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 November 3, 2001
----------------
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
----
(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 7, 2001
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Common Stock, $.01 par value 5,960,977
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 Nine Months
Ended November 3, 2001 and October 28, 2000
Condensed Consolidated Balance 4
Sheets - as of November 3, 2001 and
February 3, 2001
Condensed Consolidated Statements 5
Of Cash Flows - Nine Months ended
November 3, 2001 and October 28, 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 Nine Months Ended
---------------------- -----------------------
Nov. 3, Oct. 28, Nov. 3, Oct. 28,
2001 2000 2001 2000
------- -------- -------- --------
Net Sales $50,243 $43,992 $143,755 $135,269
------ ------- -------- -------
Costs and expenses:
Cost of goods sold 23,187 21,783 70,401 68,386
General and administrative 5,800 4,251 14,700 13,180
Sales and marketing 18,564 16,884 53,760 49,295
Store opening costs 168 136 364 152
One-time charge -- -- 210 --
------ ------- -------- --------
47,719 43,054 139,435 131,013
------ ------- -------- --------
Operating income 2,524 938 4,320 4,256
Interest expense, net 435 301 966 845
------ -------- -------- -------
Income before provision for
income taxes 2,089 637 3,354 3,411
Provision for income taxes 773 230 1,241 1,312
------ ------- -------- -------
Net income $ 1,316 $ 407 $ 2,113 $ 2,099
====== ======= ======== ========
Earnings per share:
Net income:
Basic $ 0.22 $ 0.07 $ 0.35 $ 0.34
Diluted $ 0.21 $ 0.07 $ 0.34 $ 0.33
Weighted average shares outstanding:
Basic 5,956 5,956 5,956 6,197
Diluted 6,172 6,112 6,184 6,345
See accompanying notes
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
November 3, February 3,
2001 2001
----------- -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 518 $ 3,126
Accounts receivable 4,233 2,724
Inventories:
Raw materials 4,768 3,861
Finished goods 70,909 46,588
--------- --------
Total inventories 75,677 50,449
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Prepaid expenses and other current assets 7,241 5,329
Deferred income taxes 941 375
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Total current assets 88,610 62,003
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Property, plant and equipment, at cost 62,291 53,808
Accumulated depreciation and amortization (30,840) (28,176)
--------- --------
Net property, plant and equipment 31,451 25,632
Deferred income taxes 1,262 1,262
Other assets 101 57
--------- --------
Total assets $ 121,424 $ 88,954
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 21,552 $ 16,663
Accrued expenses 15,250 16,268
Current portion of long-term debt 761 422
--------- --------
Total current liabilities 37,563 33,353
Noncurrent Liabilities:
Long-term debt, net of current portion 32,629 6,447
Deferred rent 3,406 3,446
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Total liabilities 73,598 43,246
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Shareholders' equity:
Common stock 71 71
Additional paid-in capital 56,540 56,535
Accumulated deficit (3,727) (5,840)
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52,884 50,766
Less: treasury stock (5,058) (5,058)
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Total shareholders' equity 47,826 45,708
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Total liabilities and shareholders' equity $ 121,424 $ 88,954
========= ========
See accompanying notes
4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands) (Unaudited)
Nine Months Ended
-----------------
November 3, October 28,
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 2,113 $ 2,099
Adjustments to reconcile net income
Net cash used in operating activities:
Increase in deferred taxes (566) --
Depreciation and amortization 3,466 3,102
Loss on disposition of assets 140 7
Net increase in operating working capital (24,862) (3,340)
--------- --------
Net cash (used in) provided by
operating activities of continuing operations (19,709) 1,868
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (9,425) (2,453)
Proceeds from disposal of assets -- 528
--------- --------
Net cash used in investing activities
of continuing operations (9,425) (1,925)
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Cash flows from financing activities:
Borrowings under long-term Credit Agreement 59,341 46,314
Repayment under long-term Credit Agreement (37,846) (42,453)
Borrowing of other long-term debt 5,500 --
Repayment of other long-term debt (474) (702)
Repurchase of Common Stock -- (3,138)
Net proceeds from issuance of Common Stock 5 36
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Net cash provided by financing activities
of continuing operations 26,526 57
Net cash provided by discontinued operations -- 301
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Net (decrease) increase in cash and cash equivalents (2,608) 301
Cash and cash equivalents - beginning of period 3,126 1,087
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Cash and cash equivalents - end of period $ 518 $ 1,388
========= ========
See accompanying notes
5
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 11/3/01
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, 11/3/01
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
Nine Months Ended
---------------------------
Nov. 3, Oct. 28,
2001 2000
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Increase in accounts receivable $ (1,509) $ (1,402)
Increase in inventories (25,228) (10,225)
Increase in prepaids and other assets (1,956) (3,289)
Increase in accounts payable 4,889 10,992
(Decrease) increase in accrued expenses and
other liabilities (1,058) 584
-------- ---------
Net increase in operating working capital $(24,862) $ (3,340)
======== =========
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 Nine Months Ended
-------------------- --------------------
Nov. 3, Oct. 28, Nov. 3, Oct. 28,
2001 2000 2001 2000
------- -------- ------- --------
Weighted average shares
outstanding for basic EPS 5,956 5,956 5,956 6,197
Diluted EPS:
Dilutive effect of common
stock equivalents 216 156 228 148
----- ----- ----- -----
Weighted average shares
outstanding for diluted EPS 6,172 6,112 6,184 6,345
===== ===== ===== =====
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, 11/3/01
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 November 3, 2001 Full-line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 42,358 $ 5,755 $ 2,130 (a) $ 50,243
Depreciation and amortization 899 16 335 1,250
Operating income (loss) (b) 7,710 1,220 (6,406) 2,524
Identifiable assets (c) 76,369 16,350 28,705 121,424
Capital expenditures (d) 2,803 -- 777 3,580
Quarter ended October 28, 2000
(in thousands)
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
8
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 11/3/01
Nine Months ended November 3, 2001 Full-line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 121,914 $ 16,566 $ 5,275 (a) $ 143,755
Depreciation and amortization 2,511 46 909 3,466
Operating income (loss) (b) 18,789 1,761 (16,230) 4,320
Identifiable assets (c) 76,369 16,350 28,705 121,424
Capital Expenditures (d) 5,903 400 3,122 9,425
Nine Months ended October 28, 2000
(in thousands)
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
(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, 11/3/01
Overview - For the third quarter of 2001, the Company earned $.21 per share
- --------
compared to $.07 per share in 2000. As such, the Company tripled its third
quarter earnings of the prior year. The $.21 per share is also a record
recurring earnings per share for a third quarter.
Total sales increased 14.2 % to $50.2 million for the third quarter, comparable
store sales increased 4.3% and combined catalog/Internet sales increased 18.2%.
The sales increases were strongest in the sportswear collection, including
outerwear such as leather coats and microfibre coats. Also, suit sales increased
slightly. The Company also opened 8 new stores in the third quarter and has
opened 18 new stores through the end of the third quarter.
Every major aspect of the business performed well in the third quarter. The
Company generated increased profits in the stores, catalog and internet
businesses. In addition, gross profit margin increased 340 basis points which is
the continuation of a trend that began in the second quarter of 2001.
Total debt at November 3, 2001 increased $20.9 million to $33.4 million compared
to $12.5 million at October 28, 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 November 3, 2001 was $21.3 million, compared to $30.2 million at
October 28, 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 Nine Months Ended
----------------------- -----------------------
Nov. 3, Oct. 28, Nov. 3, Oct. 28,
2001 2000 2001 2000
------- -------- ------- --------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 46.1 49.5 49.0 50.6
----- ----- ----- -----
Gross profit 53.9 50.5 51.0 49.4
General and administrative expenses 11.5 9.7 10.2 9.7
Sales and marketing expenses 37.0 38.4 37.4 36.5
Store opening costs 0.4 0.3 0.3 0.1
One-time charge -- -- 0.1 --
----- ----- ----- -----
Operating income 5.0 2.1 3.0 3.1
Interest expense, net 0.8 0.7 0.7 0.6
----- ----- ----- -----
Income before income taxes 4.2 1.4 2.3 2.5
Provision for income taxes 1.6 0.5 0.8 1.0
----- ----- ----- -----
Net income 2.6% 0.9% 1.5% 1.6%
===== ===== ===== =====
Net Sales - Total sales for the third quarter of 2001 increased 14.2%, to $50.2
- ---------
million, compared to $44.0 million in 2000. Comparable store sales increased
4.3% in the third quarter of 2001. Total sales for the first nine months of 2001
increased 6.3%, to $143.8 million, compared to $135.3 million in 2000.
Comparable store sales increased .5% in the first nine months of 2001. The sales
were driven by increases in sportswear, suits and shirts.
10
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q 11/3/01
Sales also increased as a result of the opening of new stores as follows:
Three Months Ended Nine Months Ended
------------------------ ----------------------
Nov. 3, Oct. 28, Nov. 3, Oct. 28,
2001 2000 2001 2000
------- -------- ------- --------
Stores open at the beginning of the period 125 110 116 108
Opened 8 5 18 7
Closed (1) (1) (2) (1)
----- ----- ----- -----
Stores open at the end of the period 132 114 132 114
===== ===== ===== =====
Gross Profit - Gross profit (sales less cost of goods sold) as a percent of
- ------------
sales increased in both the third quarter and nine months ended November 3,
2001. The increase relates primarily to a combination of better management of
markdowns at a very detailed level and higher initial merchandise margins.
General and Administrative Expenses - General and administrative expenses
- -----------------------------------
increased $1.5 million in the third quarter and nine months ended November 3,
2001 compared to the same period last year. The increase in the third quarter
relates primarily to accrued incentive compensation, distribution center
expenses, professional fees and travel expenses. The increase for the nine
months relates primarily to distribution center costs, professional fees,
compensation expense and travel expense. Depending on the results of the fourth
quarter of 2001, incentive compensation expense could increase significantly in
the fourth quarter of 2001.
Sales and Marketing Expenses - Sales and marketing expenses (which consist
- ----------------------------
primarily of store occupancy, advertising, and store payroll costs) increased
$1.7 million in the third quarter of fiscal 2001 and increased $4.5 million for
the first nine months of 2001. These differences were primarily the result of
increased occupancy and payroll for additional stores.
Store Opening Costs -Store opening costs increased in both the third quarter and
- -------------------
first nine months of fiscal 2001 as a result of the greater number of 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 nine months of fiscal 2001 effective income tax rate
- ------------
was 37% compared to 38.5% in fiscal 2000. The decrease resulted from certain
permanent tax adjustments effective in the current fiscal year.
Liquidity and Capital Resources - The Company has substantial availability under
- -------------------------------
its current borrowing agreement. At November 3, 2001, the Company had
outstanding borrowings of $23.7 million with $21.3 million of availability under
its Credit Agreement compared to borrowings of $9.4 million and availability of
$30.2 million at October 28, 2000.
11
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 11/3/00
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, if supported by the
borrowing base.
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
---------------------
Nov. 3, Oct. 28,
2001 2000
---- ----
Cash provided by (used in):
Operating activities $(19,709) $ 1,868
Investing activities (9,425) (1,925)
Financing activities 26,526 57
Discontinued operations -- 301
-------- -------
Net (decrease) increase in cash
and cash equivalents $ (2,608) $ 301
======== =======
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 processing
inventory for the additional stores, 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 21 new stores and to update the distribution
center. The capital expenditures are being financed through operations, the
Credit Agreement and the term debt.
Historically, the Company's operations had not been greatly affected by seasonal
fluctuations. Although variations in sales volumes do exist between quarters,
the Company believes the nature of its merchandise helps to stabilize demand
between the different periods of the year. However, as the Company's merchandise
continues to include more Corporate Casual and Sportswear, profits generated
during the fourth quarter have become a larger portion of annual profits.
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, 11/3/01
PART II. OTHER INFORMATION
Item 6. Exhibit
----------------
(a) None
13
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 11/3/00
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 17, 2001 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/ David E. Ullman
-------------------------------
David E. Ullman
Executive Vice President, Chief
Financial Officer
14