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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 2005
Jos. A. Bank Clothiers, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-23874 36-3189198
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Hanover Pike 21074
Hampstead, Maryland
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 239-2700
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
On February 7, 2005, in a letter to the Center for Public Company Audit
Firms-American Institute of Certified Public Accountants (the "SEC Letter"), the
Chief Accountant of the Securities and Exchange Commission (the "SEC") expressed
the views of the SEC staff concerning certain operating lease accounting issues
and their application under generally accepted accounting principles.
Specifically, the SEC Letter addressed the appropriate accounting for: (1) the
amortization of leasehold improvements by a lessee in an operating lease with
lease renewals, (2) the pattern of recognition of rent when the lease term in an
operating lease contains a period where there are free or reduced rents
(commonly referred to as "rent holidays"), and (3) incentives related to
leasehold improvements provided by a landlord/lessor to a tenant/lessee in an
operating lease. Like many other companies in the retail industry, Jos. A. Bank
Clothiers, Inc. (the "Company") has re-evaluated its lease accounting practices
in light of the SEC Letter.
Amortization of Leasehold Improvements- In order to comply with the
accounting standards regarding amortization of leasehold improvements discussed
in the SEC Letter, the Company revised the straight-line rent schedules for
thirteen of its stores to achieve consistency with the corresponding leasehold
amortization schedules. The resulting change to rent expense was immaterial.
Rent Holidays- In the SEC Letter, the SEC staff reiterated the
long-existing accounting standard that "rent holidays in an operating lease
should be recognized by the lessee on a straight-line basis over the lease term
(including any rent holiday period) ...." The Company has always followed, and
will continue to follow, this standard. The question arises, however, of when
the rent expense schedule should begin. In prior periods, the Company had
generally recognized the straight line expense for a lease beginning on the date
the store opened, which was generally the date the lease term commenced in
accordance with the lease. The period during which the store was being
constructed was excluded from the straight-line rent schedule because the
construction period was not considered to be part of the lease term in
accordance with the lease. Recent discussions within the accounting profession
and by the Company with KPMG LLP ("KPMG") and Deloitte & Touche LLP ("Deloitte")
have clarified that rent expense should begin on the date the Company has the
right to control the use of the leased property. Based on such discussions and
the SEC Letter, the Company has concluded that the construction period should be
included in the straight-line rent schedule.
As a result of the change of its rent schedules, the Company estimates that
earnings for fiscal year 2002 will be reduced by approximately $.00-$.02 per
share and for fiscal year 2003 will be reduced by approximately $.02-$.04 per
share. The foregoing changes are inclusive of the immaterial changes resulting
from the modification of the rent schedules to achieve consistency with the
corresponding leasehold amortization schedules, as set forth above.
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Landlord/Tenant Incentives- Leasehold improvement incentives provided by a
landlord to the Company were previously recorded by the Company as a reduction
of the property, plant and equipment account on its balance sheet and amortized
as a reduction to depreciation expense in its income statement. However, the SEC
Letter states that such incentives should be "recorded as deferred rent and
amortized as reductions to lease expense." As a result, the Company's property,
plant and equipment asset account and deferred rent liability account as of
February 1, 2003 (fiscal year 2002) and January 31, 2004 (fiscal year 2003) will
increase by equal amounts. These changes will be reflected in the appropriate
sections of a restatement of the Company's financial statements for fiscal year
2003. The changes will also:
o Increase depreciation expense and decrease lease expense;
o Have no impact upon reported cash and debt balances;
o Have no impact on the classification of expenses within the
statements of income, as store lease expense and depreciation
expense are both recorded in sales and marketing expenses; and
o Have no impact on future cash payments for rent or property,
plant and equipment.
The Audit Committee of the Board of Directors of the Company (the "Audit
Committee") has discussed the SEC Letter and management's conclusion that
changes in the Company's lease accounting practices are necessary.
As a result of the foregoing, on February 25, 2005, the Audit Committee
concluded that the financial statements included in the Company's Annual Report
on Form 10-K for fiscal years 2002 and 2003, as well as those in the Company's
Quarterly Reports on Form 10-Q for the quarters ended May 1, 2004, July 31, 2004
and October 30, 2004, should no longer be relied upon.
The Company has discussed its lease accounting practices and conclusions
with (a) KPMG, who was previously engaged as the independent registered public
accountant to audit the Company's fiscal year 2002 and fiscal year 2003
financial statements, and (b) Deloitte, who is currently engaged as the
independent registered public accountant to audit the Company's fiscal year 2004
financial statements.
Fiscal Year 2004 Earnings Guidance- The Company posted a 24.3% sales
increase in the year ended January 29, 2005 (fiscal year 2004) and on February
3, 2005, announced that earnings for fiscal year 2004 would increase to at least
$1.71 per share. The SEC Letter was issued subsequent to that announcement. The
Company estimates that the impact of the lease accounting changes on fiscal year
2004 earnings will be approximately $.02-$.04 per share. As a result of this
impact and the preliminary results of its year-end financial statement closing
process, the Company expects the fiscal year 2004 earnings to be in the range of
$1.69 to $1.71 per share.
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General- 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 outside of the Company's control
that can affect the Company's operating results, liquidity and financial
condition such as risks associated with economic, weather, public health and
other factors affecting consumer spending, the ability of the Company to finance
its expansion plans, the mix and pricing of goods sold, the market price of key
raw materials such as wool and cotton, availability of lease sites for new
stores, the ability to source product from its global supplier base and other
competitive factors. These cautionary statements qualify all of the
forward-looking statements the Company makes herein. The Company cannot assure
you that the results or developments anticipated by the Company will be realized
or, even if substantially realized, that those results or developments will
result in the expected consequences for the Company or affect the Company, its
business or its operations in the way the Company expects. The Company cautions
you not to place undue reliance on these forward-looking statements, which speak
only as of their respective dates, and assumes no obligation to update any of
the forward-looking statements. These risks should be carefully reviewed before
making any investment decision.
Any results of operations and financial condition contained herein,
including the foregoing fiscal year 2004 earnings guidance, are being furnished
to the Securities and Exchange Commission and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that section, and shall not be
incorporated by reference into any filing of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such
filing.
The correction of the Company's lease accounting practices
discussed above is immaterial to periods prior to fiscal year 2002 and will be
reflected in the opening stockholders' equity balance as of the beginning of
fiscal year 2002.
All estimates contained in this Form 8-K are subject to change as the
Company completes the preparation of its restated financial statements and its
fiscal year 2004 financial statements.
All earnings per share amounts reflect diluted earnings per share and
reflect the impact of two stock dividends distributed in fiscal year 2004.
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SIGNATURES
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 hereunto duly authorized.
JOS. A. BANK CLOTHIERS, INC.
Registrant)
Date: February 25, 2005
By: /s/David E. Ullman
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David E. Ullman,
Executive Vice President-
Chief Financial Officer
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