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 2, 1998
---------------
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 Identification
Classification Number)
Code 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 for 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 10, 1998
- ---------------------------- -------------------------------
Common stock. $.01 par value 6,791,152
Jos. A. Bank Clothiers, Inc.
Index
Part I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Consolidated Statements 3
of Income - Three Months
ended May 2, 1998 and
May 3, 1997
Condensed Consolidated Balance 4
Sheets - as of May 2, 1998 and
January 31, 1998
Condensed Consolidated Statements 5
of Cash Flows -Three Months
ended May 2, 1998 and
May 3, 1997
Notes to Condensed Consolidated 6-8
Financial Statements
Item 2. Management's Discussion and Analysis 9-11
of Results of Operations and
Financial Condition
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 12
(a) Exhibits - Exhibit 27-Financial Data
Schedule (EDGAR filing only)
Signatures 13
- ----------
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three Months Ended
------------------
May 2, May 3,
1998 1997
------- -------
NET SALES $43,383 $38,655
Costs and expenses:
Cost of goods sold 22,151 19,793
General and administrative 4,528 4,120
Sales and marketing 14,670 13,427
Store opening costs 240 --
------- -------
41,589 37,340
------- -------
Operating income 1,794 1,315
Interest expense, net 437 590
------- -------
Income from continuing operations
before provision for income taxes 1,357 725
Provision for income taxes 529 288
------- -------
INCOME FROM CONTINUING OPERATIONS 828 437
Loss from discontinued operations (51) (55)
------- -------
NET INCOME $ 777 $ 382
======= =======
Earnings per share:
Income from continuing operations:
Basic $0.12 $0.06
Diluted $0.12 $0.06
Discontinued operations (net of tax):
Basic $(0.01) $(0.01)
Diluted $(0.01) $(0.01)
Net income:
Basic $0.11 $0.06
Diluted $0.11 $0.06
Weighted average shares outstanding:
Basic 6,791 6,791
Diluted 6,918 6,827
See accompanying notes.
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
May 2, January 31,
1998 1998
-------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 677 $ 564
Accounts receivable 3,466 2,737
Inventories:
Raw materials 7,938 6,994
Finished goods 39,016 33,120
------- -------
Total inventories 46,954 40,114
------- -------
Prepaid expenses and other current assets 4,695 4,338
Deferred income taxes 4,084 4,030
------- -------
Total current assets 59,876 51,783
------- -------
Property, plant and equipment,
at cost 47,674 46,925
Accumulated depreciation and amortization (24,917) (24,818)
------- -------
Net property, plant and equipment 22,757 22,107
------- -------
Deferred income taxes 1,207 1,680
Other assets 713 791
Net noncurrent assets of discontinued operations 750 783
------- -------
TOTAL ASSETS $85,303 $77,144
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $16,381 $13,319
Accrued expenses 10,740 9,774
Current portion of long-term debt 1,720 1,885
Net current liabilities of discontinued operations 438 663
------- -------
Total current liabilities 29,279 25,641
Long-term liabilities 18,832 15,105
------- -------
Total liabilities 48,111 40,746
------- -------
Shareholders' equity:
Common stock 70 70
Additional paid-in capital 56,353 56,336
Accumulated deficit (17,311) (18,088)
------- -------
39,112 38,318
Less treasury stock (1,920) (1,920)
------- -------
TOTAL SHAREHOLDERS' EQUITY 37,192 36,398
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $85,303 $77,144
======= =======
See accompanying notes.
4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Three Months Ended
--------------------
May 2, May 3,
1998 1997
------- -------
Cash flows from operating activities:
Net income $ 777 $ 382
Loss from discontinued operations 51 55
------- -------
Income from continuing operations 828 437
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Decrease in deferred taxes 419 240
Depreciation and amortization 950 854
Net increase in operating working capital (4,032) (5,929)
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
OF CONTINUING OPERATIONS (1,835) (4,398)
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (1,550) (599)
------- -------
NET CASH USED IN INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (1,550) (599)
------- -------
Cash flows from financing activities:
Borrowings under long-term Credit Agreement 10,625 14,573
Repayment under long-term Credit Agreement (7,090) (9,435)
Borrowings of other long-term debt 277 --
Repayment of other long-term debt (88) (98)
Other 17 --
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES
OF CONTINUING OPERATIONS 3,741 5,040
------- -------
Net cash used in discontinued operations (243) (106)
------- -------
Net increase (decrease) in cash and cash equivalents 113 (63)
Cash and cash equivalents - beginning of period 564 719
------- -------
Cash and cash equivalents - end of period $ 677 $ 656
======= =======
See accompanying notes.
5
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/2/98
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
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 31, 1998 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 manufactured and purchased
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, 5/2/98
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
Three Months Ended
-----------------------
May 2, May 3,
1998 1997
------- -------
Increase in accounts receivable $ (729) $ (342)
Increase in inventories (6,840) (6,929)
(Increase)decrease in prepaids and other assets (279) 424
Increase in accounts payable 3,062 2,566
Increase (decrease) in accrued expenses and other liabilities 754 1,648)
------- -------
Net increase in operating working capital $(4,032) $(5,929)
======= =======
4. NEW ACCOUNTING STANDARDS
Earnings Per Share - During 1997, the Financial Accounting Standards Board
(FASB) issued Statement No. 128 (SFAS No. 128), "Earnings Per Share," which
establishes new standards for computing and presenting earnings per share.
The Company has adopted SFAS No. 128 and restated earnings per share data
presented to reflect the new standard. 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 Month Ended
-------------------
May 2, May 3,
1998 1997
----- ------
Weighted average shares outstanding for basic EPS 6,791 6,791
Diluted EPS:
Dilutive effect of common stock equivalents 127 36
----- -----
Weighted average shares outstanding for 6,918 6,827
diluted EPS ===== =====
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.
Reclassifications - Certain reclassifications have been made to the May 3,
1997 financial statements in order to conform with the May 2, 1998,
presentation.
7
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 5/2/98
5. DISCONTINUED OPERATIONS
In January 1998, the Company formalized a plan to dispose of its
manufacturing operations. Accordingly, the consolidated financial statements
have been presented to reflect the disposition of the manufacturing
operations as discontinued operations. The revenues, costs and expenses,
assets and liabilities, and cash flows of the manufacturing operations have
been excluded from the respective captions in the Consolidated Statements of
Income, Consolidated Balance Sheets and Consolidated Statements of Cash
Flows and the related footnotes included herein.
In April 1998, the Company entered into an agreement which included the
disposition of the Company's manufacturing operations. Based upon the
agreement, an estimated loss on disposal of $2.5 million was reported net of
an income tax benefit of $1.0 million for an after-tax loss of $1.5 million
during the fiscal year ended January 31, 1998.
Summarized financial information for the discontinued operations is as
follows (in thousands):
May 2, Jan 31,
1998 1998
------ ------
Loss before income taxes $ (84) $ (374)
Net loss $ (51) $ (266)
------ ------
Current assets $3,743 $3,839
Less current liabilities 4,181 4,502
------ ------
Net current assets (liabilities) $ (438) $ (663)
------ ------
Noncurrent assets $ 991 $1,028
Noncurrent liabilities 241 245
------ ------
Net noncurrent assets $ 750 $ 783
------ ------
Revenues of the manufacturing operations primarily represent
intercompany sales which have been eliminated in consolidation.
Net current and noncurrent assets/liabilities of discontinued
operations noted above includes inventories, plant and equipment,
pension termination and other transaction costs associated with the
discontinued manufacturing operations.
8
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 5/2/98
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 31, 1998.
OVERVIEW - The Company's income from continuing operations for the quarter ended
May 2, 1998 increased to $.8 million or $.12 per share compared to $.4 million
or $.06 per share for the same period in 1997. This improvement was due
primarily to higher sales attributable to an increase in comparable store sales
and the opening of 15 new stores since May 3, 1997.
The Company continues to pursue its expansion strategy of opening new stores in
existing markets and opened seven new stores in existing markets during the
quarter. This provides the Company with greater leverage of selling, marketing
and general and administrative expenses.
The Company's availability under the Credit Agreement increased to $25.6 million
as of May 2, 1998 which was $11.8 million higher than the same time last year.
RESULTS OF OPERATIONS - The following table is derived from the Company's
condensed consolidated statements of income and sets forth, for the periods
indicated, the items included in the condensed consolidated statements of
income, expressed as a percentage of net sales.
Percentage of Net Sales
Quarter Ended
-----------------------
May 2, May 3,
1998 1997
------ ------
Net Sales......................................... 100.0% 100.0%
Cost of goods sold................................ 51.1 51.2
----- -----
Gross profit...................................... 48.9 48.8
General and administrative expenses............... 10.4 10.7
Sales and marketing expenses...................... 33.8 34.7
Store opening costs............................... .6 --
----- -----
Operating income.................................. 4.1 3.4
Interest expense, net............................. 1.0 1.5
----- -----
Income from continuing operations before income taxes 3.1 1.9
Provision for income taxes........................ 1.2 0.7
----- -----
Income from continuing operations................. 1.9 1.1
Loss from discontinued operations, net............ (0.1) (0.1)
----- -----
Net income........................................ 1.8% 1.0%
===== =====
9
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 5/2/98
NET SALES - Net sales increased 12.2 percent to $43.4 million in the first
quarter of 1998 from $38.7 million in the same period last year. Comparable
store sales increased 5.0 percent in the quarter compared to a 1.5 percent
decline in the first quarter of 1997. The increase in comparable stores was
achieved despite the opening of 15 new stores in the existing markets in the
past 12 months. Sales generated by the new stores are not included in comparable
sales. Catalog sales decreased 10.2 percent in the first quarter despite an 18.0
percent decrease in catalog circulation.
COST OF GOODS SOLD - Gross profit increased $2.3 million to $21.2 million in the
first quarter of 1998 compared to $18.9 million for the same period in the prior
year. Gross profit as a percent of sales remained strong and increased .1
percent over the same period in the prior year, reflecting strong performance in
all major categories especially sportcoats and slacks.
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
decreased to 10.4 percent of sales in the first quarter of 1998 compared to 10.7
percent in the first quarter of 1997. This improvement reflects the Company's
continued effort to control overhead costs while growing the business.
SALES AND MARKETING EXPENSES - Sales and marketing expenses (which include store
and catalog payroll, marketing and occupancy expenses, among others) decreased
.9 percent of sales to 33.8 percent in the first quarter of 1998 from 34.7
percent in the same period in the prior year. This improvement is primarily the
result of achieving existing store sales increases while maintaining appropriate
staffing levels in stores, sales generated by new stores in existing markets and
a strong response to the catalog mailings.
INTEREST EXPENSE - Interest expense was $.2 million lower in the first quarter
of 1998 compared to the same period in 1997 due primarily to a $6.8 million
decrease in total debt outstanding at May 2, 1998 compared to May 3, 1997.
INCOME TAXES - At May 2, 1998, the Company had approximately $14.0 million of
tax net operating loss carryforwards (NOLs) which expire through 2010. SFAS No.
109 requires that the tax benefit of such NOLs be recorded as an asset to the
extent that management assesses the utilization of such NOLs to be "more likely
than not". Realization of the future tax benefits is dependent on the Company's
ability to generate taxable income within the carryforward period. Future levels
of operating income are dependent upon general economic conditions, including
interest rates and general levels of economic activity, competitive pressures on
sales and margins and other factors beyond the Company's control. Therefore no
assurance can be given that sufficient taxable income will be generated for full
utilization of the NOLs.
Management has determined, based on the Company's history of earnings, that
future earnings of the Company will more likely than not be sufficient to
utilize at least $10 million of NOLs prior to their expiration. Accordingly, the
Company has recorded a deferred tax asset of $4 million and a valuation
allowance of $1.4 million relating to the NOLs. Management believes that
although the prior earnings and current year operating results might justify a
higher amount, the recorded asset represents a reasonable estimate of the future
utilization of the NOLs. The Company will continue to evaluate the likelihood of
future profit and the necessity of future adjustments to the deferred tax asset
valuation allowance.
10
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 5/2/98
LIQUIDITY AND CAPITAL RESOURCES - At May 2, 1998 the Company had outstanding
borrowings of $16.7 million with $25.6 million of availability under its Credit
Agreement compared to borrowings of $23.1 million and availability of $13.8
million at the same time last year. The Company's availability at May 2, 1998
increased $11.8 million compared to the same time in 1997. The increase in
availability was generated principally by cash provided by operating activities
during the preceding twelve months and a higher borrowing base created by an
additional $4.0 million term loan facility which was obtained in September,
1997.
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 2, May 3,
1998 1997
------- -------
Cash provided by (used in):
Operating activities $(1,835) $(4,398)
Investing activities (1,550) (599)
Financing activities 3,741 5,040
Discontinued operations (243) (106)
------- -------
Net increase (decrease) in cash and cash equivalents $ 113 $ (63)
======= =======
Cash used by operating activities was due primarily to higher inventory levels
to support new stores, although the average inventory per store decreased. Cash
used in investing activities relates primarily to improvements to new stores.
Cash provided by financing activities represents primarily borrowings on the
revolving loan.
The Company expects to spend between $6.0 and $7.0 million on capital
expenditures in 1998, primarily to open up to 17 new stores and to relocate two
existing stores. The store expansion program is being financed through
operations and the Credit Agreement. The Company also expects to open up to 46
additional stores (including 12 relocations) beyond 1998, mostly in existing
markets. The Company believes that its existing markets can support these
additional stores which will provide leverage for its management, distribution,
advertising and sourcing infrastructure. To support this growth, the Company
expects to upgrade certain information systems and its existing distribution
center in 1998 and 1999. The Company believes that its current liquidity and its
Credit Agreement will be adequate to support its current working capital and
investment needs. Further expansion beyond 1998 may necessitate revised
financing arrangements for the Company.
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 mix of
goods sold, pricing, availability of lease sites for new stores and other
competitive factors.
11
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 5/2/98
PART 2. OTHER INFORMATION
Item 6. Exhibits
- -----------------
Exhibits
10.15 Brookhill Lease Agreement, filed herewith
10.15a First Amendment to Brookhill Lease Agreement, filed herewith
10.16 Brookhill Sublease Agreement, filed herewith
10.17 North Avenue Lease Agreement, filed herewith
27.0 Financial Date Schedule, filed herewith
12
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 5/2/98
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 15, 1998 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/: David E. Ullman
_________________________________________________
Executive Vice President, Chief Financial Officer
13