-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A7yBK2OpJI4fdF8lxmzKpwMqKgBtD5sQA4ypasDHN6ar0fYHg3+M2GEXlPOfo5KR j9IDUw70AfSYg7xsYW0c7w== 0000928385-98-002537.txt : 19981216 0000928385-98-002537.hdr.sgml : 19981216 ACCESSION NUMBER: 0000928385-98-002537 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK JOS A CLOTHIERS INC /DE/ CENTRAL INDEX KEY: 0000920033 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 363189198 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23874 FILM NUMBER: 98769567 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-Q 1 FORM 10-Q 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 October 31, 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 Number) Classification 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 December 8, 1998 ---------------------------- ---------------------------------- Common stock. $.01 par value 6,792,027 Jos. A. Bank Clothiers, Inc. Index ----- Part I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Condensed Consolidated Statements 3 of Income - Three and Nine Months ended October 31, 1998 and November 1, 1997 Condensed Consolidated Balance 4 Sheets - as of October 31, 1998 and November 1, 1998 Condensed Consolidated Statements 5 of Cash Flows -Nine Months ended October 31, 1998 and November 1, 1997 Notes to Condensed Consolidated 6-8 Financial Statements Item 2. Management's Discussion and Analysis 9-13 of Results of Operations and Financial Condition Part II. Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K 13 (a) Exhibits - Exhibit 27-Financial Data Schedule (EDGAR filing only) Signatures 14 - ---------- 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 Nine Months Ended ------------------------- ------------------------- Oct. 31, Nov. 1, Oct. 31, Nov. 1, 1998 1997 1998 1997 -------- -------- -------- -------- Net sales $ 44,584 $ 41,536 $129,914 $119,721 Costs and expenses: Cost of goods sold 22,268 21,509 66,176 62,674 General and administrative 4,618 4,464 13,424 12,982 Sales and marketing 15,552 13,821 44,598 39,900 Store opening costs 180 229 541 229 -------- -------- -------- -------- 42,618 40,023 124,739 115,785 -------- -------- -------- -------- Operating income 1,966 1,513 5,175 3,936 Interest expense, net 535 738 1,409 1,995 -------- -------- -------- -------- Income from continuing operations before provision for income taxes 1,431 775 3,766 1,941 Provision for (benefit from) income taxes (807) 318 103 796 -------- -------- -------- -------- Income from continuing operations 2,238 457 3,663 1,145 Loss from discontinued operations (net of tax) -- (55) (51) (165) -------- -------- -------- -------- Net income $ 2,238 $ 402 $ 3,612 $ 980 ======== ======== ======== ======== Earnings per share: Income from continuing operations: Basic $ .33 $ .07 $ .54 $ .17 Diluted $ .32 $ .07 $ .53 $ .17 Discontinued operations (net of tax): Basic $ .00 $ (.01) $ (.01) $ (.02) Diluted $ .00 $ (.01) $ (.01) $ (.02) Net income: Basic $ .33 $ .06 $ .53 $ .14 Diluted $ .32 $ .06 $ .52 $ .14 Weighted average shares outstanding: Basic 6,791 6,791 6,791 6,791 Diluted 6,946 6,889 6,958 6,846
See accompanying notes. 3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
October 31, January 31, 1998 1998 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 889 $ 564 Accounts receivable 4,199 2,737 Inventories: Raw materials 4,939 6,994 Finished goods 46,923 33,120 -------- -------- Total inventories 51,862 40,114 -------- -------- Prepaid expenses and other current assets 5,762 4,338 Deferred income taxes 4,310 4,030 -------- -------- Total current assets 67,022 51,783 -------- -------- Property, plant and equipment, at cost 50,413 46,925 Accumulated depreciation and amortization (25,991) (24,818) -------- -------- Net property, plant and equipment 24,422 22,107 -------- -------- Deferred income taxes 1,699 1,680 Other assets 593 791 Net noncurrent assets of discontinued operations 633 783 -------- -------- Total Assets $ 94,369 $ 77,144 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 14,753 $ 13,319 Accrued expenses 13,469 9,774 Current portion of long-term debt 1,456 1,885 Net current liabilities of discontinued operations 373 663 -------- -------- Total current liabilities 30,051 25,641 Long-term liabilities 24,264 15,105 -------- -------- Total liabilities 54,315 40,746 -------- -------- Shareholders' equity: Common stock 70 70 Additional paid-in capital 56,380 56,336 Accumulated deficit (14,476) (18,088) -------- -------- 41,974 38,318 Less treasury stock (1,920) (1,920) -------- -------- TOTAL SHAREHOLDERS' EQUITY 40,054 36,398 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 94,369 $ 77,144 ======== ========
See accompanying notes 4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended -------------------------- Oct. 31, Nov. 1, 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 3,612 $ 980 Loss from discontinued operations 51 165 -------- -------- Income from continuing operations 3,663 1,145 Adjustments to reconcile net income to net cash used in operating activities: (Increase) decrease in deferred taxes (299) 627 Depreciation and amortization 2,854 2,647 Net increase in operating working capital (9,646) (8,477) -------- -------- NET CASH USED IN OPERATING ACTIVITIES OF CONTINUING OPERATIONS (3,428) (4,058) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (5,012) (3,155) -------- -------- NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS (5,012) (3,155) -------- -------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 33,416 31,379 Repayment under long-term Credit Agreement (24,540) (22,756) Borrowings of other long-term debt 277 324 Repayment of other long-term debt (241) (231) Other 44 -- -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS 8,956 8,716 Net cash used in discontinued operations (191) (172) -------- -------- Net increase in cash and cash equivalents 325 1,331 Cash and cash equivalents - beginning of period 564 719 -------- -------- Cash and cash equivalents - end of period $ 889 $ 2,050 ======== ========
See accompanying notes. 5 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/31/98 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 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. Reclassifications - Certain reclassifications have been made to the November 1, 1997 financial statements in order to conform with the October 31, 1998 presentation. 6 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 10/31/98 3. WORKING CAPITAL The net change in operating working capital is composed of the following:
Nine Months Ended --------------------------------- Oct. 31, Nov. 1, 1998 1997 --------- --------- Increase in accounts receivable $ (1,462) $ (1,223) Increase in inventories (11,748) (9,199) (Increase) decrease in prepaids and other assets (1,395) 491 Increase in accounts payable 1,434 2,160 Increase (decrease) in accrued expenses and other liabilities 3,525 (706) --------- --------- Net increase in operating working capital $ (9,646) $ (8,477) ========= =========
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 Months Ended Nine Months Ended --------------------------- ----------------------------- Oct. 31, Nov. 1, Oct. 31, Nov. 1, 1998 1997 1998 1997 -------- ------- -------- -------- Weighted average shares outstanding for basic EPS 6,791 6,791 6,791 6,791 Diluted EPS: Dilutive effect of common stock equivalents 155 98 167 55 ----- ----- ----- ----- Weighted average shares outstanding for diluted EPS 6,946 6,889 6,958 6,846 ===== ===== ===== =====
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, 10/31/98 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 fourth quarter of fiscal year ended January 31, 1998. Summarized financial information for the discontinued operations is as follows (in thousands):
Three Months Ended Nine Months Ended ----------------------------------- --------------------------------- Oct. 31, Nov. 1, Oct. 31, Nov. 1, 1998 1997 1998 1997 ------------- ----------- ----------- ----------- Loss before income taxes $ -- $ (93) $ (84) $ (279) Net loss $ -- $ (55) $ (51) $ (165)
As of As of Oct. 31, Jan. 31, 1998 1998 ------------- ------------- Current assets $ 1,686 $ 3,839 Current liabilities 2,059 4,502 ------------- ------------- Net current (liabilities) $ (373) $ (663) ============= ============= Noncurrent assets $ 874 $ 1,028 Noncurrent liabilities 241 245 ------------- ------------- Net noncurrent assets $ 633 $ 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, receivables, 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 10/31/98 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 delivered its eleventh consecutive quarter of improved - -------- profits. Income from continuing operations for the quarter ended October 31, 1998 increased to $2.2 million or $.32 per share compared to $.5 million or $.07 per share for the same period in 1997. For the nine months, income from continuing operations increased to $3.7 million or $.53 per share compared to $1.1 million or $.17 per share for the same period last year. This improvement was due primarily to higher sales attributable to the opening of 16 new stores since November 1, 1997 and improved margins resulting from strong inventory management and a shift toward higher-end products. The results for the third quarter and nine months ended October 31, 1998 included a one-time $1.4 million ($.20 per share) benefit relating to tax loss carryforwards which were generated in prior years and recognized in the current period. The Company continues to pursue its expansion strategy of opening new stores in existing markets and has opened 26 new stores in the last two years, including 14 during 1998. This will provide the Company with greater leverage of selling, marketing and general and administrative expenses as these new stores mature. The Company recently opened its 100th store and had 102 stores as of October 31, 1998. The Company's availability under the Credit Agreement increased to $24.3 million as of October 31, 1998, which was $7.6 million higher than the same time last year and borrowings are $7.4 million lower than at the same time last year despite opening the new stores. 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. 9 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 10/31/98
Percentage of Net Sales Percentage of Net Sales Three Months Ended Nine Months Ended ----------------------------- ----------------------------- Oct. 31, Nov. 1, Oct. 31, Nov. 1, 1998 1997 1998 1997 -------- ------- -------- ------- Net Sales....................................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold.............................. 49.9 51.8 50.9 52.4 ------ ----- ----- ----- Gross profit.................................... 50.1 48.2 49.1 47.6 General and administrative expenses............. 10.4 10.7 10.3 10.8 Sales and marketing expenses.................... 34.9 33.3 34.3 33.3 Store opening costs............................. 0.4 0.6 0 .4 0.2 ------ ----- ----- ----- Operating income................................ 4.4 3.6 4.0 3.3 Interest expense, net........................... 1.2 1.8 1.1 1.7 ------ ----- ----- ----- Income from continuing operations before income taxes.......................... 3.2 1.9 2.9 1.6 Provision (benefit) for income taxes ........... (1.8) 0.8 -- 0.7 ------ ----- ----- ----- Income from continuing operations............... 5.0 1.1 2.9 0.9 Loss from discontinued operations, net.......... -- (0.1) (0.1) (0.1) ------ ----- ----- ----- Net income...................................... 5.0% 1.0% 2.8% 0.8% ====== ===== ===== =====
NET SALES - Net sales increased 7.3% to $44.6 million in the third quarter of - --------- 1998 compared to $41.5 million in 1997. For the nine months ended October 31, 1998, net sales increased 8.5 percent, to $129.9 million, compared to $119.7 million in 1997. Comparable store sales were even for the third quarter and first nine months of 1998, compared to increases of 2.0 percent and 3.5 percent, respectively, for the third quarter and first nine months of 1997. The opening of 16 stores in existing markets since November 1, 1997 has temporarily slowed comparable store sales growth as new stores are not included in comparable sales. Gross margin dollars in comparable stores increased during the third quarter and nine months, resulting in greater profits in these stores. Catalog sales for the third quarter of 1998 were comparable to the same period last year despite a 4% reduction in circulation, while catalog sales increased 1% for the nine months ended October 31, 1998 on a 5% reduction in circulation. COST OF GOODS SOLD - Gross profit increased by $2.3 million to $22.3 million in - ------------------ the third quarter and increased by $6.7 million to $63.7 million in the first nine months of 1998 compared to the same periods in the prior year. Gross profit as a percent of sales remained strong and increased 1.9 and 1.5 percentage points in the quarter and nine months respectively. The gross margin improvement was primarily the result of higher maintained margins in nearly all product categories, the shift toward higher end products and strong inventory management. 10 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 10/31/98 GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses - ----------------------------------- decreased to 10.4 percent of sales in the third quarter and 10.3 percent of sales during the nine months ended October 31, 1998 compared to 10.7 percent and 10.8 percent of sales during the same periods in 1997, as the Company continues to leverage its infrastructure. The decrease relates primarily to a reduction in professional fees and the Company's continued emphasis to control overhead costs while growing the business. SALES AND MARKETING EXPENSES - Sales and marketing expenses increased 1.6 and - ---------------------------- 1.0 percent of sales due primarily to higher new store fixed occupancy costs as a percent of sales as the stores take several years to mature. The increased store base has enabled the Company to spend more on marketing in existing markets to strengthen all stores. STORE OPENING COSTS - Store opening costs increased $.3 million in the nine - ------------------- months ended October 31, 1998 due to the addition of 14 new stores during 1998 compared to 6 new stores in the first nine months of 1997. INTEREST EXPENSE - Interest expense was $.2 million lower during the quarter and - ---------------- $.6 million lower during the nine months ended October 31, 1998 compared to the same periods in 1997. This improvement was due primarily to a $7 million reduction in total debt outstanding during 1998. INCOME TAXES - At October 31, 1998, the Company had approximately $10 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. As of the beginning of the current fiscal year, the Company had a deferred tax asset of $4.6 million and an offsetting valuation allowance of $1.4 million. Management has determined, based on the Company's recent history of earnings, that future earnings of the Company will more likely than not be sufficient to utilize all of the NOLs prior to their expiration. Accordingly, during the third quarter of 1998, the Company eliminated the $1.4 million valuation reserve reflecting the Company's expectation that all of the NOLs will be utilized prior to expiration. LIQUIDITY AND CAPITAL RESOURCES - At October 31, 1998 the Company had - ------------------------------- outstanding borrowings of $17.7 million with $24.3 million of availability under its Credit Agreement compared to borrowings of $25.1 million and availability of $16.7 million at the same time last year. The increase in availability was generated principally by cash provided by operating activities during the preceding twelve months and $3 million of additional availability created by higher inventory levels to support the new stores. 11 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 10/31/98 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 -------------------- Oct. 31, Nov. 1, Cash provided by (used in): 1998 1997 -------- -------- Operating activities $(3,428) $(4,058) Investing activities (5,012) (3,155) Financing activities 8,956 8,716 Discontinued operations (191) (172) ------- ------- Net increase in cash and cash equivalents $ 325 $ 1,331 ======= =======
Cash used by operating activities was due primarily to higher inventory levels to support new stores. Cash used in investing activities relates primarily to build-out costs for new stores. Cash provided by financing activities represents primarily borrowings on the revolving loan. The net cash used in discontinued operations was due primarily to certain costs related to the divestiture of the manufacturing operations including payments of accrued severance, vacation, professional fees and other selling costs partially offset by the sale of manufacturing related inventories. The Company expects to spend between $6.0 and $6.5 million on capital expenditures in 1998, primarily to open 16 new stores and to relocate or renovate four existing stores. The store expansion program is being financed through operations, the Credit Agreement and fixture leasing arrangements. 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 additional 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 1999 may necessitate revised financing arrangements for the Company. The Company expects to devote significant efforts over the next year to ensure that its business - critical systems are "Year 2000 compliant". The Year 2000 ("Y2K") issue is the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems will be unable to accurately interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. The Company has performed an assessment of its systems in order to identify Y2K issues and has identified its business-critical area of exposure to be: (a) merchandising and financial, (b) point-of-sale, (c) cash management, (d) catalog, (e) warehouse management, and (f) third party relationships. Most of the Company's applications operate on two IBM AS/400 hardware configurations and are "off-the-shelf" packages with modifications and interfaces made by the Company. The Company also relies on personal computers to prepare detailed analysis. The Company believes that by installing the vendor-developed upgrades to the latest versions of its existing systems and re-working its modifications and interfaces, most of the Y2K issues should be corrected. The vendors for the merchandising, general ledger and catalog applications have certified that the updated versions of their systems are Y2K compliant. 12 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10Q, 10/31/98 The Company expects to install the latest versions of its systems by the middle of 1999 with Y2K testing performed for each application installed. In accordance with this plan, in August, 1998 the Company installed and implemented the latest version of its merchandising, warehouse, sales audit, accounts payable and general ledger system (which included many upgrades in addition to Y2K compliance), and expects to finalize the related Y2K testing for these applications early in 1999. The Company has identified certain third parties who supply product to the Company and they do not expect to have any significant disruptions to deliveries as a result of Y2K issues. However, the Company will continue to monitor this situation. The Company estimates that it will spend approximately $1.0 million (representing a combination of capital and expense) on these upgrades through the end of fiscal 1999, although an exact amount related to Y2K compliance cannot be measured because many of the upgrades include increased functionality as well as Y2K compliance. Should these efforts not be successful, the Y2K problems could have a material impact on the operations of the Company. Although there is a high level of confidence that these efforts will be successful, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. The Company has not developed a formal contingency plan should any of its critical systems not operate in the Year 2000 and expects to focus on this aspect of the Y2K project in the second half of 1999. 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. PART 2. OTHER INFORMATION Item 6. Exhibits - ----------------- Exhibit 10.15 Employment Agreement, dated August 31, 1998, between J.F. Timothy Carroll and Jos. A. Bank Clothiers, Inc. Exhibit 27.0 Financial Data Schedule. 13 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 10/31/98 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: December 15, 1998 Jos. A. Bank Clothiers, Inc. (Registrant) /s/ David E. Ullman ------------------------------------------------- David E. Ullman Executive Vice President, Chief Financial Officer 14 EX-10.15 2 EXHIBIT 10.15 Exhibit 10.15 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of August 31, 1998 between J.F. TIMOTHY CARROLL ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer" or "Company"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. EMPLOYMENT OF EXECUTIVE Employer hereby agrees to employ Executive, and Executive hereby agrees to be and remain in the employ of Employer, upon the terms and conditions hereinafter set forth. This Agreement is a contract for the personal services of Executive and services pursuant hereto may only be performed by Executive. 2. EMPLOYMENT PERIOD The term of Executive's employment under this Agreement (the "Employment Period") shall commence as of the date hereof and shall, subject to earlier termination as provided in Section 5, continue through August 31, 1999 and shall continue thereafter for successive one-year periods unless, at least 180 days before the end of the initial Employment Period or any subsequent one-year period, either party gives notice to the other of his or its desire to terminate the Employment Period, in which case the Employment Period shall terminate as of the end of the then-current term. 3. DUTIES AND RESPONSIBILITIES 3.1 General. During the Employment Period, Executive (i) shall have the ------- title of Senior Vice President - Corporate Sales and (ii) shall devote substantially all of his business time and expend his best efforts, energies and skills to the business of the Company. Executive shall perform such duties, consistent with his status as Senior Vice President - Corporate Sales, as he may be assigned from time to time by Employer's Chief Executive Officer (the "Chief Executive Officer"). 3.2 Location of Executive Office. The Company will maintain its principal ---------------------------- executive offices at a location in the Baltimore, Maryland metropolitan area. Executive shall not be required to perform services for the Company at any other location, except for services rendered in connection with required travel on the Company's business. 4. COMPENSATION AND RELATED MATTERS 4.1 Base Salary. Employer shall pay to Executive during the Employment ----------- Period an annual base salary (the "Base Salary") of $175,000. The Base Salary shall be increased from to time to time upon mutual agreement of the parties hereto; provided, that the Base Salary shall in all events be increased at least once every twelve (12) months by a percentage not less than the percentage increase in the Consumer Price Index (or any equivalent index in the event the Consumer Price Index shall no longer be published). The Base Salary for each year shall be payable in installments in accordance with the Company's policy on payment to executives in effect from time to time. 4.2 ADDITIONAL COMPENSATION. ----------------------- a. Annual Bonus. For fiscal year 1999 (ending on or about January 31, 2000) and for each fiscal year that begins during the Employment Period (each such fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus of 40% of Base Salary (each, a "Bonus") conditioned upon the satisfaction of (a) Company performance goals established by the Compensation Committee of the Board of Directors of the Company (the "Committee") for such Bonus Year and (b) personal performance goals submitted by the Executive to, and approved by, the Company and the Committee for such Bonus Year. Company and personal performance goals are herein referred to collectively as the "Performance Goals". In the event the Performance Goals for any Bonus Year are not fully satisfied, the Committee shall have the right, but not the obligation, to grant a partial Bonus for such Bonus Year. Notwithstanding anything to the contrary contained herein, the minimum Bonus payable to Executive for Bonus Year 1999 shall be $17,500 or such lesser amount as may be calculated in accordance with this Section 4.2 in the event the Employment Period shall expire or terminate prior to the last day of Bonus Year 1999. The Performance Goals for each Bonus Year shall be established as soon as possible following the beginning of such Bonus Year. The Bonus earned for any Bonus Year shall be payable promptly following the determination thereof, but in no event later than 90 days following the end of each Bonus Year. If (a) the Employment Period shall expire or terminate and (b) Employee is entitled to payment of a bonus pursuant to Section 6 hereof, the Bonus payable for the Bonus Year in which the Employment Period terminates or expires shall equal the Bonus that would have been paid had the Employment Period not so terminated or expired, multiplied by a fraction, the numerator of which shall be the number of days of the Employment Period within the Bonus Year and the denominator of which shall be 365. For the purposes of determining the amount of Bonus payable pursuant to the immediately preceding sentence, it shall be assumed that all conditions to payment based upon performance by the Executive (e.g. personal performance goals) have been satisfied. Notwithstanding anything to the contrary contained herein or in the Employer's Bonus Plan, in the event (y) the Employment Period shall end for any reason whatsoever on a day prior to payment to Executive of a Bonus for the last full Bonus Year contained within the Employment Period, and (z) Executive would have been entitled to receive a Bonus for such last full Bonus Year had the Employment Period not ended - then, Employer shall pay to Executive the Bonus for such last full Bonus ---- Year as and when such Bonus would have been paid had the Employment Period not ended. b. 1998 Bonus. The Company shall pay to Executive a bonus in the amount of $10,000 on February 1, 1999 in compensation for a bonus which would or may have been payable to Executive by his former employer, A.T. Cross Company ("Cross"). The Company shall have the right, but not the obligation, to also include Executive in the Company's 1998 bonus program. The amount of any bonus payable to Executive for fiscal year 1998 in excess of the aforementioned $10,000 shall be determined by the Company in its sole discretion. c. Cross Stock Buyout. The Company shall pay to Executive the amount of $38,565 on February 1, 1999 as a buyout of certain options held or previously held by Executive to purchase Cross stock. Such amount has been calculated as the sum of (i) 14,596 multiplied by (A) $12.25 (the fair market value of one share of Cross stock as of close of market on August 17, 1998) less (B) $9.96 (Executive's exercise price); plus (ii) 2,000 multiplied by (A) $12.25 less (B) $9.68. 2 4.3 Automobile. Throughout the Employment Period, Employer shall provide to ---------- Executive, at Employer's expense, an automobile in accordance with Employer's policy in effect from time to time for the leasing of automobiles for use by Employer's senior management or Employer shall pay to Executive a car allowance; provided that such expense or allowance shall in no event exceed $900 per month. Employer shall also be responsible for all expenses of use and operation of any leased automobile. 4.4 Other Benefits. During the Employment Period, subject to, and to the -------------- extent Executive is eligible under their respective terms, Executive shall be entitled to receive such fringe benefits as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees (other than those provided under or pursuant to separately negotiated individual employment agreements or arrangements), including (but not limited to) relocation expenses. Executive shall all be entitled to reimbursement of reasonable initiation fees and dues at a social club. 5. TERMINATION OF EMPLOYMENT PERIOD 5.1 Termination Without Cause or Good Reason. Employer may terminate the ---------------------------------------- Employment Period at any time without cause. Executive may, by delivery of not less than 60 days' notice to Employer at any time during the Employment Period, terminate the Employment Period without good reason. 5.2 By Employer for Cause. Employer may terminate the Employment Period in --------------------- accordance with this Section 5.2 at any time for cause. For the purpose of this Section 5.2, "cause" shall mean any of the following: a) the conviction of Executive in a court of competent jurisdiction of a felony involving money or property of the Company or moral turpitude; b) the willful commission of an act not approved of or ratified by the Chief Executive Officer involving a series of material conflicts of interest or self-dealings relating to any material aspect of the Company; c) the willful commission of any act of fraud or misrepresentation (including the omission of material facts) relating to the business of the Company and materially and negatively impacting upon the Company and its business; or d) at any time prior to a change in control of the Company, the willful and material failure of Executive to comply with the lawful orders of the Chief Executive Officer, provided such orders are consistent with Executive's duties, responsibilities and/or authority as Senior Vice President Corporate Sales of the Company. In the event Employer shall elect to pursue a termination for cause, Employer shall deliver to Executive a written notice from the Chief Executive Officer setting forth with reasonable particularity the grounds upon which the Chief Executive Officer has found cause for termination. In the event 3 such grounds are predicated upon acts or omissions as set forth in paragraphs (b), (c) or (d) above, Executive shall have thirty (30) days, or such longer period as may be necessary provided Executive has commenced and is diligently proceeding, to cure or eliminate the cause for termination. In the event Executive has failed to timely cure or eliminate the cause for termination as set forth in the immediately preceding sentence, the Company shall have the right to terminate Executive for cause. 5.3 By Executive for Good Reason. Executive may, at any time during the ---------------------------- Employment Period by notice to Employer, terminate the Employment Period under this Agreement "for good reason" effective immediately. For the purposes hereof, "for good reason" means (i) any material breach by Employer of any provision of this Agreement which, if susceptible of being cured, is not cured within 30 days of delivery of notice thereof to Employer by Executive; it being agreed, however, that the foregoing 30 day cure period shall not be applicable to any failure timely to pay (or any reduction in) compensation or benefits paid or payable to Executive pursuant to the provisions of Section 4 hereof or (ii) the occurrence of a change in control (as hereinafter defined) of Employer, if, and only if, any of the duties, responsibilities or perquisites of Executive as provided in this Agreement are thereafter reduced. Without limitation of the generality of the foregoing, each of the following shall be deemed to be a material breach of this Agreement by Employer: (x) any failure timely to pay (or any reduction in) compensation or benefits paid or payable to Executive pursuant to the provisions of Section 4 hereof; (y) any reduction in the duties, responsibilities or perquisites of Executive as provided in this Agreement; and (z) any transfer of the Company's principal executive offices outside the geographic area described in Section 3.2 hereof or requirement that Executive principally perform his duties outside such geographic area. For purposes of this Agreement, a "change in control" of the Company shall be deemed to have occurred if, as a result of a single transaction or a series of transactions, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company ( including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities; or (B) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities and there are at least a majority of directors serving on the Board of Directors of the Company who were not serving in such capacity as of the date hereof or who were not elected with the consent of the Executive; or (C) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% 4 of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 5.4 Death. The Employment Period shall end on the date of Executive's ----- death. 6. TERMINATION COMPENSATION; NON-COMPETE 6.1 Termination Without Cause by Employer or for Good Reason by Executive. --------------------------------------------------------------------- If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3 hereof, Employer will pay to Executive (a) Base Salary for the twelve (12) month period following the date of termination, calculated at the applicable Base Salary rate which would have been in effect from time to time during the balance of Employment Period, assuming no termination, payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated, (b) on the date bonuses for the Bonus Year in which the Employment Period is terminated are generally paid by Employer to Employer's senior management employees, the Bonus for such Bonus Year prorated as provided in Section 4.2 and (c) if applicable, the Bonus for the last full Bonus Year pursuant to Section 4.2. All other benefits provided for in Section 4.4 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1. Without limiting the generality of the immediately preceding sentence, Employer agrees that (x) the health benefits to be continued on behalf of the Executive (at Company expense) during the severance period shall not be part of Executive's optional COBRA period; (y) Executive shall have the right and option to continue health coverage at Executive's expense after the severance period to the greatest extent required to be offered by the Company pursuant to applicable law; and (z) Executive shall be entitled to continue contributions into the Company's 401k Plan during the severance period and the Company shall match a share of such contributions in accordance with the Company's general policy applicable to active employees. Notwithstanding termination of the Employment Period, Executive shall continue to be entitled to discounts on purchases of products from the Company in accordance with the discount program in effect from time to time for active employees of the Company. 6.2 Certain Other Terminations. If the Employment Period is terminated by -------------------------- Employer pursuant to the provisions of Section 5.2, by Executive pursuant to Section 5.1 or as a result of the death of Executive as set forth in Section 5.4, Employer shall pay to Executive (a) Base Salary (calculated at its then current rate per year) through the date of termination, (b) in the case of termination as a result of the death of Executive as set forth in Section 5.4, when due pursuant to provisions of Section 4.2 the Bonus for the Bonus Year in which the date of termination occurred prorated as provided in said Section 4.2 and (c) if applicable, the Bonus for the last full Bonus Year pursuant to Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.3 Expiration at Election of Employer. In the event the Employment Period ---------------------------------- expires because of an election by Employer to allow the Employment Period to expire at the end of its then stated term as provided in Section 2 hereof, Employer shall pay to Executive (a) Base Salary for the twelve (12) month period following the date of termination (calculated at its then current rate per 5 year), payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated, (b) when due pursuant to the provisions of Section 4.2, the Bonus for the Bonus Year in which the Employment Period expired prorated as provided in said Section 4.2 and (c) if applicable, the Bonus for the last full Bonus Year pursuant to Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.4 Mitigation. Executive shall not be required to mitigate the amount of ---------- any payments or benefits provided for hereunder upon termination of the Employment Period by seeking employment with any other person, or otherwise, nor shall the amount of any such payments or benefits be reduced by any compensation, benefit or other amount earned by, accrued for or paid to Executive as the result of Executive's employment by or consultancy or other association with any other person, provided, that any medical, dental or hospitalization insurance or benefits provided to Executive with his employment by or consultancy with an unaffiliated person during such period shall be primary to the benefits to be provided to Executive pursuant to this Agreement for the purposes of coordination of benefits. 6.5 Non-Compete. For so long as any termination compensation is being paid ----------- to Executive pursuant to this Section 6 or, in the event of termination of this Agreement by Employer for cause or by Executive without good reason, for the balance of what would have been the current Employment Period assuming no such termination, Executive shall not, directly or indirectly, (i) engage in any activities that are in competition with the Company in any geographic area where the Company is engaged in business, (ii) solicit any customer of the Company or (iii) solicit any person who is then employed by the Company or was employed by the Company within one year of such solicitation to (a) terminate his or her employment with the Company, (b) accept employment with anyone other than the Company, or (c) in any manner interfere with the business of the Company. Executive acknowledges and agrees that in the event of any violation or threatened violation by Executive of his obligations under the preceding sentence, Employer shall be entitled to injunctive relief without any necessity to post bond. 6.6 Unused Vacation. Upon termination of Executive's employment pursuant to --------------- Section 5 herein or non-renewal of the Employment period as provided for under Section 2 herein, for any reason whatsoever, Employer shall pay Executive, in addition to any termination compensation provided for under this Section 6, an amount equivalent to Executive's per diem compensation at the then-current Base Salary rate multiplied by the number of unused vacation days, including any carry-over, accrued by Executive as of the date of termination. 7. INDEMNIFICATION The Company shall indemnify and hold Executive harmless from and against any expenses (including attorneys' fees of the attorneys selected by Executive to represent him, which shall be advanced as incurred), judgements, fines and amounts paid in settlement incurred by him by reason of his being made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of any act or omission to act by Executive during the Employment Period or otherwise by reason of the fact that he is or was a director or officer of Employer or any subsidiary or affiliate included as a part of the 6 Company, to the fullest extent and in the manner set forth and permitted by the General Corporation Law of the State of Delaware and any other applicable law as from time to time in effect. The provisions of this Section 7 shall survive any termination of the Employment Period or any deemed termination of this Agreement. 8. MISCELLANEOUS 8.1 Notices. Any notice, consent or authorization required or permitted to ------- be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth below, by registered or certified mail, postage paid (deemed given five days after deposit in the U.S. mail) or personally or by facsimile transmission (deemed given upon receipt), or at such other address as either party shall designate by notice given to the other in the manner provided herein. Notices to Employer shall be sent to: Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead, Maryland 21074-2095, Attn: Secretary. Notices to Executive shall be sent to: Mr. J.F. Timothy Carroll, Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead, Maryland 21074-2095. 8.2 Legal Fees. From and after any change in control of the Company, ---------- Employer shall, upon demand by Executive, pay directly or reimburse Executive for all costs and expenses, including but not limited to attorneys' fees and court costs, incurred by Executive (a) in the event of any breach or threatened breach by Employer of any of the terms and conditions of this Agreement, (b) in the event of any dispute under this Agreement between Employer and Executive, (c) in connection with the enforcement of any right or remedy reserved to Executive under this Agreement, (d) in connection with the defense of any claim by Employer of a breach by Executive under this Agreement (regardless of whether such claim is proven) or (e) in connection with any modification of or amendment to this Agreement. Neither the institution of any lawsuit nor the rendering of any particular judgement therein shall constitute a condition precedent to Executive's rights under the immediately preceding sentence. 8.3 Taxes. Employer is authorized to withhold (from any compensation or ----- benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgement of Employer to comply with applicable laws and regulations. 8.4 Interpretation. This Agreement shall be governed by and construed and -------------- enforced in accordance with the laws of the State of Maryland applicable to agreements made and to be performed therein. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. If any provision of this Agreement, or any part thereof, is held to be unenforceable, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect. 8.5 Arbitration. Any dispute or controversy arising under or in connection ----------- with this Agreement shall be settled exclusively by arbitration in Baltimore, Maryland in accordance with the rules of the American Arbitration Association then in effect. Judgement may be entered on the 7 arbitration award in any court having jurisdiction; provided, however, that -------- ------- Executive shall be entitled to seek specific performance of his right to be paid until expiration of the Employment Period during the pendency of any arbitration. 8.6 Entire Agreement and Representation. This Agreement contains the entire ----------------------------------- agreement and understanding between Employer and Executive with respect to the subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its several businesses, or relating to the Company's assets, liabilities, operations, future plans or prospects have been made by or on behalf of Employer to Executive. This Agreement supersedes any prior agreement between the parties relating to the subject matter hereof. 8.7 Successor and Assigns. This Agreement shall be binding upon and inure --------------------- to the benefit of each of the parties hereto and their respective successors, heirs (in the case of Executive) and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By: /s/ Timothy F. Finley ------------------------------------------ Timothy F. Finley, Chairman and Chief Executive Officer /s/ J.F. Timothy Carroll ------------------------------------------ J.F. TIMOTHY CARROLL 8 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-30-1999 OCT-31-1998 889 0 4,199 0 51,862 67,022 50,413 25,991 94,369 30,051 0 0 0 70 39,984 93,369 44,584 44,584 22,268 20,350 0 0 535 1,431 (807) 2,238 0 0 0 2,238 $0.33 $0.32
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