United States Securities and Exchange Commission Washington, DC 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended October 28, 2000 Or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-23874 ------- Jos. A. Bank Clothiers, Inc. Delaware 5611 36-3189198 -------- ---- ---------- (State incorporation) (Primary Standard (I.R.S. Employer Industrial Classification Identification Code Number) Number) 500 Hanover Pike, Hampstead, MD 21074-2095 - ------------------------------- ---------- None ---- (Former name or former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or if such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of December 8, 2000 - ----- ---------------------------------- Common Stock, $.01 par value 5,955,627 Jos. A. Bank Clothiers, Inc. Index ----- Part I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Condensed Consolidated Statements 3 Of Operations - Three and Nine Months Ended October 28, 2000 and October 30, 1999 Condensed Consolidated Balance 4 Sheets - as of October 28, 2000 and January 29, 2000 Condensed Consolidated Statements 5 Of Cash Flows - Nine Months ended October 28, 2000 and October 30, 1999 Notes to Condensed Consolidated Financial Statements 6-10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10-13 Part II. Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K 14 (a) Exhibits - Exhibit 27 - Financial Data Schedule (EDGAR filing only) Signatures 15 - ---------- 2 PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In Thousands except per share data) (Unaudited) Three Months Ended Nine Months Ended ------------------------- --------------------------- Oct. 28, Oct. 30, Oct. 28, Oct. 30, 2000 1999 2000 1999 ---------- --------- ----------- ----------- Net Sales $ 43,992 $ 43,739 $ 135,269 $ 131,549 ---------- --------- ----------- ---------- Costs and expenses: Cost of goods sold 21,783 22,177 68,386 66,603 General and administrative 4,251 4,866 13,180 13,506 Sales and marketing 16,884 16,596 49,295 49,066 Store opening costs 136 77 152 139 One-time charge: Executive payout and other costs -- -- -- 2,177 ---------- --------- ----------- ---------- 43,054 43,716 131,013 131,491 ---------- --------- ----------- ---------- Operating income 938 23 4,256 58 Interest expense, net 301 409 845 984 ---------- --------- ----------- ---------- Income (loss) before provision for income taxes 637 (386) 3,411 (926) Provision (benefit) for income taxes 230 (150) 1,312 (361) ---------- ---------- ----------- ---------- Net income (loss) $ 407 $ (236) $ 2,099 $ (565) ========== ========= =========== ========== Earnings per share: Net income (loss): Basic $ 0.07 $ (0.03) $ 0.34 $ (0.08) Diluted $ 0.07 $ (0.03) $ 0.33 $ (0.08) Weighted average shares outstanding: Basic 5,956 6,792 6,197 6,792 Diluted 6,112 6,792 6,345 6,792 See accompanying notes 3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) October 28, January 29, 2000 2000 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 1,388 $ 1,087 Accounts receivable 4,003 2,601 Inventories: Raw materials 2,066 3,351 Finished goods 54,546 43,036 --------- --------- Total inventories 56,612 46,387 --------- --------- Prepaid expenses and other current assets 6,467 3,178 Deferred income taxes 2,479 2,479 --------- --------- Total current assets 70,949 55,732 --------- --------- Property, plant and equipment, at cost 54,349 56,140 Accumulated depreciation and amortization (28,841) (28,893) --------- --------- Net property, plant and equipment 25,508 27,247 Deferred income taxes 1,699 1,699 Other assets 1 73 --------- --------- Total assets $ 98,157 $ 84,751 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 24,187 $ 13,195 Accrued expenses 15,132 14,573 Current portion of long-term debt 11,050 1,218 Net current liabilities of discontinued operations -- 254 --------- --------- Total current liabilities 50,369 29,240 Long-term liabilities 5,005 11,725 --------- --------- Total liabilities 55,374 40,965 --------- --------- Shareholders' equity: Common stock 71 70 Additional paid-in capital 56,535 56,500 Accumulated deficit (8,765) (10,864) --------- --------- 47,841 45,706 Less: treasury stock (5,058) (1,920) --------- --------- Total shareholders' equity 42,783 43,786 --------- --------- Total liabilities and shareholders' equity $ 98,157 $ 84,751 ========= ========= See accompanying notes 4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Nine Months Ended ----------------------------------- October 28, October 30, 2000 1999 ------------ ------------- Cash flows from operating activities: Net income (loss) $ 2,099 $ (565) Adjustments to reconcile net income (loss) to net cash used in operating activities: Net cash used in operating activities: Decrease in deferred taxes -- (747) Depreciation and amortization 3,102 2,917 Loss on disposition of assets 7 -- Stock based compensation -- 63 Net increase in operating working capital (3,340) (12,463) ----------- ----------- Net cash provided by (used in) operating activities 1,868 (10,795) ----------- ----------- Cash flows from investing activities: Additions to property, plant and equipment (2,453) (4,824) Proceeds from disposal of assets 528 -- ----------- ----------- Net cash used in investing activities (1,925) (4,824) ----------- ----------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 46,314 49,319 Repayment under long-term Credit Agreement (42,453) (33,496) Repayment of other long-term debt (702) (241) Repurchase of Common Stock (3,138) -- Net proceeds from Issuance of Common Stock 36 62 ----------- ----------- Net cash provided by financing activities 57 15,644 ----------- ----------- Net cash provided by (used in) discontinued operations 301 (8) ----------- ----------- Net increase in cash and cash equivalents 301 17 Cash and cash equivalents - beginning of period 1,087 748 ----------- ----------- Cash and cash equivalents - end of period $ 1,388 $ 765 =========== =========== See accompanying notes 5 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) 1. BASIS OF PRESENTATION Jos. A. Bank Clothiers, Inc. (the "Company") is a nationwide retailer of classic men's clothing through conventional retail stores and catalog and internet direct marketing. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. These adjustments are of a normal recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's January 29, 2000 Annual Report on Form 10-K. 2. SIGNIFICANT ACCOUNTING POLICIES Inventories are stated at the lower of first-in, first-out, cost or market. The Company capitalizes into inventories certain warehousing and delivery costs associated with getting its inventory to the point of sale. Costs related to mail order catalogs and promotional materials are included in prepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, not to exceed six months. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS 109). This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates attributable to deductible temporary differences between financial statement and income tax basis of assets and liabilities and to tax net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. 6 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 3. WORKING CAPITAL The net change in operating working capital is composed of the following: Nine Months Ended -------------------------- October 28, October 30, 2000 1999 ----------- ----------- Increase in accounts receivable $ (1,402) $ (1,110) Increase in inventories (10,225) (12,898) Increase in prepaids and other assets (3,289) (1,481) Increase in accounts payable 10,992 1,576 Increase in accrued expenses and other liabilities 584 1,450 ---------- ---------- Net decrease in operating working capital $ (3,340) $ (12,463) ========== ========== 4. EARNINGS PER SHARE Earnings Per Share (EPS) - Statement of Financial Accounting Standards (SFAS) No. 128 requires presentation of basic earnings per share and diluted earnings per share. The weighted average shares used to calculate basic and diluted earnings per share in accordance with SFAS No. 128 is as follows: Three Months Ended Nine Months Ended --------------------- --------------------- Oct. 29, Oct. 30, Oct. 28, Oct. 30, 2000 1999 2000 1999 -------- -------- -------- -------- Weighted average shares outstanding for basic EPS 5,956 6,792 6,197 6,792 Diluted EPS: Dilutive effect of common stock equivalents 156 -- 148 -- -------- -------- -------- -------- Weighted average shares outstanding for diluted EPS 6,112 6,792 6,345 6,792 ======== ======== ======== ======== Weighted average shares outstanding for calculating dilutive EPS include basic shares outstanding, plus shares issuable upon the exercise of stock options, using the treasury stock method. 7 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 5. STOCK REPURCHASE On April 12, 2000, the Company announced a repurchase of approximately 13% of its then outstanding stock. In a private transaction, the Company purchased 896,400 shares at $3.50 per share. The purchase has been recorded in the accompanying Consolidated Balance Sheet at October 28, 2000 as treasury stock. 6. DISCONTINUED OPERATIONS Summarized financial information for the discontinued operations is as follows (in thousands): As of As of Oct. 28, Jan. 29, 2000 2000 ---- ---- Current assets $ -- $ 580 Current liabilities -- 834 -------- -------- Net current (liabilities) $ -- $ (254) ======== ======== Net current and noncurrent assets/liabilities of discontinued operations noted above include deferred income taxes, pension costs, severance and other transaction costs associated with the discontinued manufacturing operations. 7. SEGMENT REPORTING The Company has two reportable segments: full line stores and catalog/internet direct marketing. While each segment offers a similar mix of men's clothing to the retail customer, the full line stores also provide alterations. The accounting policies of the segments are the same as those described in the Company's January 29, 2000 Annual Report on Form 10-K. The Company evaluates performance of the segments based on "four wall" contribution which excludes any allocation of "management company" costs, distribution center costs (except order fulfillment costs which are allocated to catalog/internet), interest and income taxes. The Company's segments are strategic business units that offer similar products to the retail customer by two distinctively different methods. In full line stores the typical customer travels to the store and purchases men's clothing and/or alterations and takes their purchases with them. The catalog/internet direct marketing customer receives a catalog in his or her home, office and/or visits our web page via the internet and either calls, mails, faxes or places an order on-line. The merchandise is then shipped to the customer. The detail segment data is presented in the following table: 8 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 Quarter ended October 28, 2000 Full line Catalog/Internet (in thousands) Stores Direct Marketing Other Total ------ ---------------- ----- ----- Net sales $ 36,999 $ 4,867 $ 2,126 (a) $ 43,992 Depreciation and amortization 789 35 242 1,066 Operating income (loss) (b) 5,176 388 (4,626) 938 Identifiable assets (c) 59,201 14,401 24,555 98,157 Capital Expenditures (d) 766 89 139 994 Quarter ended October 30, 1999 (in thousands) Net sales $ 36,700 $ 4,923 $ 2,116 (a) $ 43,739 Depreciation and amortization 793 4 204 1,001 Operating income (loss) (b) 4,945 475 (5,397) 23 Identifiable assets (c) 55,967 13,034 31,674 100,675 Capital Expenditures (d) 1,117 9 134 1,260 Nine Months ended October 28, 2000 Full line Catalog/Internet (in thousands) Stores Direct Marketing Other Total ------ ---------------- ----- ----- Net sales $ 113,803 $ 15,818 $ 5,648 (a) $ 135,269 Depreciation and amortization 2,336 44 722 3,102 Operating income (loss) (b) 16,641 1,574 (13,959) 4,256 Identifiable assets (c) 59,201 14,401 24,555 98,157 Capital Expenditures (d) 1,088 852 513 2,453 Nine Months ended October 30, 1999 (in thousands) Net sales $ 110,316 $ 15,815 $ 5,418 (a) $ 131,549 Depreciation and amortization 2,299 11 607 2,917 Operating income (loss) (b) 14,950 1,624 (16,516) 58 Identifiable assets (c) 55,967 13,034 31,674 100,675 Capital Expenditures (d) 3,226 83 1,515 4,824 (a) Revenue from segments below the quantitative thresholds are attributable primarily to four operating segments of the Company. Those segments include factory stores, outlet stores, franchise and regional tailor shops. None of these segments has ever met any of the quantitative thresholds for determining reportable segments. (b) Operating income represents profit before allocations of overhead from corporate office and the distribution center, interest and income taxes. (c) Identifiable assets include cash, accounts receivable, inventories, prepaid expenses and fixed assets residing in or related to the reportable segments. Assets included in Other are primarily fixed assets associated with the corporate office and distribution center, deferred tax assets, and inventory which has not been assigned to one of the reportable segments. (d) Capital Expenditures include purchases of property, plant and equipment made for the reportable segment. 9 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 8. EXECUTIVE PAYOUT AND OTHER COSTS During the second quarter of 1999, the Company's Chairman and CEO retired and the Company recorded a one-time charge of approximately $2.2 million associated with that event. The one-time charge includes a payout to the former Chairman/CEO of approximately $1.8 million and professional fees - primarily recruiting and related expenses - that were incurred in the second quarter of 1999. This charge reduced basic earnings per share by $.20 in 1999. Accordingly, all amounts outstanding under the Credit Agreement have been classified as current liabilities as of October 28, 2000. 9. CREDIT REFINANCING The Company's current Credit Agreement expires on April 2001 based on its original term. The Company expects to obtain extended financing prior to the end of 2000 and does not anticipate any problems obtaining its financing. However, there can be no assurance that such financing will be obtained on acceptable terms. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto and with the Company's audited financial statements and notes thereto for the fiscal year ended January 29, 2000. Overview - For the third quarter ended October 28, 2000 the Company's earnings - -------- per share improved to $.07 per share compared to a loss of $.03 per share in the third quarter of 1999. The results were driven by a moderate increase in sales, improved gross profit performance and lower expenses. The sales and gross profit improvements were primarily the result of strong customer acceptance of the Company's Corporate Casual and Sportswear products. The lower expenses reflected reduced travel and professional fees. For the nine months ended October 28, 2000, earnings per share increased to $.33 per share compared to recurring income per share of $.11 in 1999. After deducting for a one-time charge in 1999, the Company generated a loss of $.08 per share for the nine months ended October 30, 1999. The sales improvements for the nine month period were also driven by Corporate Casual and Sportswear. Total debt decreased $12.3 million to $12.5 million at October 28, 2000, compared to $24.8 million at October 30, 1999, despite using $3.1 million to repurchase common stock in April, 2000 and investing over $1 million for a new Internet site. The Company's availability to borrow under its bank credit agreement, as of October 28, 2000, increased to $30.2 million, which was $8.4 million higher than the same time last year. The Company recently announced plans to open up to 30 new stores in fiscal 2001. To build out the new stores and to create the additional infrastructure to support the new stores, the Company expects to spend between $12 million and $15 million in capital expenditures in 2001. The Company expects to finance these capital expenditures using the cash from operations and borrowings under its Credit 10 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 Agreement. The Company's current Credit Agreement expires on April 2001 based on its original term. The Company expects to obtain extended financing prior to the end of 2000 and does not anticipate any problems obtaining its financing. However, there can be no assurance that such financing will be obtained on acceptable terms. Results of Operations - The following table is derived from the Company's - --------------------- condensed consolidated statements of operations and sets forth, for the periods indicated, the items included in the condensed consolidated statements of operations, expressed as a percentage of net sales. Percentage of Net Sales Percentage of Net Sales Three Months Ended Nine Months Ended ------------------ ----------------- Oct. 28, Oct. 30, Oct. 28, Oct. 30, 2000 1999 2000 1999 ---- ---- ---- ---- Net Sales ....................................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold................................... 49.5 50.7 50.6 50.6 ------- ------- ------- -------- Gross profit ....................................... 50.5 49.3 49.4 49.4 General and administrative expenses.................. 9.7 11.1 9.7 10.3 Sales and marketing expenses......................... 38.4 37.9 36.5 37.3 Store opening costs.................................. 0.3 0.2 0.1 0.1 Executive payout and other costs..................... -- -- -- 1.7 ------- ------- ------- -------- Operating income (loss).............................. 2.1 0.1 3.1 -- Interest expense, net................................ 0.7 0.9 0.6 0.7 ------- ------- ------- -------- Income (loss) before income taxes.................... 1.4 (0.8) 2.5 (0.7) Provision (benefit) for income taxes................. 0.5 (0.3) 1.0 (0.3) ------- ------- ------- -------- Net income (loss).................................... 0.9% (0.5)% 1.6% (0.4)% ======= ======= ======= ======== Net Sales - Total sales for the third quarter of 2000 increased 1%, to $44.0 - --------- million, compared to $43.7 million in 1999, while comparable store sales increased 2% in the third quarter of 2000. Total sales for the first nine months of 2000 increased 3%, to $135.3 million, compared to $131.5 million in 1999, while comparable store sales increased 3.0% in the first nine months of 2000. For the nine months ended October 28, 2000, Internet sales increased 219% and catalog sales decreased 10%. The sales increases were driven by increases in sportcoats, slacks and sportswear as the Company continued to expand its assortment to meeting the demand for corporate casual in the workplace. Gross Profit - Gross profit (sales less cost of goods sold) as a percent of - ------------ sales increased in the third quarter ended October 28, 2000 compared to the same period in 1999. The increase in the quarter relates primarily to less promotional markdowns on the better-selling products. For the nine months ended October 28, 2000, gross profit percent was even to last year as the Company was aggressive in the first half of 2000 in its promotions. General and Administrative Expenses - General and administrative expenses - ----------------------------------- decreased $.6 million in the third quarter of 2000 and decreased $.3 million in the nine months ended October 28, 2000 compared to the same period last year. The decrease in the third quarter and nine months relates primarily to lower professional fees and travel expenses. The same decreases for the nine month period 11 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 were offset partially by a $.5 million increase in accrued incentive compensation expense. Depending on the results of the fourth quarter of 2000, incentive compensation expense could increase significantly in the fourth quarter of 2000. Sales and Marketing Expenses - Sales and marketing expenses (which consist - ---------------------------- primarily of store occupancy, advertising, and store payroll costs) increased $.3 million in the third quarter of fiscal 2000 and $.2 million in the first nine months of 2000. These differences were the result of reduced advertising spending in 2000, as offset by increased occupancy for additional stores. Store Opening Costs - The Company opened five new stores in the third quarter of - ------------------- 2000 and incurred $136 thousand of store opening costs compared to $77 thousand for two new stores in same quarter in the prior year. Store opening costs increased to $152 thousand in the first nine months of 2000 during which the Company opened seven new stores compared to $139 thousand in the same period in 1999 when the Company opened four new stores. The decrease per store relates to lower advertising costs. Interest Expense - Interest expense decreased $.1 million in the first nine - ---------------- months of 2000 compared to the prior year due primarily to the lower average outstanding balance in the current year being partially offset by higher interest rates. Income Taxes - The first nine months of 2000 effective tax rate is 38.5% which - ------------ is lower compared to 39.0% in 1999. Liquidity and Capital Resources - The Company has substantial availability under - ------------------------------- its current borrowing agreement. At October 28, 2000, the Company had outstanding borrowings of $9.4 million with $30.2 million of availability under its Credit Agreement compared to borrowings of $18.6 million and availability of $21.8 million at the same time last year. The following table summarizes the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows: Nine Months Ended ----------------- Oct. 28, Oct. 30, 2000 1999 ---- ---- Cash provided by (used in): Operating activities $ 1,868 $ (10,795) Investing activities (1,925) (4,824) Financing activities 57 15,644 Discontinued operations 301 (8) --------- --------- Net increase in cash and cash equivalents $ 301 $ 17 ========= ========= Cash provided by operating activities was primarily from income generated from operations, an increase in accounts payable and a decrease in inventories. Cash used in investing activities primarily relates to the purchase and installation of the Company's new e-commerce website, and the opening and renovation of stores. Cash used in financing activities primarily represents the repurchase of common stock partially offset by borrowings on the revolving portion of the Credit Agreement. 12 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 The Company expects to spend between $4 and $5 million on capital expenditures in fiscal 2000, primarily to open eight new stores, to relocate, downsize or renovate at least two stores, to install a new e-commerce website to replace its existing site and to install an inventory planning system. The capital expenditures are being financed through operations, the Credit Agreement and possibly leasing arrangements. The Company's Credit Agreement expires in April, 2001 based on its original term. The Company expects to obtain extended financing prior to the end of 2000 and does not anticipate any problems obtaining its financing. However, there can be no assurance that such financing will be obtained on acceptable terms. The Company's statements concerning future operations contained herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forecast due to a variety of factors that can adversely affect the Company's operating results, liquidity and financial condition such as risks associated with economic, weather and other factors affecting consumer spending, the ability of the Company to finance its expansion plans, the mix of goods sold, pricing, availability of lease sites for new stores and other competitive factors. Many of the risks are described in the Company's reports filed with the Securities and Exchange Commission, which should be carefully reviewed before making any investment decision. 13 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 PART II. OTHER INFORMATION Item 6. Exhibit - --------------- (a) Exhibit 27 - Financial Data Schedule 14 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/28/00 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 11, 2000 Jos. A. Bank Clothiers, Inc. (Registrant) /s/ David E. Ullman --------------------------------- David E. Ullman Executive Vice President, Chief Financial Officer 15