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 August 4, 2001
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Or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-23874
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Jos. A. Bank Clothiers, Inc.
Delaware 5611 36-3189198
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(State incorporation) (Primary Standard (I.R.S. Employer
Industrial Classification Identification
Code Number) Number)
500 Hanover Pike, Hampstead, MD 21074-2095
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None
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(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 September 11, 2001
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Common Stock, $.01 par value 5,955,627
Jos. A. Bank Clothiers, Inc.
Index
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Part I. Financial Information Page No.
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Item 1. Financial Statements
Condensed Consolidated Statements 3
Of Operations - Three and Six Months
Ended August 4, 2001 and July 29, 2000
Condensed Consolidated Balance 4
Sheets - as of August 4, 2001 and
February 3, 2001
Condensed Consolidated Statements 5
Of Cash Flows - Six Months ended
August 4, 2001 and July 29, 2000
Notes to Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of 9-12
Results of Operations and Financial Condition
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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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 Six Months Ended
------------------ ----------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Net Sales $ 46,106 $ 44,869 $ 93,512 $ 91,277
------ ------ ------ ------
Costs and expenses:
Cost of goods sold 23,318 23,437 47,214 46,603
General and administrative 4,347 4,081 8,900 8,929
Sales and marketing 17,540 16,095 35,196 32,411
Store opening costs 127 3 196 16
One-time charge -- -- 210 --
------ ------ ------ ------
45,332 43,616 91,716 87,959
------ ------ ------ ------
Operating income 774 1,253 1,796 3,318
Interest expense, net 312 251 531 544
------ ------ ------ ------
Income before provision for
income taxes 462 1,002 1,265 2,774
Provision for income taxes 171 391 468 1,082
------ ------ ------ ------
Net income $ 291 $ 611 $ 797 $ 1,692
====== ====== ====== ======
Earnings per share:
Net income:
Basic $ 0.05 $ 0.10 $ 0.13 $ 0.27
Diluted $ 0.05 $ 0.10 $ 0.13 $ 0.26
Weighted average shares outstanding:
Basic 5,956 5,956 5,956 6,318
Diluted 6,171 6,106 6,191 6,462
See accompanying notes
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
August 4, February 3,
2001 2001
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,451 $ 3,126
Accounts receivable 2,325 2,724
Inventories:
Raw materials 5,554 3,861
Finished goods 55,697 46,588
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Total inventories 61,251 50,449
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Prepaid expenses and other current assets 6,134 5,329
Deferred income taxes 941 375
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Total current assets 72,102 62,003
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Property, plant and equipment, at cost 59,283 53,808
Accumulated depreciation and amortization (30,022) (28,176)
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Net property, plant and equipment 29,261 25,632
Deferred income taxes 1,262 1,262
Other assets 105 57
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Total assets $ 102,730 $ 88,954
======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20,124 $ 16,663
Accrued expenses 13,334 16,268
Current portion of long-term debt 732 422
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Total current liabilities 34,190 33,353
Noncurrent Liabilities:
Long-term debt, net of current portion 18,614 6,447
Deferred rent 3,421 3,446
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Total liabilities 56,225 43,246
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Shareholders' equity:
Common stock 71 71
Additional paid-in capital 56,535 56,535
Accumulated deficit (5,043) (5,840)
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51,563 50,766
Less: treasury stock (5,058) (5,058)
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Total shareholders' equity 46,505 45,708
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Total liabilities and shareholders' equity $ 102,730 $ 88,954
======= ======
See accompanying notes
4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands) (Unaudited)
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 797 $ 1,692
Adjustments to reconcile net income
Net cash used in operating activities:
Increase in deferred taxes (566) --
Depreciation and amortization 2,216 2,036
Loss on disposition of assets -- 7
Net (increase) decrease in operating working capital (10,754) 2,042
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Net cash (used in) provided by
operating activities (8,307) 5,777
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Cash flows from investing activities:
Additions to property, plant and equipment (5,845) (1,459)
Proceeds from disposal of assets -- 528
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Net cash used in investing activities (5,845) (931)
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Cash flows from financing activities:
Borrowings under long-term Credit Agreement 34,164 25,381
Repayment under long-term Credit Agreement (26,883) (27,185)
Borrowing of other long-term debt 5,500 --
Repayment of other long-term debt (304) (227)
Repurchase of Common Stock -- (3,138)
Net proceeds from issuance of Common Stock -- 36
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Net cash provided by (used in) financing activities
of continuing operations 12,477 (5,133)
Net cash provided by discontinued operations -- 301
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Net (decrease) increase in cash and cash equivalents (1,675) 14
Cash and cash equivalents - beginning of period 3,126 1,087
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Cash and cash equivalents - end of period $ 1,451 $ 1,101
======= ======
See accompanying notes
5
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/01
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 February 3, 2001 Annual Report on Form 10-K.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventories are stated at the lower of first-in, first-out, cost or market.
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, 8/4/01
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
Decrease in accounts receivable $ 399 $ 153
(Increase) decrease in inventories (10,802) 1,920
Increase in prepaids and other assets (853) (1,415)
Increase in accounts payable 3,461 2,900
Decrease in accrued expenses and
other liabilities (2,959) (1,516)
--------- ----------
Net (increase) decrease in operating
working capital $ (10,754) $ 2,042
========= ==========
4. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128 (SFAS 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 128 is as follows:
Three Months Ended Six Months Ended
------------------ ----------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Weighted average shares
outstanding for basic EPS 5,956 5,956 5,956 6,318
Diluted EPS:
Dilutive effect of common
stock equivalents 215 150 235 144
--- --- --- ---
Weighted average shares
outstanding for diluted EPS 6,171 6,106 6,191 6,462
===== ===== ===== =====
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, 8/4/01
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 Sheets as treasury stock.
6. 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 February 3, 2001 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:
Quarter ended August 4 2001 Full-Line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 38,974 $ 5,478 $1,654 (a) $ 46,106
Depreciation and amortization 821 16 290 1,127
Operating income (loss) (b) 5,256 203 (4,685) 774
Identifiable assets (c) 76,438 11,928 14,364 102,730
Capital expenditures (d) 2,323 10 1,528 3,861
Quarter ended July 29, 2000
(in thousands)
Net sales $ 37,335 $ 5,701 $1,833 (a) $ 44,869
Depreciation and amortization 775 4 242 1,021
Operating income (loss) (b) 4,901 432 (4,080) 1,253
Identifiable assets (c) 59,283 9,391 16,077 84,751
Capital Expenditures (d) 230 348 60 638
8
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/01
Six Months ended August 4, 2001 Full-line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 79,556 $ 10,811 $3,145 (a) $ 93,512
Depreciation and amortization 1,612 30 574 2,216
Operating income (loss) (b) 11,079 541 (9,824) 1,796
Identifiable assets (c) 76,438 11,928 14,364 102,730
Capital Expenditures (d) 3,100 400 2,345 5,845
Six Months ended July 29, 2000
(in thousands)
Net sales $ 76,804 $ 10,951 $ 3,522 (a) $ 91,277
Depreciation and amortization 1,547 9 480 2,036
Operating income (loss) (b) 11,465 1,186 (9,333) 3,318
Identifiable assets (c) 59,283 9,391 16,077 84,751
Capital Expenditures (d) 322 763 374 1,459
(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, regional tailor shops and
corporate store opening costs. 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.
7. ONE-TIME CHARGE
During the first quarter of fiscal 2001, the Company recorded a one-time
charge of $.2 million. The one-time charge primarily represents
professional fees incurred in the first quarter of 2001 in connection with
a strategic action considered by the Board of Directors.
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 February 3, 2001.
9
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/01
Overview - The Company generated increased profits in its full-line store
--------
segment and in the internet in the second quarter and in the first half of
fiscal 2001 compared to fiscal 2000. However, reduced profits from catalog and
factory stores, higher costs associated with opening new stores and a one-time
charge in the first quarter of fiscal 2001 reduced total earnings per share.
The full-line store profits increased primarily from an increase in gross
profit percentage while internet profits increased based on sales increases of
85% and 110% for the quarter and six months respectively. Catalog profits
decreased primarily from reduced sales as customer response rates declined.
Factory store profits declined principally from lower sales and the mix of
product sold. The Company expects the increase in gross profit percentage over
the prior period and the higher internet sales to continue in the second half
of 2001. The Company has made many changes, including circulation and creative,
to the catalog and factory store businesses and expects their profitability to
improve in the second half of 2001.
Total debt at August 4, 2001 increased $12.0 million to $19.3 million compared
to $7.3 million at July 29, 2000, The increased debt was used primarily to
purchase inventory and capital expenditures for new stores as well as to
purchase inventory to support certain low-risk, key items that the Company is
increasing in its stores. The Company's availability to borrow under the bank
agreement as of August 4, 2001 was $27.8 million, compared to $28.2 million at
July 29, 2000.
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 Six Months Ended
------------------ ----------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Net Sales............................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................................... 50.6 52.2 50.5 51.1
---- ---- ---- ----
Gross profit.......................................... 49.4 47.8 49.5 48.9
General and administrative expenses................... 9.4 9.1 9.5 9.8
Sales and marketing expenses.......................... 38.0 35.9 37.6 35.5
Store opening costs................................... .3 -- .2 --
One-time charge....................................... -- -- .2 --
-- -- -- --
Operating income...................................... 1.7 2.8 2.0 3.6
Interest expense, net................................. .7 0.6 .6 0.6
-- --- -- ---
Income before income taxes............................ 1.0 2.2 1.4 3.0
Provision for income taxes............................ .4 .8 .5 1.2
-- -- -- ---
Net income............................................ .6% 1.4% .9% 1.8%
====== ===== ===== ====
Net Sales - Total sales for the second quarter of 2001 increased 2.8%, to $46.1
---------
million, compared to $44.9 million in 2000. Comparable store sales declined 1.2%
in the second quarter of 2001. Total sales for the first half of 2001 increased
2.4%, to $93.5 million, compared to $91.3 million in 2000. Comparable store
sales decreased 1.0% in the first half of 2001. The sales were driven by
increases in sportcoats, slacks and sportswear as the Company continues to
expand its assortment to meet the
10
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q 8/4/01
demand for corporate casual in the workplace. For the first half of 2001, suits
were 30% of total sales compared to 34% in the first half of 2000, thus
demonstrating the shift to corporate casual. Sales also increased as a result of
the opening of new stores as follows:
Three Months Ended Six Months Ended
------------------ ----------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Stores open at the beginning of the period 118 110 116 108
Opened 7 -- 10 2
Closed -- -- ( 1) --
--- --- ---- ----
Stores open at the end of the period 125 110 125 110
=== === ==== ====
Gross Profit - Gross profit (sales less cost of goods sold) as a percent of
------------
sales increased in both the second quarter and six months ended August 4, 2001.
The increase relates primarily to a combination of higher retail prices and
lower merchandise cost.
General and Administrative Expenses - General and administrative expenses
-----------------------------------
increased $.3 million in the second quarter of 2001 and was flat in the six
months ended August 4, 2001 compared to the same period last year. The increase
in the second quarter relates primarily to professional fees and travel
expenses. For the six month period, these expense increases were offset by a
reduction in accrued incentive compensation expense.
Sales and Marketing Expenses - Sales and marketing expenses (which consist
----------------------------
primarily of store occupancy, advertising, and store payroll costs) increased
$1.4 million in the second quarter of fiscal 2001 and increased $2.8 million for
the first six months of 2001. These differences were the result of reduced
promotional spending in 2001, as offset by increased occupancy and payroll for
additional stores.
Store Opening Costs -Store opening costs increased in both the second quarter
-------------------
and first half of fiscal 2001 as a result of the new store openings noted above.
Interest Expense - Interest expense increased in the second quarter of 2001
----------------
compared to the prior year due primarily to the higher average outstanding
balance in the current year being partially offset by lower interest rates.
Income Taxes - The first half of fiscal 2001 effective income tax rate was 37%
------------
compared to 39% in fiscal 2000. The decrease resulted from lower effective tax
rates.
Liquidity and Capital Resources - The Company has substantial availability under
-------------------------------
its current borrowing agreement. At August 4, 2001, the Company had outstanding
borrowings of $9.6 million with $27.8 million of availability under its Credit
Agreement compared to borrowings of $4.3 million and availability of $28.2
million at the same time last year.
11
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/00
A bank credit agreement (the "Credit Agreement") provides for a revolving loan
whose limit is determined by a formula based on the Company's inventories,
accounts receivable and equipment values. In December, 2000, the Company
extended the Credit Agreement to April, 2004. The amended Credit Agreement
changed the maximum revolving amount under the facility to $50,000,000.
The following table summarizes the Company's sources and uses of funds as
reflected in the condensed consolidated statements of cash flows:
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
Cash provided by (used in):
Operating activities $ (8,307) $ 5,777
Investing activities (5,845) (931)
Financing activities 12,477 (5,133)
Discontinued operations -- 301
-------- ---------
Net (decrease) increase in cash and cash
equivalents $ (1,675) $ 14
======== =========
The cash used in operations was primarily used to purchase inventory as noted
earlier. This was partially offset by income generated from operations and an
increase in accounts payable. Cash used in investing activities primarily
relates to the upgrade of the Company's distribution center to handle additional
store inventory, and the opening and renovation of stores. Cash provided by
financing activities primarily represents the borrowings on the revolving
portion of the Credit Agreement and the issuance of a $5.5 million real estate
loan.
The Company expects to spend between $13 and $14 million on capital expenditures
in fiscal 2001, primarily to open up to 21 new stores, and to update the
distribution center. The capital expenditures are being financed through
operations, the Credit Agreement and the term debt.
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.
12
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/01
PART II. OTHER INFORMATION
Item 6. Exhibit
---------------
(a) None
13
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/4/00
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: September 17, 2001 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/ David E. Ullman
----------------------------
David E. Ullman
Executive Vice President, Chief
Financial Officer
14