (ii) two (2) years Base Salary, and (B) the amount, if any, of the bonus payment described in Section 3(b) hereof, if such amount shall not have been paid as of the date of the Employee's termination and (C) the amount of incentive compensation, if any, which shall be subject to award to the Employee pursuant to the terms of the Incentive Plan for a completed full fiscal year but which shall not have been paid to the Employee as of the date of the Employee's termination. 5 A termination for "good reason" shall be deemed to have occurred, and the Employee shall be entitled to the benefits set forth in this paragraph 9, if the Employee voluntarily terminates his employment after the occurrence of any of the following events, if either the circumstances set forth in paragraphs (e)(i) or (e)(ii) has occurred: (i) the assignment to the Employee of any duties inconsistent with the highest position (including status, offices, titles and reporting requirements), authority, duties or responsibilities attained by the Employee during the period of his employment by the Company; (ii) a relocation of the Employee outside the metropolitan Boston area; or (iii) a decrease in the Employee's compensation (including base salary, bonus or fringe benefits). For purposes hereof, "Change of Control of the Company" shall have the meaning set forth in the Company's 1994 Equity Incentive Plan, as approved by the Stockholders of the Company on June 7, 1994 (and without regard to any subsequent amendments thereto). For purposes of this Agreement "Base Salary" shall mean the Employee's Base Salary as set forth in subparagraph 3(a) of this Agreement, as such Base Salary may be increased from time to time. If any of the termination events set forth in this subparagraph (e) shall occur during the Term hereof or other applicable time periods, the provisions of paragraph 7 hereof shall be null and void and have no further force or effect. 10. Approval of Board. The Company represents that this Agreement has been duly approved by the Board and is in all respects valid and binding upon the Company. 11. Key Person Insurance. The Employee agrees to take such actions as may be reasonably required to permit the Company to maintain key person life insurance on the Employee's life in such amounts and for such periods of time, if any, as the Company deems appropriate, with all benefits being payable to the Company. Upon payment by the Employee of the cash surrender value, if any, of any such policy and any paid but unearned premiums for such policy, the Company will assign such policy to the Employee upon termination (other than because of the Employee's death) of the Employee's employment with the Company, provided, however, that, in the event the Employee's employment is terminated by reason of the disability of the Employee and the death of the Employee may reasonably be expected within one year after such termination as a result of such disability, the Company shall not be required to assign any such policy. 12. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been given and received when actually delivered, one business day after dispatch by telegraphic means, two business days after dispatch by recognized overnight delivery service, or five days after mailing by certified or registered mail with proper postage affixed, return receipt requested and addressed as follows (or to such other address as a party entitled to receive notice hereunder may have designated by notice pursuant to this Section 12): 6 (a) If to the Company: J. Baker, Inc. 555 Turnpike Street Canton, Massachusetts 02021 Attention: President (b) If to the Employee: James D. Lee 1148 High Street Westwood, MA 02090 13. Severability. If any provision of this Agreement or its application to any person or circumstances is invalid or unenforceable, then the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby. Further, if any provision or application hereof is invalid or unenforceable, then a suitable and equitable provision shall be substituted therefor in order to carry out so far as may be valid or enforceable the intent and purposes of the invalid and unenforceable provision. 14. Applicable Law. This Agreement shall be interpreted and construed in accordance with, and shall be governed by, the laws of the Commonwealth of Massachusetts without giving effect to the conflict of law provisions thereof. 15. Assignment. Neither of the parties hereto shall, without the written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, provided, however, that in the event that the Company sells all or substantially all of its assets the Company may assign its rights and transfer its obligations hereunder to the purchaser of such assets. A merger of the Company with or into another corporation shall be deemed not to be an assignment of this Agreement, and, in any such event, this Agreement shall inure to the benefit of and be binding upon the surviving corporation and the Employee. Subject to the foregoing, this Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, heirs, administrators, executors, personal representatives and assigns. 16. Headings. This section and paragraph headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 7 17. Remedies. It is specifically understood and agreed that any breach of the provisions of Section 7 or 8 of this Agreement is likely to result in irreparable injury to the Company, that damages at law will be inadequate remedy for such breach, and that in addition to any other remedy it may have, the Company shall be entitled to enforce the specific performance of said Sections and to seek both temporary and permanent injunctive relief therefor without the necessity of proving actual damages. 18. Waiver of Breach. Any waiver by either the Company or the Employee of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 19. Amendment of Agreement. This Agreement may be altered, amended or modified, in whole or in part, only by a writing signed by both the Employee and the Company. 20. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter thereof and supersedes all prior agreements with respect to such subject matter between the parties including, without limitation, that certain Executive Employment Agreement dated as of January 26, 1996 as amended by a First Amendment dated November 6, 1995, a Second Amendment dated September 21, 1996 and a Third Amendment dated March 31, 1997. Intending to be legally bound, the Company and the Employee have signed this Agreement as if under seal as of the date set forth at the head of the first page. J. BAKER, INC. /s/ Alan I. Weinstein -------------------------- Alan I. Weinstein President /s/ James D. Lee -------------------------- James D. Lee 8 EX-10 3 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.02 EXECUTIVE EMPLOYMENT AGREEMENT This Agreement is dated as of June 5, 1997 by and between Roger J. Osborne (the "Employee") and J. BAKER, INC., a Massachusetts corporation together with any subsidiaries of the Company (the "Company"). WHEREAS, the Employee and the Company desire to set forth in writing the terms and conditions of the Employee's employment agreement with the Company from the date hereof; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Employment. Under and subject to the terms and conditions set forth herein, the Company hereby agrees to employ, or to continue to employ, the Employee during the Term (as defined in Section 6 hereof) as its Executive Vice President and President of the Company's Work 'N Gear division and/or in such other senior executive management position(s) with the Company, or any parent or subsidiary of the Company, as the Board of Directors of the Company (the "Board") may determine from time to time, and the Employee hereby accepts such employment. 2. Duties. The Employee agrees, during the Term and any extension of the Term, faithfully to perform for the Company such duties as may be assigned to him from time to time by the Company. The Employee further agrees to devote his entire business time, attention and energies exclusively to such employment and to conform to the rules, regulations, instructions, personnel practices and policies of the Company and its subsidiaries, as existing and amended from time to time. The Employee may be required to relocate his principal residence only to an area in which the Company or a subsidiary of the Company has or determines to have significant operations. 3. Compensation. (a) The Company shall pay the Employee during the Term an annual base salary of not less than $220,000, payable no less often than monthly, in equal installments in accordance with the Company's regular pay intervals for its senior executives. 1 (b) Cash Incentive Compensation. In addition to his annual base salary as determined pursuant to Section 3(a), the Company shall pay to the Employee a guaranteed bonus payment (the "Payment") equal to $30,000 for the fiscal year ending January 31, 1998 payable no later than 90 days after the Company's fiscal year end provided the Employee remains employed through the Company's fiscal year end and is still employed on the payment date of the guaranteed bonus Payment. During the Term, the Employee shall also be paid such amounts, if any, to which the Employee is entitled, as an officer of the Company, under the Company's Cash Incentive Compensation Plan (the "Incentive Plan"), as from time to time such Incentive Plan may be amended; provided, however, that any amounts to which the Employee is entitled under the Incentive Plan with respect to the fiscal year ending January 31, 1998 shall not be subject to pro-ration for such fiscal year based upon the Employee's date of hire, but shall be reduced by the amount of the guaranteed bonus Payment received by the Employee for such fiscal year. 4. Other Benefits. (a) Fringe Benefits. The Employee shall be entitled to participate in all benefit programs that the Company establishes and makes available to management generally and in any event shall be entitled to receive benefits at least substantially comparable to those provided pursuant to the present practices of the Company and its subsidiaries. (b) Paid Vacations. The Employee shall be entitled to an annual paid vacation of three (3) weeks in each calendar year, to be taken at such time or times as the Employee and the Company shall mutually agree, provided, however, that no more than two (2) weeks shall be taken during any three month period unless otherwise agreed upon by the Company's Chief Executive Officer. 5. Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other business expenses incurred or paid by the Employee in performing his duties under this Agreement upon presentation by the Employee of expense statements or vouchers and such other supporting information as the Company may from time to time request, provided, however, that the amount available for such expenses may be fixed in advance by the Board after consultation with the Employee. The Company shall also pay or reimburse the reasonable relocation expenses of the Employee (consistent with the present policies of the Company) in connection with a relocation of the Employee's principal residence outside of the greater Boston area required by the Company pursuant to Section 2 hereof. 6. Effective Date and Term. This Agreement shall become effective as of the date hereof and the Employee's employment under this Agreement shall commence on such date and, unless sooner terminated as provided herein or extended, shall continue for a term (the "Term") ending on June 5, 1999. The Employee and the Company have obligations hereunder extending past the Term. 2 7. Noncompetition. (a) During the Employee's employment under this Agreement or otherwise and for a period of two years after the date of termination of such employment (the "Termination Date"), the Employee will not, without the express written consent of the Company, anywhere in the United States or any territory or possession thereof or in any foreign country in which the Company was active as of the Termination Date: (i) compete with the Company or any other entity directly or indirectly controlled by the Company (each an "Affiliate"), in the Company's Business (as defined in Section 7(c) hereof); or (ii) otherwise interfere with, disrupt or attempt to interfere with or disrupt the relationship between the Company or an Affiliate and any person or business that was a customer, supplier, lessor, licensor, manufacturer, contractor, designer or employee of the Company or such Affiliate on the Termination Date or within two years prior to the Termination Date. (b) The term "compete" as used in this Section 7 means directly or indirectly, or by association with any entity or business, either as a proprietor, partner, employee, agent, consultant, director, officer, shareholder (provided that the Employee may make passive investments in competitive enterprises the shares of which are listed on a national securities exchange if the Employee at no time owns directly or indirectly more than 2% of the outstanding equity ownership of such enterprise) or in any other capacity or manner (i) to solicit, hire, purchase from, sell to, rent from, or otherwise conduct business related to the Company's Business with any party that is a customer or supplier of the Company or an Affiliate or (ii) operate any retail store or leased footwear department ("Leased Department") which sells products related to the Company's Business (as defined in Section 7(c) hereof). (c) The term "Company's Business" as used in this Section 7 means the operation of any of the following specialty retail businesses, as a principal business unit, either alone or in combination: (i) Leased Departments in discount or mass merchandising department stores; (ii) retail stores offering casual clothing for "Big and Tall" men; or (iii) retail stores offering primarily work related clothing and uniforms for medical and laboratory purposes or the mail order catalog sales thereof. The term shall also include any additional specialty retail businesses which the Company may acquire subsequent to the date hereof and which are operated as principal business units of the Company on the Termination Date. (d) The term "supplier" as used in this Section 7 shall mean any party or affiliate of a party from which, on the Termination Date or within two years prior to the Termination Date, the Company or an Affiliate purchased products sold by the Company or an Affiliate or was in contact or actively planning to contact in connection with the purchase of products sold by the Company or an Affiliate on or before the Termination Date or which the Company or an Affiliate was contemplating the sale of at some time after the Termination Date. 3 (e) The term "customer" as used in this Section 7 shall mean any party or affiliate of a party, that on the Termination Date or within two years prior to the Termination Date, was a wholesale vendee or prospective wholesale vendee of the Company or an Affiliate or in connection with whose business the Company or an Affiliate operated a Leased Department, a retail store for the sale of casual clothing for "Big and Tall" men, work related clothing and uniforms for medical and laboratory purposes or any other specialty retail business which the Company operated as a principal business unit on the Termination Date, had contacted in connection with the potential operation of such businesses within two years prior to the Termination Date or which the Company or an Affiliate was actively planning to contact in connection with the potential operation of any such businesses on the Termination Date. 8. Confidential Information. The Employee will never use for his own advantage or disclose any proprietary or confidential information relating to the business operations or properties of the Company, any Affiliate or any of their respective customers, suppliers, landlords, licensors or licensees. Upon termination of the Employee's employment, the Employee will surrender and deliver to the Company all documents and information of every kind relating to or connected with the Company and Affiliates and their respective businesses, customers, suppliers, landlords, licensors and licensees. 9. Termination. (a) Death. In any event of the death of the Employee during the Term, his employment shall terminate and the Company shall pay to the Employee's surviving spouse, or to the Employee's estate if their is no surviving spouse, (i) the Employee's base salary for one year from the date of death, and (ii) amounts under the Incentive Plan, if any, payable with respect to the fiscal year in which his death occurs which otherwise would have been paid to the Employee on the basis of the results for such fiscal year, prorated to the date of his death. Upon the death of the Employee, the rights of the Employee's surviving spouse or estate hereunder, as the case may be, shall be limited solely to the benefits set forth in this Section 9(a). (b) Disability. In the event that the Employee shall become disabled (as hereinafter defined) during the Term, the Company shall have the right to terminate the Employee's employment upon written notice, provided, however, that in such event the Company shall (i) continue to pay the Employee's base salary for one year from the date such termination occurs, payable in accordance with the Company's regular pay intervals for its senior executives and (ii) pay to the Employee amounts under the Incentive Plan, if any, which otherwise would have been paid to the Employee on the basis of the results for the fiscal year in which such termination occurs, prorated to the date of such termination. For purposes of this Agreement, the Employee shall be considered disabled on the date when any physical or mental illness or other incapacity shall, in the judgment of a majority of the members of the Board, after consulting with or being advised by one or more physicians (it being understood 4 that one of such physicians may be the Employee's physician but that the Board shall not be bound by his views), have prevented the performance in a manner reasonably satisfactory to the Company of the Employees duties under this Agreement for a period of six consecutive months. (c) For Cause. The Company may by notice terminate the Employee's employment at any time for cause, which shall mean (i) failure by the Employee to cure a material breach of this Agreement within 15 days after written notice thereof by the Company, (ii) the continuation after notice by the Company of willful misconduct by the Employee in the performance of the Employee's duties hereunder or (iii) the commission by the Employee of an act constituting a felony. In such event all obligations of the Company hereunder shall thereupon terminate, including the obligation to pay any amounts under the Incentive Plan with respect to the fiscal year in which such termination occurs, but the Employee shall be entitled to receive any accrued salary and other amounts under the Incentive Plan accrued with respect to any prior fiscal years. (d) Without Cause. During the Term hereof and prior to any Change of Control of the Company, the Company may terminate this Agreement at any time without cause. In such event, the Company shall pay to the Employee, in accordance with the Company's regular pay intervals for its senior executives, an amount equal to the greater of (i) the amount of Base Salary the Employee would have received through the last day of the Term or (ii) one (1) year of Base Salary. (e) Change of Control/Change of Management. (i) In the event the Employee's employment with the Company is terminated (A) by the Company or (B) by the Employee for "good reason" within three (3) years after a Change in Control of the Company occurring during the Term hereof (regardless of whether such Employee's termination occurs after the expiration of the Term), or (ii) in the event the Employee's employment is terminated (C) by the Company (except if such termination is for "cause" as defined in subparagraph 9(c) hereof) or (D) by the Employee for "good reason" within three (3) years after the employment of Mr. Alan Weinstein as the Company's President and Chief Financial Officer has terminated during the Term hereof for any reason including, without limitation, dismissal, resignation, retirement, death or termination for any other reason, then, in such event, the Company shall pay to the Employee an amount, in cash, (the "Severance Payment") equal to the greater of (i) the amount of Base Salary the Employee would have received through the last day of the Term or (ii) one (1) year of Base Salary. For purposes of this Agreement "Base Salary" shall mean the Employee's Base Salary as set forth in subparagraph 3(a) of this Agreement, as such Base Salary may be increased form time to time. If any of the termination events set forth in this subparagraph (e) shall occur during the Term hereof or other applicable time periods, the provisions of paragraph 7 hereof shall be null and void and have no further force or effect. 5 (f) A termination for "good reason" shall be deemed to have occurred, and the Employee shall be entitled to the benefits set forth in this paragraph 9, if the Employee voluntarily terminates his employment after the occurrence of any of the following events, if either the circumstances set forth in paragraphs (e)(i) or (e)(ii) has occurred: (i) the assignment to the Employee of any duties inconsistent with the highest position (including status, offices, titles and reporting requirements), authority, duties or responsibilities attained by the Employee during the period of his employment by the Company; (ii) a relocation of the Employee outside the metropolitan Boston area; or (iii) a decrease in the Employee's compensation (including base salary, bonus or fringe benefits). For purposes hereof, "Change of Control of the Company" shall have the meaning set forth in the Company's 1994 Equity Incentive Plan, as approved by the Stockholders of the Company on June 7, 1994 (and without regard to any subsequent amendments thereto). (g) In the event the Employees's employment is terminated as described in Paragraph 9(e)(i) above, the Severance Payment shall be made to the Employee in a single lump sum cash payment. In the event the Employees's employment is terminated as described in Paragraph 9(e)(ii) above, the Severance Payment shall be made to the Employee in accordance with the Company's regular pay intervals for its senior executives beginning immediately following the Employee's termination of employment with the Company. (h) Severance Payment Limitation Upon Change of Control. If all or part of the Severance Payment payable to the Employee pursuant to subparagraph 9(e) hereof, when added to other payments payable to the Employee as a result of a Change of Control, constitute Parachute Payments, the following limitation shall apply. If the Parachute Payments, net of the sum of the Excise Tax, Federal income and employment taxes and state and local income taxes on the amount of the Parachute Payments in excess of the Threshold Amount, are greater than the Threshold Amount, the Employee shall be entitled to the full Severance Payment payable under subparagraph 9(e) of this Agreement. If the Threshold Amount is greater than the Parachute Payments, net of the sum of the Excise Tax, Federal income and employment taxes and state and local income taxes on the amount of the Parachute Payments in excess of the Threshold Amount, then the Severance Payment payable under subparagraph 9(e) of this Agreement shall be reduced to the extent necessary so that the maximum Parachute Payments shall not exceed the Threshold Amount. The Company shall select a firm of independent certified public accountants to determine which of the foregoing alternative provisions shall apply. For purposes of determining the amount of the Federal income and employment taxes, and state and local income taxes on the amount of the Parachute Payments in excess of the Threshold Amount, the Employee shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation applicable to individuals for the calendar year in which the Severance Payments under subparagraph 9(e) of this Agreement are payable and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Employee's residence for the calendar year in which the Severance Payments under Subparagraph 9(e) of this Agreement are payable, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. 6 For purposes of this Agreement: "Parachute Payments" shall mean any payment or provision by the Company of any amount or benefit to and for the benefit of the Employee, whether paid or payable or provided or to be provided under the terms of this Agreement or otherwise, that would be considered "parachute payments" within the meaning of Section 280G(B)(2)(A) of the Internal Revenue Code and the regulations promulgated thereunder. "Threshold Amount" shall mean three times the Employee's "base amount" within the meaning of Section 280(G)(b)(3) of the Internal Revenue Code and the regulations promulgated thereunder, less one dollar. "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Internal Revenue Code. 10. Approval of Board. The Company represents that this Agreement has been duly approved by the Board and is in all respects valid and binding upon the Company. 11. Key Person Insurance. The Employee agrees to take such actions as may be reasonably required to permit the Company to maintain key person life insurance on the Employee's life in such amounts and for such periods of time, if any, as the Company deems appropriate, with all benefits being payable to the Company. Upon payment by the Employee of the cash surrender value, if any, of any such policy and any paid but unearned premiums for such policy, the Company will assign such policy to the Employee upon termination (other than because of the Employee's death) of the Employee's employment with the Company, provided, however, that, in the event the Employee's employment is terminated by reason of the disability of the Employee and the death of the Employee may reasonably be expected within one year after such termination as a result of such disability, the Company shall not be required to assign any such policy. 12. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been given and received when actually delivered, one business day after dispatch by telegraphic means, two business days after dispatch by recognized overnight delivery service, or five days after mailing by certified or registered mail with proper postage affixed, return receipt requested and addressed as follows (or to such other address as a party entitled to receive notice hereunder may have designated by notice pursuant to this Section 12): 7 (a) If to the Company: J. Baker, Inc. 555 Turnpike Street Canton, Massachusetts 02021 Attention: President (b) If to the Employee: Roger J. Osborne 25 Hidden Valley Road Marshfield, Massachusetts 02052 13. Severability. If any provision of this Agreement or its application to any person or circumstances is invalid or unenforceable, then the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby. Further, if any provision or application hereof is invalid or unenforceable, then a suitable and equitable provision shall be substituted therefor in order to carry out so far as may be valid or enforceable the intent and purposes of the invalid and unenforceable provision. 14. Applicable Law. This Agreement shall be interpreted and construed in accordance with, and shall be governed by, the laws of the Commonwealth of Massachusetts without giving effect to the conflict of law provisions thereof. 15. Assignment. Neither of the parties hereto shall, without the written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, provided, however, that in the event that the Company sells all or substantially all of its assets the Company may assign its rights and transfer its obligations hereunder to the purchaser of such assets. A merger of the Company with or into another corporation shall be deemed not to be an assignment of this Agreement, and, in any such event, this Agreement shall inure to the benefit of and be binding upon the surviving corporation and the Employee. Subject to the foregoing, this Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, heirs, administrators, executors, personal representatives and assigns. 16. Headings. This section and paragraph headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 8 17. Remedies. It is specifically understood and agreed that any breach of the provisions of Section 7 or 8 of this Agreement is likely to result in irreparable injury to the Company, that damages at law will be inadequate remedy for such breach, and that in addition to any other remedy it may have, the Company shall be entitled to enforce the specific performance of said Sections and to seek both temporary and permanent injunctive relief therefor without the necessity of proving actual damages. 18. Waiver of Breach. Any waiver by either the Company or the Employee of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 19. Amendment of Agreement. This Agreement may be altered, amended or modified, in whole or in part, only by a writing signed by both the Employee and the Company. 20. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter thereof and supersedes all prior agreements with respect to such subject matter between the parties. Intending to be legally bound, the Company and the Employee have signed this Agreement as if under seal as of the date set forth at the head of the first page. J. BAKER, INC. /s/ Alan I. Weinstein -------------------------- Alan I. Weinstein President /s/ Roger J. Osborne -------------------------- Roger J. Osborne 9 EX-11 4 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 J. BAKER, INC. AND SUBSIDIARIES Computation of Primary and Fully Diluted Earnings Per Share* (Unaudited) Quarter Ended Six Months Ended August 2, August 3, August 2, August 3, 1997 1996 1997 1996 -------- -------- -------- ------ PRIMARY: Net Earnings $1,904,108 $1,485,722 $ 2,173,119 $ 2,311,282 ========== ========== =========== =========== Weighted average number of common shares outstanding 13,912,934 13,891,265 13,902,952 13,882,729 ========== ========== ========== ========== Earnings Per Share $0.137 $0.110 $0.156 $0.166 ========== ========== =========== ========== ASSUMING FULL DILUTION: Net Earnings $1,904,108 $1,485,722 $ 2,173,119 $ 2,311,282 ========== ========== =========== =========== Weighted average number of common shares outstanding 13,912,934 13,891,265 13,902,952 13,882,729 Dilutive effect of outstanding stock options 57,593 37,467 56,646 20,647 ---------- ---------- ---------- ---------- Weighted average number of common shares as adjusted 13,970,527 13,928,732 13,959,598 13,903,376 ========== ========== ========== ========== Earnings Per Share $0.136 $0.110 $0.156 $0.166 ========== ========== ========== ==========
* This calculation is submitted in accordance with Item 601(b)(11) of Regulation S-K. EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF J. BAKER, INC. FOR THE QUARTER ENDED MAY 3, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-31-1998 AUG-2-1997 1,711,896 0 21,659,334 5,667,867 164,268,910 227,780,894 120,867,048 45,734,247 341,479,846 63,321,210 201,049,575 0 0 6,958,614 66,970,298 341,479,846 281,279,618 281,279,618 155,491,836 155,491,836 0 0 6,450,077 3,562,119 1,389,000 2,173,119 0 0 0 2,173,119 0.16 0.16
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