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 May 4, 2002
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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 June 13, 2002
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Common Stock, $.01 par value 6,169,472
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Jos. A. Bank Clothiers, Inc.
Index
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Part I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Statements 3
of Operations - Three Months ended
May 4, 2002 and May 5, 2001
Condensed Consolidated Balance 4
Sheets - as of May 4, 2002 and
February 2, 2002
Condensed Consolidated Statements 5
of Cash Flows - Three Months ended
May 4, 2002 and May 5, 2001
Notes to Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9-12
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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
------------------
May 5, May 4,
2001 2002
---- ----
Net sales $ 47,406 $ 55,760
------ ------
Costs and expenses:
Cost of goods sold 23,896 26,411
General and administrative 4,553 5,849
Sales and marketing 17,656 20,342
Store opening costs 69 27
One-time charge 210 --
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46,384 52,629
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Operating income 1,022 3,131
Interest expense, net 219 293
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Income before provision for income taxes 803 2,838
Provision for income taxes 297 1,107
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Net income $ 506 $ 1,731
====== ======
Earnings per share:
Net income:
Basic $ 0.08 $ 0.29
Diluted $ 0.08 $ 0.25
Weighted average shares outstanding:
Basic 5,956 6,045
Diluted 6,210 6,819
See accompanying notes
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
February 2, May 4,
2002 2002
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(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 827 $ 1,182
Accounts receivable 2,364 3,599
Inventories:
Raw materials 5,018 4,668
Finished goods 59,624 59,270
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Total inventories 64,642 63,938
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Prepaid expenses and other current assets 6,532 5,770
Deferred income taxes 594 594
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Total current assets 74,959 75,083
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Property, plant and equipment, at cost 64,559 67,107
Accumulated depreciation and amortization (32,018) (33,292)
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Net property, plant and equipment 32,541 33,815
Other assets 117 109
Deferred income taxes 840 840
--------- ---------
Total assets $ 108,457 $ 109,847
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 16,528 $ 18,276
Accrued expenses 19,930 19,305
Current portion of long-term debt 744 710
--------- ---------
Total current liabilities 37,202 38,291
Noncurrent Liabilities:
Long-term debt 15,894 12,528
Deferred rent 3,109 3,094
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Total liabilities 56,205 53,913
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Shareholders' equity:
Common stock 71 73
Additional paid-in capital 56,558 58,507
Retained earnings 681 2,412
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57,310 60,992
Less treasury stock (5,058) (5,058)
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Total shareholders' equity 52,252 55,934
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Total liabilities and shareholders' equity $ 108,457 $ 109,847
========= =========
See accompanying notes
4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands) (Unaudited)
Three Months Ended
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May 5, May 4,
2001 2002
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Cash flows from operating activities:
Net income $ 506 $ 1,731
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Increase in deferred taxes (566) --
Depreciation and amortization 1,089 1,300
Net (increase) decrease in operating working capital (8,674) 1,347
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Net cash (used in) provided by
operating activities (7,645) 4,378
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Cash flows from investing activities:
Capital expenditures (1,984) (2,574)
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Net cash used in investing activities (1,984) (2,574)
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Cash flows from financing activities:
Borrowings under long-term Credit Agreement 17,136 14,968
Repayments under long-term Credit Agreement (15,482) (18,184)
Borrowing of other long-term debt 5,500 --
Repayment of other long-term debt (130) (184)
Net proceeds from issuance of common stock -- 1,951
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Net cash provided by (used in) financing
activities 7,024 (1,449)
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Net (decrease) increase in cash and cash equivalents (2,605) 355
Cash and cash equivalents - beginning of period 3,126 827
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Cash and cash equivalents - end of period $ 521 $ 1,182
======= ========
See accompanying notes
5
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
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 2, 2002 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 inventory certain warehousing and
delivery costs associated with shipping its merchandise 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 carry
forwards, to the extent that realization of such benefits is more likely
than not.
Reclassifications - Certain reclassifications have been made to the May
5, 2001 financial statements in order to conform with the May 4, 2002
presentation.
6
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
Three Months Ended
May 5, May 4,
2001 2002
---- ------
Increase in accounts receivable $ (540) $(1,235)
(Increase) decrease in inventories (8,453) 704
(Increase) decrease in prepaids and other assets (252) 770
Increase in accounts payable 1,861 1,748
Decrease in accrued expenses and
other liabilities (1,290) (640)
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Net (increase) decrease in operating
working capital $(8,674) $ 1,347
======= =======
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
------------------
May 5, May 4,
2001 2002
------ -------
Weighted average shares
outstanding for basic EPS 5,956 6,045
Dilutive effect of common
stock equivalents 254 774
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Weighted average shares
outstanding for diluted EPS 6,210 6,819
====== =======
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, 5/4/02
5. 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 2, 2002 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 May 4, 2002 Full line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 47,489 $ 6,109 $ 2,162 (a) $ 55,760
Depreciation and amortization 950 15 335 1,300
Operating income (loss) (b) 8,316 1,354 (6,539) 3,131
Identifiable assets (c) 66,168 13,979 29,700 109,847
Capital expenditures (d) 835 -- 1,739 2,574
Quarter ended May 5, 2001 Full line Catalog/Internet
(in thousands) Stores Direct Marketing Other Total
------ ---------------- ----- -----
Net sales $ 41,024 $ 4,891 $ 1,491 (a) $ 47,406
Depreciation and amortization 791 15 283 1,089
Operating income (loss) (b) 5,851 310 (5,139) 1,022
Identifiable assets (c) 59,975 11,453 25,627 97,055
Capital expenditures (d) 777 390 817 1,984
(a) Net sales 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
"management company" 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.
8
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
6. 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 fiscal 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 2, 2002.
Overview - For the first quarter of fiscal 2002, the Company earned
$.25 per share compared with $.08 per share in fiscal 2001. As such, earnings
per share was more than triple compared with the prior year. The earnings per
share of $.25 represents the third consecutive quarter of record earnings for
the Company. The Company generated increased profits in both the stores and
catalog/internet segments driven by increased sales and gross profit margins.
The Company's gross profit percent increased 300 basis points in the first
quarter of fiscal 2002 as the Company continued to improve its sourcing of
merchandise.
The Company had $12.1 million of total debt outstanding as of the end
of the quarter (excluding cash) compared with $13.4 million at the same time
last year. Total debt decreased $3.8 million in the first quarter of fiscal 2002
whereas last year total debt increased $9.6 million in the first quarter. The
Company had $32.7 million of additional availability in the bank line of credit
as of June 7, 2002, compared with $32.3 million at the same time last year.
The Company expects to open 23 to 25 new stores in fiscal 2002, mostly
in existing markets. Two of the new stores were opened in the first quarter, 6
to 10 are scheduled to open in the second quarter, 6 to10 are scheduled to open
in the third quarter, with the remainder opening in the fourth quarter. The
Company also expects to open at least 30 stores next year, which will be
evaluated as the year progresses.
9
Jos.A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
Inventories at the end of the first quarter of fiscal 2002 were
approximately $64 million, or $5 million (9%) higher than last year. The
increase relates almost entirely to the new stores that were opened since the
end of the first quarter of fiscal 2001. The Company expects to increase
inventories in the second half of fiscal 2002 to support new stores and
anticipated sales growth.
Percentage of Net Sales
Three Months Ended
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May 5, May 4,
2001 2002
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Net sales ............................................. 100.0% 100.0%
Cost of goods sold .................................... 50.4 47.4
---- ----
Gross profit .......................................... 49.6 52.6
General and administrative expenses ................... 9.6 10.5
Sales and marketing expenses .......................... 37.2 36.5
Store opening costs ................................... 0.1 --
One-time charge ....................................... 0.4 --
---- ----
Operating income ...................................... 2.2 5.6
Interest expense, net ................................. 0.5 0.5
---- ----
Income before provision for income taxes .............. 1.7 5.1
Provision for income taxes ............................ 0.6 2.0
---- ----
Net income ............................................ 1.1% 3.1%
==== ====
Net sales - Net sales increased 17.7% or $8.4 million to $55.8 million in the
first quarter of fiscal 2002 compared with $47.4 million in fiscal 2001. The
sales increase was primarily related to a 15.7% increase in store sales in both
new and existing stores and a 24.9% increase in combined catalog/internet sales.
The sales increases were across the Company's broad range of products.
The following table summarizes store opening and closing activity during the
respective periods.
For the Three Months Ended
--------------------------
May 5, May 4,
2001 2002
---- ----
Stores open at the beginning of the period 116 135
Opened 3 2
Closed 1 --
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Stores open at the end of the period 118 137
===== =====
Gross profit - Gross profit (net sales less cost of goods sold) increased $5.8
million to $29.3 million in the first quarter of fiscal 2002 compared to $23.5
million in fiscal 2001. Gross profit as a percent of sales increased 300 basis
points to 52.6% primarily due to the continued improvement in sourcing of
merchandise.
10
Jos.A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
General and Administrative Expenses - General and administrative expenses
increased $1.3 million to $5.8 million in fiscal 2002 compared with $4.6 million
in fiscal 2001. The increase was due primarily to higher accrued incentive
compensation expense and other expenses such as professional fees, recruitment
costs and travel related to business expansion.
Sales and Marketing Expenses - Sales and marketing expenses increased $2.7
million to $20.3 million, or 36.5% of net sales, in the first quarter of fiscal
2002 from $17.7 million, or 37.2% of net sales in the first quarter of fiscal
2001. The increased sales and marketing expense primarily represents occupancy,
payroll and advertising for the 20 new stores opened since the end of the first
quarter of fiscal 2001. The decrease in expense as a percentage of sales relates
to increased leverage of store expenses on the higher store sales.
Store Opening Costs - Store opening costs decreased to $27 thousand during the
first quarter of fiscal 2002 from $69 thousand in the prior year as the Company
opened two new stores in the first quarter of fiscal 2002 and three new
stores in the first quarter of fiscal 2001. The decrease per store
relates primarily to lower store opening advertising costs for the new stores.
Interest Expense - Interest expense increased in the first quarter of fiscal
2002 compared with the prior year due primarily to the higher average
outstanding debt balance in the current year.
One-Time Charge - The one-time charge in the prior year primarily represents
professional fees incurred in the first quarter of fiscal 2001 in connection
with a strategic action considered by the Board of Directors.
Income Taxes - The first quarter of fiscal 2002 effective income tax rate is
39.0% compared with 37.0% in fiscal 2001. The increase resulted from higher
effective state tax rates for the first quarter of fiscal 2002. The Company
operates in 29 states with varying tax rates.
Liquidity and Capital Resources - The Company has significant availability under
its current $60 million Credit Agreement which expires April 30, 2005. At May 4,
2002 the Company had outstanding borrowings of $4.0 million and $34.4 million of
availability under its Credit Agreement compared with borrowings of $3.4 million
and availability of $35.1 million at the end of the first quarter last year. The
Company also has $6.6 million of term debt due over the next 11 years.
The Company had $12.1 million of total debt outstanding as of the end of the
quarter (excluding cash) compared with $13.4 million at the same time last year.
Total debt decreased $3.8 million in the first quarter of fiscal 2002 whereas
last year total debt increased $9.6 million in the first quarter. The Company
had $32.7 million of additional availability in the bank line of credit as of
June 7, 2002, compared with $32.3 million at the same time last year.
11
Jos.A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
The following table summarizes the Company's sources and uses of funds as
reflected in the condensed consolidated statements of cash flows:
Three Months Ended
------------------
May 5, May 4,
2001 2002
---- ----
Cash provided by (used in):
Operating activities $(7,645) $ 4,378
Investing activities (1,984) (2,574)
Financing activities 7,024 (1,449)
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Net increase (decrease) in cash and cash equivalents $(2,605) $ 355
======= =======
Cash provided by operating activities was primarily due to earnings, an increase
in accounts payable and depreciation. Cash used in investing activities
primarily relates to the purchase of a corporate aircraft and opening new
stores. Cash used in financing activities is primarily from repayments under the
Credit Agreement.
In the remaining three quarters of fiscal 2002, the Company expects to spend
between $6 million and $8 million on capital expenditures primarily to open the
remaining 23 to 25 new stores to be opened in fiscal 2002 and to renovate
several stores. The capital expenditures will be financed through operations,
the Credit Agreement and additional term debt. The Company believes that its
current liquidity, Credit Agreement and term loans will be adequate to support
its current working capital and capital expenditure needs.
The Company's plans and beliefs 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, mix of goods sold,
pricing, availability of lease sites for new stores, the ability to source the
product from its global supplier base 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 any investment
decision.
Critical Accounting Policies - The Company believes the following critical
accounting policy affects management's significant judgments and estimates used
in the preparation of the Consolidated Financial Statements. For a detailed
discussion on the application of this and other accounting policies, see Note 1
in the Consolidated Financial Statements in the Company's February 2, 2002
Annual Report on Form 10K.
Inventory. The Company records inventory at the lower of cost
or market. The estimated market value is based on assumptions for
future demand and related pricing. If actual market conditions are less
favorable than those projected by management, reductions in the value
of inventory may be required.
12
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At May 4, 2002, there were no derivative financial instruments. In
addition, the Company does not believe it is materially at risk for changes in
market interest rates or foreign currency fluctuations. The Company's interest
on borrowings under its Credit Agreement is at a variable rate based on the
prime rate or a spread over the LIBOR.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit 10.8(b) -- Amended and Restated Employment Agreement dated May 15, 2002 between
David E. Ullman and Jos. A. Bank Clothiers, Inc., filed herewith
(Contract renewal)
Exhibit 10.13(b) -- Amended and Restated Employment Agreement dated May 15, 2002 between
Charles D. Frazer and Jos. A. Bank Clothiers, Inc., filed herewith
(Contract renewal)
Exhibit 10.17(d) -- Fourth Amendment to Employment Agreement dated May 28, 2002 between
Robert Hensley and Jos. A. Bank Clothiers, Inc., filed herewith
Exhibit 10.18(c) -- Third Amendment to Employment Agreement dated May 29, 2002 between R.
Neal Black and Jos. A. Bank Clothiers, Inc., filed herewith
Exhibit 10.21 -- Employment Offer Letter dated September 18, 2000 between Gary Merry and
Jos. A. Bank Clothiers, Inc., filed herewith
(b) Reports on Form 8-K
On May 8, 2002 the Company filed a report on Form 8-K related to the termination
of Arthur Andersen LLP and the engagement of KPMG LLP to serve as the Company's
independent public accountants.
13
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/4/02
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: June 18, 2002 Jos. A. Bank Clothiers, Inc.
---------
(Registrant)
/s/ David E. Ullman
-------------------------------
David E. Ullman
Executive Vice President, Chief
Financial Officer
14