-----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, FfEA61CeMrw4JjeUaai6Y1RzcgTgOwtsZW2wlhifDRKXG7AnLoed4oMyS5s7dfKR 4z51Ias1YDb6bQ7tB1YITA== 0000950168-99-001365.txt : 19990503 0000950168-99-001365.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950168-99-001365 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990130 FILED AS OF DATE: 19990430 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-K SEC ACT: SEC FILE NUMBER: 000-23874 FILM NUMBER: 99607896 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-K 1 JOS. A. BANK CLOTHIERS, INC.--FORM 10-K Securities and Exchange Commission Washington, D.C. 20549 Form 10-K [X] Annual Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 for the fiscal year ended January 30, 1999 ("Fiscal 1998"). [ ] Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 for the transition period from to . [Commission file number 0-23874] JOS. A. BANK CLOTHIERS, INC. (Exact name of registrant as specified in its character) Delaware 36-3189198 (State of Incorporation) (I.R.S. Employer Identification No.) 500 Hanover Pike, Hampstead, MD 21074 (Address of principal executive offices) (zip code) (410) 239-2700 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(g) of the Act: Title of each class Common Stock (the "Common Stock") par value $.01 per share Securities registered pursuant to Section 12(b) of the Act: None Rights to purchase units of Series A Preferred Stock 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III for this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the registrant, based upon the closing price of shares of Common Stock on the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market System at April 23, 1999 was approximately $49,649,717. The number of shares of Common Stock, par value $0.01 per share, outstanding on April 23, 1999 was 6,792,027. DOCUMENTS INCORPORATED BY REFERENCE: Portions of Definitive Proxy Statement for Annual Meeting of Shareholders to be held on June 8, 1999 are incorporated by reference into Part III hereof. Index to the exhibits appears on Pages 14 and 15. PART I Item 1. BUSINESS General Jos. A. Bank Clothiers, Inc., (the "Company"), established in 1905, is a retailer and cataloger of men's tailored and casual clothing and accessories. The Company's products are sold exclusively under the Jos. A. Bank label through its 91 Company-operated retail stores, 4 outlet stores and 10 franchise stores located throughout the Northeast, Midwest, South and Mid-Atlantic regions of the U.S., as well as through the Company's nationwide catalog operations. The Company also initiated an Internet site in 1997 and began to take customer orders through the Internet in August, 1998. The Company's products are targeted at the male career professional, and its marketing emphasizes the Jos. A. Bank line of quality tailored and casual clothing and accessories, which is offered at price points typically established at approximately 20% below those of its principal competitors for items of comparable quality. The Company believes that it is able to achieve this pricing advantage for its men's suits, sport coats and pants, primarily by its design capability, and its sourcing leverage. In April, 1998, the Company completed the disposition of its remaining manufacturing operations and now sources all of its products through third party vendors. The Company has two principal, wholly-owned subsidiaries, The Joseph A. Bank Mfg. Co., Inc., (the "Manufacturer") and National Tailoring Services, Inc. ("NTS"). History Financial and Results of Operations On May 10, 1994, the Company sold 2,000,000 shares of its Common Stock for $10.00 per share in connection with an initial registration with the Securities Exchange Commission. The net proceeds of $16,894,000 were used to pay off long-term debt of approximately $8,100,000 and for the opening of new stores. During fiscal year 1996, the Company focused on its core men's business after discontinuing its women's business in 1995. Earnings from continuing operations have increased each year since 1995, to $5.9 million ($.85 per share) in 1998 from $2.5 million ($.36 per share) in 1997 and $.7 million ($.10 per share) in 1996. The improved earnings were due primarily to: a) a 44% increase in stores from 72 stores at the beginning of 1996 to 104 stores at the end of 1998, b) increased gross profit resulting from merchandise mix and improved inventory management, c) improved financial position which has reduced debt by $21.0 million in the last three years and d) leverage of selling, general and administrative costs as a result of increased sales volume. In fiscal year 1997, the Company decided to eliminate its final manufacturing operations and focus solely on retail operations, resulting in an after-tax charge of $1.8 million from discontinued operations. Strategy The Company's strategy is to further enhance its competitive position in men's proprietary label, updated apparel, and to capitalize on the strength of the Jos. A. Bank name and reputation by offering its customers multiple convenient outlets to purchase product, including its retail stores, catalog, Internet site and Corporate Sales Division. Store and Catalog Operations and Growth. The Company's strategy is to operate its stores and catalogs as an integrated business and to provide the same personalized service to its customers regardless of whether merchandise is purchased through its stores or catalogs. The Company believes that the synergy between its stores and catalogs offers an important convenience to its customers and a competitive advantage to the Company in identifying new store sites and testing new business concepts. The Company also uses its catalog to communicate the Jos. A. Bank image, to provide customers with fashion guidance in coordinating outfits and to generate store traffic. The Company believes that it has substantial opportunity to increase its store base by adding stores in its existing markets and entering new markets. The Company opened 29 new full-line stores and 3 franchise stores since Spring 1996 and expects to open approximately 30 new stores (excluding relocations) in the next two years. Substantially all of the stores to be opened in the next two to three years will be placed in existing markets which allows the Company to leverage its existing advertising, management, distribution and sourcing infrastructure. 1 The Company has developed and refined a new store prototype over the past two years. The prototype consists of a 4,000 square foot store, which compares to an average store size of 8,200 square feet as of the beginning of fiscal year 1997, and an average store size of 6,800 square feet at the end of fiscal year 1998. The Company believes this prototype allows more flexibility to enter markets and effectively reduces its operating expenses. The Company expects that approximately 65% of its stores will be of a size similar to the prototype by the end of fiscal year 2000. The growth in the Company's catalog will be generated by new product offerings and increased circulation. In Fall 1999, the Company expects to launch a branded shoe and sportswear catalog which will feature prominent brands such as Cole Haan, Allen Edmonds, Timberland, Johnston & Murphy, Joseph Abboud and others along with the Jos. A. Bank sportswear brand. Internet. The Company's success as a cataloger facilitated the development of on-line selling capabilities in August, 1998, providing a worldwide purchasing audience. In early 1999, the Company drew a significant number of new customers to its web site and monthly hits to the site grew to 14,000 from 1,500 just one year ago. To date, Internet sales for early 1999 exceed last year's busiest holiday purchasing months of November and December. The Company is establishing solid on-line partnerships that will generate even more exposure for the web site. Through amazon.com's "Shop the Web" feature, customers can compare price points of similar products offered by various retailers and then gain immediate access to the Company's web site. Through a partnership agreement with America Online, Inc. (AOL), the Company's 16 million subscribers can now access the web site directly from AOL's shopping page. Corporate Sales. The newest division of Jos. A. Bank, corporate sales, was created in mid-1998. The division capitalizes on the expanding corporate market - purchases made by end user organizations as gifts or incentives to their clients or employees. Corporate sales combines two existing business units, the corporate card program and corporate incentive program, with a new business line, corporate monogrammed services. Merchandising The Company's target customer is a professional man, age 25 to 55, who is well-educated and relatively affluent. The Company's merchandising strategy focuses on achieving an updated classic look with extreme detail for quality materials and workmanship. The Company is a value oriented retailer with price points typically established at approximately 20% below those of its principal competitors for items of comparable quality. The Company's stores offer a distinctive collection of proprietary label, classic career clothing and accessories, as well as casual wear for men, all made exclusively for the Company in predominantly natural fibers. The men's line includes all clothing and accessories necessary to dress the career man from head to toe, including suits, tuxedos, shirts, vests, ties, sport coats, pants, formal wear, overcoats, mufflers, sweaters, belts and braces, socks and underwear. The market for classic quality men's clothing is segmented to target men at various points in their careers and the Company has designed special collections to target these segments: "Signature Collection" - is designed for the man who has achieved success and is willing to pay for the value of the best fabric, superior quality and extra details. "Corporate Collection" - was created for the confident executive who is making his mark and is looking to set himself apart. It features updated, tailored clothing and dress furnishings offered in a range of fabrics and silhouettes that reflect current trends in the men's market. "Executive Collection" - is designed for the executive creating or replenishing his wardrobe essentials. It includes tailored clothing and dress furnishings in a broad range of basic fabrics and styles at affordable prices. "Corporate Casual and JAB Sportswear" - was created for the man who seeks the same quality for casual attire and leisure wear as for their working lives. Classic sportswear featuring quality, styling, fabric and details comparable to brands which are considerably more expensive. In 1997, the Company signed a five-year agreement with David Leadbetter, a world-renowned golf professional, to produce golf and other apparel under his name and is sold along with other "JAB" Sportswear. In 1998, casual wear (which includes sportcoats, slacks and sportswear) accounted for 35% of the Company's sales. 2 The Company believes that its merchandise offerings which range from tuxedos to sportswear, is well positioned to meet the changing trends of dress for its target customer. As the corporate work environment has trended to casual wear, the Company's product offering has been modified to meet the needs of the Jos. A. Bank customer. Since Spring 1991, the Company has offered its customers its Business Express line, a concept for purchasing suits that allows customers to customize their wardrobe by selecting separate, but perfectly matched, jackets and pants from one of three coat styles, plain front or pleated pants, and numerous fabric choices. Matching vests are also available in selected fabrics. The Business Express line allows a customer to buy a suit with minimal alteration that fits their unique body size, similar to a custom-made suit. Jos. A. Bank is one of the few retailers in the country that has successfully developed this concept which the Company believes is a competitive advantage. Design and Purchasing The Jos. A. Bank merchandise is designed through the coordinated efforts of the Company's merchandising, buying and planning staffs working in conjunction with contract manufacturers. The merchandising buying staff oversees the development of each product in terms of style, color and fabrication. Because the Company's designs are focused on updated classic clothing, the Company experiences much less fashion risk than other retailers. The process of creating a new garment begins approximately nine months before the product's expected in-store date. The Company's planning staff is responsible for providing the catalog operations and stores with the correct amount of products at all times. The Company believes that it gains a distinct advantage over many of its competitors in terms of quality and price by effectively designing products, sourcing piece goods and then having merchandise manufactured to its own specifications by contract manufacturers, either domestically or abroad. For example, the Company currently buys quality English and Italian wool for some of its suits and Italian silk for its neckwear, and then has the suits made and neckwear hand sewn by contract manufacturers. The Company buys its shirts from leading U.S. and overseas shirt manufacturers who also supply shirts to many of the Company's competitors. All clothing manufactured for the Company by contract manufacturers must conform to the Company's rigorous specifications with respect to standardized sizing and quality. The Company transacts business on an order-by-order basis and does not maintain any long-term or exclusive contracts, commitments or arrangements to purchase from any piece goods vendor or contract manufacturer other than those discussed in the "Manufacturing" section. During fiscal 1998, Burlington Industries, Inc., Eighteen International 1981, Ltd., HMS International Fabrics Corp. and Warren Corporation, accounted for over 85% of the piece goods purchased by the Company. The Company does business with all of its vendors in U.S. currency and has not experienced any material difficulties as a result of any foreign political, economic or social instabilities. The Company believes that it has good relationships with its piece goods vendors and contract manufacturers and that there will be adequate sources to produce a sufficient supply of quality goods in a timely manner and on satisfactory economic terms. Marketing, Advertising and Promotion Strategy Historically, the Company pursued a traditional or mass marketing approach in support of its retail locations. In 1996, in addition to employing print and radio medias to convey its message, direct mail usage was enhanced to achieve improved marketing efficiency. Core to each campaign, while primarily promotional, is the identification of the Jos. A. Bank name as synonymous with high quality, updated classic clothing offered at price points typically established at approximately 20% below those of its principal competitors for items of comparable quality. The Company has a database of over 2.6 million names of people who have previously made a purchase from either the Company's retail store or catalog or have requested a catalog from the Company. Of these, over 1.2 million individuals have made such purchase or request in the past 24 months. The Company selects names from this database based on expectations of response to specific promotions which allows the Company to more efficiently use its advertising dollars. The Company believes that it has strong brand recognition and wants to increase the awareness of its name as a complement to its store opening strategy. In 1997, the Company began allocating a portion of its marketing expenditures to image advertising, with national ads running on CNN Headline News and ESPN. The Company expanded this advertising in 1998, with a focus on image and promotion and is continuing this campaign into 1999. 3 Product Specific Sales and Promotional Events Throughout each season, the Company promotes specific items or categories at specific prices that are below the normal retail price. Examples are the trade-in sale whereby a customer receives a fixed dollar amount off the purchase of a suit by "trading-in" an old suit which is donated to charity and the wardrobe and $199 suit sales. These sales are used to complement promotional events and to meet the needs of the customers. These events also include the wardrobe sale and the clearance sales. At the end of each season, the Company stores conduct clearance sales to promote the sale of that season's merchandise. Corporate Sales Division The newest division of Jos. A. Bank, corporate sales, was created in mid-1998. The division capitalizes on the expanding corporate market - purchases made by end user organizations as gifts or incentives to their clients or employees. Corporate sales combines two existing business units, the corporate card program and corporate incentive program, with a new business line, corporate monogrammed clothing. Corporate Card Organizations and companies can participate in our corporate card program, through which all of their employees receive a 20% discount off regularly-priced Jos. A. Bank merchandise. The card is honored at all stores as well as for catalog purchases. Over 6,700 companies nationally, from privately-owned to large public companies, are now participating in the program. As marketing efforts for the corporate card increase and companies actively promote it as a free benefit to their employees, corporate card sales are expected to grow. Apparel Incentive Program Jos. A. Bank Clothiers apparel incentive gift certificates are used by various companies as a reward for achievement for their employees. The Company also redeems proprietary gift certificates marketed by major premium/incentive companies through its stores and catalogs. Corporate Monogrammed Clothing As a recognized high-quality supplier of business and promotional casual wear, we are leveraging our brand awareness and quality reputation to further meet the promotional needs of companies and other organizations. With few high-quality, branded competitors in the decorative services market, we are favorably positioned to offer a full range of options such as reproduction of trademarks, logos and customized monograms on a wide selection of our products including blazers, sweaters, polo shirts, turtlenecks, wind vests and shirts and dress shirts. Jos. A. Bank Credit Card In addition to accepting cash, checks and major credit cards, since 1992 the Company has offered customers its own credit card. The Company pays an independent contractor to administer the Jos. A. Bank credit card and assume all credit risks. Sales through the Jos. A. Bank credit card represented less than 3% of total retail sales in 1998. The Company discontinued the card in early 1999 and does not expect the change to impact sales volume. Stores At April 23, 1999, the Company operated 91 retail stores and 4 outlet stores and had 10 franchise locations in a total of 28 states and the District of Columbia. The following table sets forth the region and market of the stores that were open at such date. 4 JOS. A. BANK STORES
Total # Total # Region & Market Of Stores Region & Market Of Stores - --------------- --------- --------------- --------- Northeast Minnesota 2 Connecticut 3 Missouri 1 New York 9 Ohio 4 Massachusetts 3 Wisconsin 1 Rhode Island 1 ------- ----- Subtotal ............... 20 Subtotal ........... 16 South Mid-Atlantic Alabam 2 (a) Delaware 1 Florida 5 New Jersey 6 Georgia 5 (a) Maryland 9 (b) North Carolina 6 (a) Pennsylvania 5 (b) South Carolina 1 Washington, D.C. 1 Kentucky 1 ----- Louisiana 3 (a) Subtotal ........... 22 Mississippi 1 (a) Tennessee 3 (a) West Texas 11 Denver, Colorado 2 Virginia 7 (b) ----- -------- Subtotal ........... 2 Subtotal .............. 45 -------- Midwest Kansas 1 TOTAL 105 Illinois 6 (a) Indiana 1 Michigan 4 (a) Indicates one or more franchise stores. (b) Indicates one or more outlet stores.
Since Spring 1996, the Company has opened 29 new full-line stores and 3 franchise stores. The Company-operated stores are located in a variety of retail settings, including high income shopping areas, malls, specialty village centers and urban locations. Stores in suburban areas are usually not located in malls, but in high-income shopping areas near major malls. In urban locations, stores are generally located in major retail or financial areas. Since the Company believes that its stores are destination stores and that its customers desire convenience, the Company stores are generally most successful in locations that are easily accessible and provide sufficient parking. Thus, when stores are located within a mall, they often have a private entrance to the parking area. The Company has developed a standard store design to appeal to the Company's quality-oriented customers while remaining consistent with the Company's value image. The design is based on the use of wooden fixtures with glass shelving, numerous tables to feature fashion merchandise, carpet and abundant accent lighting and is intended to promote a pleasant and comfortable shopping environment. The Company developed this standard design to effect cost savings in the design and construction of new stores. With its 4,000 square feet prototype that has been developed over the last three years, 80% of a store's space is dedicated to selling activities, with the rest allocated to stockroom and other support areas. This compares favorably to existing stores where approximately 65% is dedicated to selling activities. The full-line stores averaged 8,200 square feet at the beginning of fiscal 1997 and averaged 6,800 square feet at the end of fiscal 1998. The newer stores are designed to utilize regional overflow tailor shops which allows the use of smaller tailor shops within each store. Each full line store has a tailor shop which provides a range of tailoring services. Substantially all of the tailor shops are owned by the Company as the Company has converted most of its leased shops to Company-owned shops in the past three years. The Company guarantees all the tailoring work and controls the pricing structure used in all stores. In addition, NTS, the Company's wholly-owned tailoring subsidiary, provides alteration services from five locations around the country primarily to the Company's stores and, to a lesser extent, outside retailers. Operating NTS has allowed the Company to reduce the number of tailors in the stores by sending all overflow work to NTS. These overflow shops experience higher productivity as the tailors are not interrupted by store personnel during the course of the day. In every store, the store manager and certain additional staff have been trained to fit tailored clothing for alterations. The Company has 10 franchise locations. Generally, a franchise agreement between the Company and the franchisee provides for a ten-year term with an option, exercisable by the franchisee under certain circumstances, to 5 extend the term for an additional ten-year period. Franchisees pay the Company an initial fixed franchise fee and then a percentage of sales. To assure that customers at franchise locations receive the same personalized service offered at Company operated stores, the Company typically requires certain franchisee employees to attend a Company sponsored training program. In addition, franchisees are required to present and sell merchandise according to the Company standardized procedures and to maintain and protect the Company's reputation for high quality, classic clothing. Franchisees purchase substantially all merchandise offered for sale in their stores from the Company at an amount above cost. The Company presently has four outlet stores which are used to liquidate excess merchandise and typically offer first quality products at a reduced price. Because of the classic character of the Company's merchandise and aggressive store clearance promotions, historically the Company has not had significant quantities of merchandise to sell through its outlet stores. Catalog The Company's catalogs offer potential and existing customers convenience in ordering the Company's merchandise. In each of fiscal 1998 and 1997, the Company distributed approximately 7.6 million catalogs, excluding catalogs sent to stores for display and general distribution. In both fiscal 1998 and 1997, catalog sales represented approximately 11% of net sales. The Company divides the year into two merchandise seasons, Spring and Fall, and mails its catalog to active customers as often as every four weeks. Catalog circulation has traditionally included base catalogs offering a representative assortment of the Company's entire range of merchandise. Catalogs offer potential and existing customers an easy way to order the full range of Jos. A. Bank products. Catalogs are important tools in communicating our high-quality image, providing customers with guidance in coordinating outfits, generating store traffic and providing useful market data on customers. Customers increasingly are becoming more comfortable purchasing traditional business attire through the catalog. To make catalog shopping as convenient as possible, the Company maintains a toll-free telephone number accessible 24 hours a day, seven days a week. The Company utilizes on-line computer terminals to enter customer orders and to retrieve information about merchandise and its availability. Catalog sales associates are generally able to help select merchandise and can provide detailed information regarding size, color, fit and other merchandise features. In most cases, sample merchandise is available for catalog sales associates to view, thereby allowing them to better assist customers. Clothing purchased from the catalog may be returned to any Company store or to the Company by mail. To process catalog orders, sales associates enter orders on-line into a computerized catalog order entry system which automatically updates all files, including the Company's customer mailing list and permits the Company to measure the response to individual merchandise and catalog mailings. Sales and inventory information is available to the Company's buyers the next day. Computer processing of orders is performed by the warehouse management system which permits efficient picking of inventory from the warehouse. The Company's order entry and fulfillment systems permit the shipment of most orders the following day. Orders are shipped primarily by second day delivery or, if requested, by expedited delivery services, such as UPS priority. Distribution Inventory of basic merchandise in the Company stores is replenished regularly based on sales tracked through its point-of-sale terminals. The Company uses a centralized distribution system, under which all merchandise is received, processed and distributed through the Company's distribution facility located in Hampstead, Maryland. Merchandise received at the distribution center is promptly inspected to insure expected quality in workmanship and conformity to Company sizing specifications. The merchandise is then allocated to individual stores, packed for delivery and shipped to the stores, principally by common carrier, usually within two days of receipt. Each store generally receives a shipment of merchandise twice a week from the distribution center; however, when necessary because of a store's size or volume, a store can receive shipments more frequently. Shipments to catalog customers are also made from the central distribution facility. Management Information Systems In connection with the millennium and to retain a competitive edge, many of the Company's systems have been updated in the last two years or will be updated in 1999. A thorough review of the impact of these changes is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein. 6 Manufacturing (See Item 2-Description of Properties). In fiscal 1997, the Company manufactured approximately 15% of its merchandise requirements at its two facilities located in Maryland. Prior to the end of fiscal 1997, the Company decided to discontinue its then remaining manufacturing operations and focus on its retailing expertise. (See "Consolidated Financial Statements - Note 24" for a discussion of discontinued manufacturing operations). As of April 18, 1998 (the date of the sale), approximately 370 employees worked at these manufacturing facilities. These employees were transferred to the purchaser of the manufacturing operations (the "Purchaser") and the Company was released from any future obligation to the employees. The Company has agreed to buy certain clothing units from the Purchaser at least through April, 2001, subject to certain conditions and performance criteria. Competition The Company competes primarily with other specialty retailers, department stores and other catalogers engaged in the retail sale of apparel, and to a lesser degree with other retailers of men's apparel. Among others, the Company's store and catalog operations compete with Brooks Brothers, Nordstrom and Lands End, as well as local competitors in each store's market. Many of these major competitors are considerably larger and have substantially greater financial, marketing and other resources than the Company. In general, the Company believes that it maintains its competitive position based not only on its ability to offer its quality career clothing at price points typically established at approximately 20% below those of its principal competitors for items of comparable quality, but also on greater selection of merchandise within the Company's focus on classic career clothing, the quality, consistency and value of the Jos. A. Bank brand, and superior customer service. Trademarks The Company is the owner in the United States of the trademark "Jos. A. Bank". This trademark is registered in the United States Patent and Trademark Office. A federal registration is renewable indefinitely if the trademark is still in use at the time of renewal. The Company's rights in the Jos. A. Bank trademark are a significant part of the Company's business. Accordingly, the Company intends to maintain its trademark and the related registration. The Company is not aware of any claims of infringement or other challenges to the Company's right to use its trademark in the United States. The Company is also the owner of pending applications for "The Miracle Tie Collection" (U.S. Serial No. 75/219,824) and "Joe's Casual" (U.S. Serial No. 74/726,017). Employees As of April 23, 1999, the Company had 1,150 employees. As of April 23 1999, 116 employees worked in the tailoring and distribution center, most of whom are represented by the Union of Needletrades Industrial & Textile Employees. The current collective bargaining agreement, which was extended in 1997, expires on April 30, 2000. The Company believes that union relations are good. During the past 48 years, the Company has had only one work stoppage, which occurred more than 18 years ago. The Company believes that its relations with its non-union employees are also good. A small number of our sales associates are union members. Item 2. DESCRIPTION OF PROPERTY The Company owns its distribution and corporate office facility located in the Maryland area, subject to certain financing liens. (See "Consolidated Financial Statements -- Note 6.") The Company believes that its existing facility are well maintained and in good operating condition. The Company also owns and leases two manufacturing facilities in Maryland. The table below presents certain information relating to the Company's corporate properties as of April 23, 1999:
Gross Owned/ Location Square Feet Leased Primary Function - -------- ----------- ------ ---------------- Hampstead, Maryland.............. 210,000 Owned Corporate offices, distribution center, catalog fulfillment and regional tailoring overflow shop Baltimore, Maryland.(1).......... 118,000 Owned Coat and pants sewing plant and central pressing Baltimore, Maryland.(1).......... 51,000 Leased Cutting facility
(1) The two properties noted above that are located in Baltimore, MD, were leased or sub-leased in connection with the disposition of the manufacturing operations in April ,1998. 7 As of April 23, 1999, the Company had 95 Company-operated stores, including its outlet stores, all of which were leased. The full line stores average 6,800 square feet as of the beginning of fiscal 1999, including selling, storage, tailor shop, and service areas. The full line stores range in size from approximately 2,600 square feet to approximately 18,855 square feet. The leases typically provide for an initial term of between 5 and 10 years, with renewal options permitting the Company to extend the term for between 5 and 10 years thereafter. The Company generally has been successful in renewing its store leases as they expire. In most cases the Company pays a fixed annual base rent plus real estate taxes, insurance and utilities and, other than free standing locations, to make contributions toward the common area operating costs. Most of the Company's lease arrangements provide for an increase in annual fixed rental payments during the lease term. Item 3. LEGAL PROCEEDINGS The Company has been named as a defendant in legal actions arising from its normal business activities. Although the outcome of these lawsuits or other proceedings against the Company cannot be accurately predicted, the Company does not expect that any such liability will have a material adverse effect on the business, net assets or financial position of the Company. On December 14, 1995, the Company filed a Verified Complaint in the United States District Court for the Northern District of Maryland (case No. MJG 95-3826) against J.A.B. of Lexington, Inc. and its principals (the "Defendants") alleging federal trademark infringement, common law trademark and service mark infringement, statutory unfair competition, common law unfair competition, breach of franchise agreement, breach of lease, breach of promissory note and breach of security agreement. Damages sought in the Verified Complaint are unspecified. The Defendants have counterclaimed against the Company seeking declaratory judgements, compensatory damages and punitive damages. The Company denies the allegations in the counterclaims and intends to vigorously defend same. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the quarter ended January 30, 1999. PART II Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Price Range of Common Stock, subsequent to its initial public offering in May 3, 1994. The Company's Common Stock trades on The Nasdaq Stock Market ("NASDAQ") under the trading symbol "JOSB". The following table sets forth, for the periods indicated, the range of high and low bid prices for the Common Stock, as reported on NASDAQ. The approximate high and low closing prices for the Common Stock tabulated below represent inter-dealer quotations which do not include retail mark-ups, mark-downs or commissions. Such prices do not necessarily represent actual transactions. Fiscal 1997 Fiscal 1998 High Low High Low 1st Quarter $ 4.25 $ 3.50 $ 8.38 $ 5.75 2nd Quarter 4.00 2.94 9.13 6.50 3rd Quarter 7.50 3.25 8.00 5.88 4th Quarter 7.00 5.06 8.00 5.88 1st Quarter (through April 23, 1999) $ 8.00 $ 6.00 On April 23, 1999 the closing sale price of the Common Stock was $ 7.31. (b) Holders of Common Stock At April 23, 1999, there were 145 holders of record of the Company's Common Stock. (c) Dividend Policy The Company intends to retain its earnings to finance the development and expansion of its business and for working capital purposes, and therefore does not anticipate paying any cash dividends in the foreseeable future. In addition, the Company's Credit Agreement prohibits the Company from paying cash dividends. 8 Item 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data with respect to each of the fiscal years in the five-year period ended January 30, 1999 have been derived from the Company's audited Consolidated Financial Statements. Fiscal year 1995 was a 53-week year and all other years consisted of 52-weeks, each of which ended on the Saturday closest to the end of January of the respective year. The information should be read in conjunction with the Consolidated Financial Statements and Notes thereto that appear elsewhere in the 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Fiscal Year ------------------------------------------------------------------------ 1994 1995 1996 1997 1998 ---- ----- ----- ---- ---- (in thousands, except per share data) Consolidated Statements of Income (Loss) Information: Net Sales: Men's $143,465 $143,459 $153,191 $172,174 $187,163 Women's 32,589 25,908 -- -- -- -------- -------- -------- -------- -------- Net Sales (a) 176,054 169,367 153,191 172,174 187,163 Cost of goods sold 94,199 100,589 82,598 92,001 96,281 -------- -------- -------- -------- -------- Gross profit 81,855 68,778 70,593 80,173 90,882 Operating Expenses: General and administrative 16,490 17,326 16,374 17,695 18,806 Sales and marketing 59,375 63,013 50,924 55,609 62,249 Store opening costs 1,025 -- 229 301 617 Store repositioning costs -- 3,500 (b) -- -- -- -------- -------- -------- -------- -------- Total operating expenses 76,890 83,839 67,527 73,605 81,672 -------- -------- -------- -------- -------- Operating income (loss) 4,965 (15,061) 3,066 6,568 9,210 Interest expense, net (2,430) (3,444) (1,946) (2,501) (1,762) -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes 2,535 (18,505) 1,120 4,067 7,448 (Provision) benefit for income taxes (989) 5,640 (437) (1,590) (1,539)(d) -------- -------- -------- -------- -------- Income (loss) from continuing operations 1,546 (12,865) 683 2,477 5,909 Loss on disposal of manufacturing operations, net of tax (c) -- -- -- (1,512) -- Loss from discontinued operations, net of tax (c) (199) (321) (432) (266) (51) -------- -------- -------- -------- -------- Net income (loss) $ 1,347 $(13,186)(a) $ 251 $ 699 $ 5,858 (d) -------- -------- -------- -------- -------- Per Share Information (Diluted): Income (loss) from continuing operations $ 0.25 $ (1.89) $ 0.10 $ 0.36 $ 0.85 (d) Loss on disposal of manufacturing operations -- -- -- (0.22) -- Loss from discontinued operations (0.03) (0.05) (0.06) (0.04) (0.01) -------- -------- -------- -------- -------- Net income (loss) per share $ 0.22 $ (1.94) $ 0.04 $ 0.10 $ 0.84 -------- -------- -------- -------- -------- Weighted average number of shares outstanding (diluted) 6,241 6,790 6,824 6,864 6,976 Balance Sheet Information (As of End of Fiscal Year): Working capital $ 45,089 $ 35,722 $ 28,989 $26,142 $ 27,062 Total assets 100,403 89,190 79,604 77,144 82,515 Total debt 23,943 30,220 18,415 12,999 9,177 Total long-term obligations (including debt) 27,914 33,373 21,472 15,105 11,808 Shareholder's equity 48,631 35,445 35,699 36,391 42,313
9 (a) In 1995, the Company discontinued its women's product line to concentrate solely on its men's business. (b) In fiscal 1995, the Company recorded an expense of $3.5 million related to the early adoption of Statement of Financial Accounting Standards No. 121 (regarding the impairment of long-lived assets) and costs to exit certain leases and reposition stores. (c) Represents disposal of manufacturing operations in 1997. All years presented herein have been restated to reflect this discontinued operation. (d) Includes a benefit of $1,365 or $.20 per share related to the reversal of a valuation allowance which had been recorded in 1995 related to tax net operating losses. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company's income from continuing operations increased to $5.9 million or $.85 per share in fiscal year 1998 from $2.5 million or $.36 per share in fiscal year 1997. This improved profitability was driven by an 8.7% increase in sales compared to 1997 and strong margins in all product categories resulting from merchandising mix and improved inventory management. While the Company's comparable store sales were even with 1997, gross profit increased $2.7 million in the comparable stores, thus generating increased profitability compared to 1997. The Company opened 17 new stores in 1998 and has opened 32 new stores since Spring 1996 (mostly in existing markets) which has temporarily slowed comparable store growth. The Company plans to open approximately 30 new stores (excluding relocations) over the next two years, an increase to the existing store base of approximately 29%. The increased store base has provided the Company with greater leverage of its expenses such as advertising, marketing, distribution and sourcing infrastructure. In the past two years, the Company has developed, opened and refined a 4,000 square foot prototype store which is significantly smaller than its average stores and which allows for increased market opportunity for new stores and for greater efficiencies in the stores. The Company believes these stores offer customers greater convenience while allowing the Company to maintain proper levels of quality merchandise. The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under its Credit Agreement, has increased to $28.7 million at April 23, 1999 compared to $25.9 million at the same time in 1998. Results of Operations The following table is derived from the Company's Consolidated Statements of Income and sets forth, for the periods indicated, the items included in the Consolidated Statements of Income expressed as a percentage of net sales.
Percentage Of Net Sales Fiscal Years 1996 1997 1998 ---- ---- ---- Net Sales 100.0% 100.0% 100.0% Cost of goods sold 53.9 53.4 51.4 Gross profit 46.1 46.6 48.6 General and administrative expenses 10.7 10.3 10.0 Sales and marketing expenses 33.3 32.3 33.3 Store opening costs 0.1 0.2 0.3 Operating income 2.0 3.8 4.9 Interest expense, net (1.3) (1.5) (0.9) Income from continuing operations before income taxes 0.7 2.3 4.0 Income taxes (0.3) (0.9) (0.8) Income from continuing operations, net of tax 0.4 1.4 3.2 Loss from discontinued operations, net of tax (0.2) (1.0) (0.1) Net income 0.2% 0.4% 3.1%
10 Fiscal 1998 Compared to Fiscal 1997 Net Sales - Net sales increased $15.0 million or 8.7% to $187.2 million in fiscal 1998 from $172.2 million in fiscal 1997. The increase in net sales was provided primarily by the opening of 32 new stores since Spring of 1996. Gross Profit - Gross profit as a percent of sales increased 2.0 percentage points to 48.6% from 46.6% due primarily to continued increases in sales of higher quality products and improved inventory management resulting in reduced markdowns. General and Administrative Expenses - General and administrative expenses continued to decline as a percent of sales to 10.0% in fiscal 1998 from 10.3% and 10.7% in fiscal years 1996 and 1997, respectively, as the Company is able to leverage its overhead while opening new stores. Total general and administrative expenses increased to $18.8 million in 1998 from $17.7 million in 1997. This increase was due primarily to higher personnel and travel costs related to Company growth. Sales and Marketing Expenses - Sales and marketing expenses increased $6.6 million to $62.2 million in fiscal 1998 from $55.6 million in fiscal 1997. Nearly all of this increase was from costs associated with new stores (stores which were open less than 24 months as of January, 1998). The Company expects these costs to decrease as a percent of sales in the future as the new stores mature. Store Opening Costs - Store opening expenses, which include direct incremental costs incurred to open new stores, increased in 1998 compared to 1997 as a result of opening 17 new stores in 1998 compared to opening 9 new stores in 1997. Interest Expense - Interest expense decreased $.7 million to $1.8 million in fiscal 1998 from $2.5 million in 1997. This improvement was due primarily to lower average borrowing on the Wells Fargo credit facility and lower interest rates in fiscal 1998 compared to fiscal 1997. The Company's borrowing rates may vary in the future depending upon prime and LIBOR rate fluctuations. Income Taxes - At January 30, 1999, the Company had approximately $6.0 million of tax net operating loss carryforwards ("NOL's") which expire in 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 fiscal year 1998, the Company had a deferred tax asset of $4.6 million related to NOLs and an offsetting valuation allowance of approximately $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. Fiscal 1997 Compared to Fiscal 1996 Net Sales - Net sales increased $19.0 million or 12.4% to $172.2 million in fiscal 1997 from $153.2 million in fiscal 1996. Comparable store sales increased 4.1% in fiscal 1997 while catalog sales increased 17%. The increase in comparable store sales was primarily due to strong merchandise offerings, an increase in marketing activity and the improvement of the sportswear offering, among other factors. The increase in catalog sales was consistent with the circulation increase, reflecting continued strong response to the catalog. The Company opened eight Company-owned stores and one franchise store in existing markets during 1997 compared to four new Company-owned stores and two new franchise stores in 1996. Gross Profit - Gross profit as a percentage of net sales increased to 46.6% in fiscal 1997 from 46.1% in fiscal 1996 due primarily to an increase in sales of higher quality products and better inventory management resulting in fewer markdowns. The Company has strategically liquidated its inventories during the year, resulting in improved inventory aging compared to the prior year. General and Administrative Expenses - General and administrative expenses of $17.7 million increased $1.3 million from $16.4 million in fiscal 1996 due primarily to a) professional fees for several union negotiations, the issuance of a stockholders rights plan and a store expansion study and b) an incentive credit recorded in fiscal 1996 related to the relocation of a store. Such expenses decreased as a percentage of sales, reflecting increased leverage from the higher store base. Sales and Marketing Expenses - Sales and marketing expenses decreased as a percentage of net sales to 32.3% in fiscal 1997 from 33.3% in fiscal 1996 reflecting improved leverage of advertising expense as a result of the higher number of stores in existing markets and a reduction in store payroll costs. In addition, the Company spent over $1.0 million on a new national 11 image advertising program on CNN Headline news in 1997 which it views as a key component to long-term brand awareness. Store Opening Costs - Store opening expenses, which include direct incremental costs incurred to open new stores, increased in 1997 compared to 1996 as a result of opening twice as many new stores in 1997. Interest Expense - Excluding $.6 million of interest income earned in fiscal 1996 related to an income tax refund received from the Company's pre-1986 parent, interest expense was comparable in 1997 and 1996, despite increasing capital expenditures to $4.1 million in 1997 from $2.1 million in 1996. The Company also amended its Credit Agreement in 1997 which resulted in a lower interest rate based on operating results. Income Taxes - The Company has net tax operating loss carryforwards (NOLs) of approximately $15.0 million which expire through 2010. The NOLs were generated during periods in which the Company operated its women's business along with the men's business, primarily in fiscal 1995. In 1995, the Company discontinued its women's business to focus its efforts on its men's business. Realization of the future tax benefits of the NOLs is dependent on the Company's ability to generate taxable income within the carryforward period. Management has determined, based on the Company's history of earnings, its recent operating results and growth plans, that future earnings of the Company will more likely than not be sufficient to utilize at least $10.0 million of the NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $4.6 million and a valuation allowance of $1.4 million relating to the NOLs. The average minimum taxable income that the Company would need to generate prior to the expiration of the NOLs would be less than the average taxable income that the Company earned during fiscal years 1996 and 1997, as adjusted for unusual charges. Management believes that although the recent earnings and estimated future earnings 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. No assurance can be given that sufficient taxable income will be generated for full utilization of the NOLs. Liquidity and Capital Resources The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under its Credit Agreement, has increased to $28.7 million at April 23, 1999 compared to $25.9 million at the same time in 1998. The Company's availability at April 23, 1999 has increased compared to the same time in 1998 principally by improved operating results. The following table summarizes the Company's sources and uses of funds as reflected in the Condensed Consolidated Statements of Cash Flows: Years Ended -------------------- Jan. 31, Jan. 30, 1998 1999 ------ --------- Cash provided by (used in): Operating activities $ 9,910 $ 9,484 Investing activities (4,056) (6,319) Financing activities (5,432) (3,817) Discontinued operations (577) 836 Net (decrease) increase in cash and cash equivalents $ (155) $ 184 Cash provided by the Company's operating activities (net) was due primarily to improved operating results and the use of tax net operating losses to reduce tax payments. Cash used in investing activities relates primarily to leasehold improvements in new, renovated and relocated stores. The Company spent approximately $6.3 million on capital expenditures in fiscal year 1998 primarily for the buildout of new, renovated and relocated stores and to upgrade its distribution center to accommodate up to 140 stores. Cash used in financing activities represents primarily repayments of the revolving loan under the Credit Agreement. The Company expects to spend between $8.0 and $8.5 million on capital expenditures in 1999, primarily to open between 12 and 15 new stores, to relocate, downsize or renovate at least ten stores and to install a new point-of-sale system. The store expansion program is being financed through operations, the Credit Agreement and fixture leasing arrangements. The Company expects to open approximately 30 additional stores (excluding relocations) in the next two years, 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 12 Company is upgrading certain information systems and its existing distribution center. 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 in 1999 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 (POS), (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 complaint. The Company expects to complete the installation of 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 in the first half of 1999. The Company expects to complete the upgrade of its catalog system in May, 1999 with Y2K testing performed thereafter. The Company's existing POS system is Y2K complaint. However, to improve customer service and customer database management, the Company is replacing its current POS system with installation of the base system expected to be completed in August, 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 has also reviewed its less critical and non-Information Technology areas such as their personal computers and related software, security and phone systems, etc., and has determined that these items are substantially Y2K compliant and does not anticipate any major disruptions. 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. Seasonality Unlike many other retailers, the Company's operations are not greatly affected by seasonal fluctuations. Although variations in sales volumes do exist between quarters, the Company believes the nature of its merchandise helps to stabilize demand between the different periods of the year. The Company does not expect seasonal fluctuation to materially affect its operations in the future. Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At January 30, 1999, 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. 13 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements listed in Item 14(a) 1 and 2 are included in the Report beginning on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information included under the captions "Directors", "Executive Officers" and "Compliance with Section 16(a) of the Exchange Act" in the Company's proxy statement for the 1999 Annual Meeting of Shareholders to be filed with the Commission (the "Proxy Statement") are incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION The information included under the captions "Executive Compensation", "Executive Employment Agreements", "Compensation of Directors", "Report of the Compensation Committee of the Board of Directors" and "Performance Graph" in the Company's Proxy Statement are incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information included under the caption "Security Ownership of Directors and Officers" in the Company's Proxy Statement is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS The information included under the caption "Certain Transactions" in the Company's Proxy Statement is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) The following Financial Statements of Jos. A. Bank Clothiers, Inc., the notes thereto, and the related reports thereon of the independent public accountants are filed under Item 8 of this report:
1. Financial Statements Page ---- Report of Independent Public Accountants F Consolidated Balance Sheets as of January 31, 1998 and January 30, 1999 F-1 Consolidated Statements of Income for the Years Ended February 1, 1997, January 31, 1998 and January 30, 1999 F-2 Consolidated Statements of Shareholders' Equity for the Years Ended February 1, 1997, January 31, 1998 and January 30, 1999 F-3 Consolidated Statements of Cash Flows for the Years Ended February 1, 1997, January 31, 1998 and January 30, 1999 F-4 Notes to Consolidated Financial Statements F-5
2. Financial Statement Schedules All required information is included within the Consolidated Financial Statements and the notes thereto. (b) Forms 8-K - Item 5 - Other events - Press release stating the Company's intention to complete a long term supply agreement with MS Pietrafesa LP. 14 (c) Exhibits 3.1 --Restated Certificate of Incorporation of the Company.* ...................................... 3.2 --By-laws of the Company, together with all amendments thereto.* .............................. 4.1 --Form of Common Stock certificate.* .......................................................... 4.2 --Amended and Restated Stockholders Agreement, dated as of January 29, 1994, among the parties named therein.* ..................................................... 4.3 --Rights Agreement dated as of September 19, 1997***** ........................................ 4.4 --Certificate of Designation governing the Company's Series A Preferred Stock***** ........................................................................ 10.1 --1994 Incentive Plan*......................................................................... 10.1(a) --Amendments to Incentive Plan dated as of October 6, 1997, ****** ............................ 10.4(f) --Fourth Amended and Restated Credit Agreement, April 30, 1996, by and among the Company, Wells Fargo Bank, N.A. *** ............................................... 10.5(c) --Amended and Restated Employment Agreement, dated as of September 19, 1997, between Timothy F. Finley and Jos. A. Bank Clothiers, Inc., ****** ...................................................................................... 10.7(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997, between Frank Tworecke and Jos. A. Bank Clothiers, Inc., ****** ....................... 10.7(b) --Amendment to the Employment Agreement dated February 9, 1999 between Frank Tworecke and Jos. A. Bank Clothiers, Inc., filed herewith ............................. 10.8(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997, between David E. Ullman and Jos. A. Bank Clothiers, Inc., ****** ...................... 10.9 --Jos. A. Bank Clothiers, Inc. Retirement and Savings Plan and Trust Agreement as amended and restated effective April 1, 1994.**** .............................. 10.10 --Collective Bargaining Agreement between Retail Employees Union Local 340, Amalgamated Clothing and Textile Workers Union, AFL-CIO and Jos. A. Bank Clothiers, Inc.**** ................................................................. 10.11 --Union Agreement, dated May 1, 1995, by and between Joseph A. Bank Mfg. Co., Inc. and Baltimore Regional Joint Board, Amalgamated Clothing and Textile Workers Union (also known as U.N.I.T.E.).**** .......................... 10.12 --Employment Agreement, dated September 19, 1997, between Gary W. Cejka and Jos. A. Bank Clothiers, Inc., ****** .............................................. 10.13 --Employment Agreement, dated September 19, 1997, between Charles D. Frazer and Jos. A. Bank Clothiers, Inc., ****** ............................................. 10.13a --Amendment to the Employment Agreement dated February 14, 1999 between Charles D. Frazer and Jos. A. Bank Clothiers, Inc., filed herewith .................................................................................... 10.15 --Employment Agreement dated August 31, 1998 between J.F. Timothy Carroll and Jos. A. Bank Clothiers, Inc., filed herewith .................................... 21.1a --Company subsidiaries, ******................................................................. 27.0 --Financial data schedule, filed herewith .....................................................
* Incorporated by reference to the Company's Registration Statement on Form S-1 filed May 3, 1994. ** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 28, 1995. *** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 3, 1996. **** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 1, 1997. ***** Incorporated by reference to the Company's Form 8-K dated September 19, 1997. ****** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 31, 1998. Pursuant to the requirements Section 13 and 15(d) 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, in the City of Hampstead, State of Maryland, on April 23, 1999. 15 JOS. A. BANK CLOTHIERS, INC. (registrant) By: /s/: Timothy F. Finley TIMOTHY F. FINLEY CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE - ---- ----- ---- /s/: Timothy F. Finley Director, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) April 23, 1999 /s/: Frank Tworecke President and Chief Operating Officer April 23, 1999 /s/: David E. Ullman Executive Vice President, Chief Financial and April 23, 1999 Administrative Officer /s/: Thomas E. Polley Vice President - Treasurer (Principal Accounting Officer) April 23, 1999 /s/: Robert B. Bank Director April 23, 1999 /s/: Andrew A. Giordano Director April 23, 1999 /s/: Gary S. Gladstein Director April 23, 1999 /s/: Peter V. Handal Director April 23, 1999 /s/: David A. Preiser Director April 23, 1999 /s/: Robert N. Wildrick Director April 23, 1999
16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Jos. A. Bank Clothiers, Inc.: We have audited the accompanying consolidated balance sheets of Jos. A. Bank Clothiers, Inc. (a Delaware corporation) and subsidiaries as of January 31, 1998 and January 30, 1999, and the related consolidated statements of income, shareholders' equity and cash flows for the years ended February 1, 1997, January 31, 1998 and January 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jos. A. Bank Clothiers, Inc. and subsidiaries as of January 31, 1998 and January 30, 1999, and the results of their operations and their cash flows for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, in conformity with generally accepted accounting principles. Arthur Andersen LLP sig appears here Baltimore, Maryland March 2, 1999 F JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 1998 AND JANUARY 30, 1999 (In Thousands, Except Share Information) ASSETS
Jan. 31, 1998 JAN. 30, 1999 - -------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 564 $ 748 Accounts receivable 2,737 2,808 Inventories 40,114 44,828 Prepaid expenses and other current assets 4,338 4,189 Deferred income taxes 4,030 2,883 - -------------------------------------------------------------------------------------- Total current assets 51,783 55,456 NONCURRENT ASSETS: Property, plant and equipment, net 22,107 24,547 Other noncurrent assets, net 791 512 Deferred income taxes 1,680 2,000 Net noncurrent assets of discontinued operations 783 -- - -------------------------------------------------------------------------------------- Total assets $ 77,144 $ 82,515 - -------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 13,319 $ 14,012 Accrued expenses 9,774 12,504 Current portion of long-term debt 1,448 1,111 Current portion of pension termination liability 437 -- Net current liabilities of discontinued operations 663 767 - -------------------------------------------------------------------------------------- Total current liabilities 25,641 28,394 NONCURRENT LIABILITIES: Long-term debt 11,551 8,066 Deferred rent 3,474 3,662 Pension liability 80 80 - -------------------------------------------------------------------------------------- Total liabilities 40,746 40,202 - -------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $.01 par, 20,000,000 shares authorized, 7,000,567 issued and 6,791,152 outstanding as of January 31, 1998 and 6,792,027 outstanding as of 70 70 January 30, 1999 Preferred stock, $1.00 par, 500,000 shares authorized, none issued or outstanding -- -- Additional paid-in capital 56,336 56,393 Accumulated deficit (18,088) (12,230) Less 209,415 as of January 31, 1998 and 208,540 as of January 30, 1999 shares of common stock held (1,920) (1,920) in treasury, at cost - -------------------------------------------------------------------------------------- Total shareholders' equity 36,398 42,313 - -------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 77,144 $ 82,515 - --------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance sheets. F-1 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED FEBRUARY 1, 1997, JANUARY 31, 1998 AND JANUARY 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
Years Ended - -------------------------------------------------------------------------------------- Feb. 1, 1997 Jan. 31, 1998 Jan. 30, 1999 - -------------------------------------------------------------------------------------- NET SALES $ 153,191 $ 172,174 $ 187,163 COST OF GOODS SOLD 82,598 92,001 96,281 - -------------------------------------------------------------------------------------- Gross Profit 70,593 80,173 90,882 - -------------------------------------------------------------------------------------- OPERATING EXPENSES: General and administrative 16,374 17,695 18,806 Sales and marketing 50,924 55,609 62,249 Store opening costs 229 301 617 - -------------------------------------------------------------------------------------- Total operating expenses 67,527 73,605 81,672 - -------------------------------------------------------------------------------------- OPERATING INCOME 3,066 6,568 9,210 Interest expense, net (1,946) (2,501) (1,762) - -------------------------------------------------------------------------------------- Income from continuing operations before provision for income taxes 1,120 4,067 7,448 Provision for income taxes (437) (1,590) (1,539) - -------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 683 2,477 5,909 Discontinued operations, net of tax: Loss on disposal of manufacturing operations -- (1,512) -- Loss from discontinued operations (432) (266) (51) - -------------------------------------------------------------------------------------- Net income $ 251 $ 699 $ 5,858 - -------------------------------------------------------------------------------------- EARNINGS PER SHARE: Income from continuing operations: Basic $ 0.10 $ 0.36 $ 0.87 Diluted $ 0.10 $ 0.36 $ 0.85 Discontinued operations (net of tax): Basic $ (0.06) $ (0.26) $ (0.01) Diluted $ (0.06) $ (0.26) $ (0.01) Net income: Basic $ 0.04 $ 0.10 $ 0.86 Diluted $ 0.04 $ 0.10 $ 0.84 Weighted average shares outstanding: Basic 6,790 6,791 6,791 Diluted 6,824 6,864 6,976
The accompanying notes are an integral part of these consolidated statements. F-2 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED FEBRUARY 1, 1997, JANUARY 31, 1998 AND JANUARY 30, 1999 (In Thousands)
Additional Total Common Paid-In Accumulated Treasury Shareholders' Stock Capital Deficit Stock Equity - ---------------------------------------------------------------------------------------- BALANCE, FEBRUARY 3, 1996 $ 70 $ 56,333 $ (19,038) $ (1,920) $ 35,445 Net income -- -- 251 -- 251 Net proceeds from issuance of common stock (1,000 shares) pursuant to Incentive Option Plan -- 3 -- -- 3 - ---------------------------------------------------------------------------------------- BALANCE, FEBRUARY 1, 1997 70 56,336 (18,787) (1,920) 35,699 - ---------------------------------------------------------------------------------------- Net income -- -- 699 -- 699 - ---------------------------------------------------------------------------------------- BALANCE, JANUARY 31, 1998 70 56,336 (18,088) (1,920) 36,398 - ---------------------------------------------------------------------------------------- Net income -- -- 5,858 -- 5,858 Net proceeds from issuance of common stock (875 shares) pursuant to Incentive Option Plan -- 5 -- -- 5 Stock based compensation -- 52 -- -- 52 - ---------------------------------------------------------------------------------------- BALANCE, JANUARY 30, 1999 $ 70 $ 56,393 $ (12,230) $ (1,920) $ 42,313 - ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED FEBRUARY 1, 1997, JANUARY 31, 1998 AND JANUARY 30, 1999 (In Thousands)
Years Ended - -------------------------------------------------------------------------------------------- Feb. 1, 1997 Jan. 31, 1998 JAN. 30, 1999 - -------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 251 $ 699 $ 5,858 Loss from discontinued operations 432 266 51 Loss on disposal of manufacturing operations -- 1,512 -- - -------------------------------------------------------------------------------------------- Income from continuing operations 683 2,477 5,909 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense 3,884 1,573 827 Depreciation and amortization 3,645 3,581 4,105 (Gain) loss on disposition of assets (25) 2 -- Stock based compensation -- -- 52 Changes in assets and liabilities: (Increase) decrease in accounts receivable 780 349 (71) (Increase) decrease in inventories 2,394 (546) (4,714) (increase) decrease in prepaid expenses and other current assets (481) 511 149 (Increase) decrease in other noncurrent assets 101 248 53 Increase in accounts payable 3,338 1,192 693 Decrease in long-term pension liability (730) (803) (437) Increase in accrued expenses 196 1,070 2,730 Increase in deferred rent 134 256 188 - -------------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 13,919 9,910 9,484 - -------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,137) (4,056) (6,319) Proceeds from disposal of assets 779 -- -- - -------------------------------------------------------------------------------------------- Net cash used in investing activities of continuing operations (1,358) (4,056) (6,319) - -------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving loan agreement 29,786 36,505 36,549 Repayment of borrowings under revolving loan agreement(40,680) (42,419) (40,329) Borrowing of other long-term debt -- 833 277 Repayment of other long-term debt (911) (335) (319) Principal payments under capital lease obligations (183) (16) -- Payments related to debt financing (142) -- -- Net proceeds from issuance of common stock 3 -- 5 - -------------------------------------------------------------------------------------------- Net cash used in financing activities of continuing operations (12,127) (5,432) (3,817) - -------------------------------------------------------------------------------------------- Net cash (used in) provided by discontinued operations (359) (577) 836 - -------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 75 (155) 184 CASH AND CASH EQUIVALENTS, beginning of year 644 719 564 - -------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of year $ 719 $ 564 $ 748 - --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 1, 1997, JANUARY 31, 1998 and JANUARY 30, 1999 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Description of Business - Jos. A. Bank Clothiers, Inc. ("Clothiers") is a nationwide retailer of classic men's clothing through conventional retail stores, catalog and internet direct marketing and franchisees. Fiscal Year - The Company maintains its accounts on a fifty-two / fifty-three week fiscal year ending on the Saturday nearest to January 31. The fiscal years ended February 1, 1997 (fiscal 1996), January 31, 1998 (fiscal 1997) and January 30, 1999 (fiscal 1998), each contained fifty-two weeks. Basis of Presentation - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include the accounts of Clothiers and its wholly-owned subsidiaries, The Joseph A. Bank Mfg. Co., Inc. and National Tailoring Services, Inc. (collectively referred to as the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents - Cash and cash equivalents include overnight investments. Supplemental Cash Flow Information - Interest and income taxes paid were as follows (in thousands): Years Ended ------------------------------- Feb. 1, Jan. 31, Jan. 30, 1997 1998 1999 -------- --------- -------- Interest paid $ 2,784 $ 2,181 $ 1,462 Income taxes paid 100 101 252 Inventories - 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 merchandise to the point of sale. Catalogs and Promotional Materials - 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. At January 31, 1998 and January 30, 1999, prepaid catalog and promotional materials were approximately $1,726,000 and $1,400,000, respectively, representing expenditures for the applicable subsequent spring catalog. Property, Plant and Equipment - Property, plant and equipment are stated at cost. The Company depreciates and amortizes property, plant and equipment on a straight-line basis over the following estimated useful lives: Estimated Asset Class Useful Lives ----------- ------------ Buildings 25 years Equipment 3-10 years Furniture and fixtures 10 years Leasehold improvements Initial term of lease, not to exceed 10 years Other Noncurrent Assets - Other noncurrent assets includes deferred financing costs of $282,000 and $57,000 as of January 31, 1998 and January 30, 1999, respectively. Deferred financing costs were incurred in connection with the Company's bank credit agreement described in Note 6 and are being amortized as additional interest expense over the remaining term of the agreement using the effective interest method. Other noncurrent assets also include $427,000 and $375,000 of notes receivable as of January 31, 1998 and January 30, 1999, respectively. Fair Value of Financial Instruments - For cash and equivalents, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Franchise Revenue Recognition - Initial franchise fees for a store are generally recognized as revenue when the Company has provided substantially all the initial franchise services. Inventory sales (and cost of sales) to the franchisees are recognized when the inventory is shipped. Monthly franchise fees are recorded when earned under the franchise agreements. Lease Expense - The Company records lease expense in accordance with Statement of Financial Accounting Standards (SFAS) No. 13 -- Accounting for Leases. As such, rent expense on leases is recorded on a straight-line basis over the term of the lease and the excess of expense over cash amounts paid are reflected as "deferred rent" in the accompanying Consolidated Balance Sheets. Store Opening Costs - Costs incurred in connection with start-up and promotion of new store openings are expensed as incurred. Income Taxes - The Company accounts for income taxes in accordance with SFAS No. 109 -- Accounting for Income Taxes. Under SFAS 109, the liability method is used in accounting for income taxes. Deferred tax liabilities are determined based on differences between the financial F-5 reporting and tax basis of assets and liabilities and are measured using tax rates and laws that are expected to be in effect when the differences are scheduled to reverse. Earnings Per Share - During 1997, the Financial Accounting Standards Board (FASB) issued 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 are as follows: 1996 1997 1998 ---- ---- ---- Weighted average shares outstanding for basic EPS 6,790 6,791 6,791 Diluted EPS: Dilutive effect of common stock equivalents 34 73 185 Weighted average shares outstanding for diluted EPS 6,824 6,864 6,976 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. New Accounting Standards - In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. There was no impact of the adoption of SFAS No. 130 on the Company's financial statements. Effective December 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information." This standard requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. See Note 13 for disclosures on segment reporting. In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures about Pensions and Other Post-retirement Benefits." SFAS No. 132 revises employers' disclosures about pension and other post-retirement benefit plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. See Note 8 for disclosures of pension and other post-retirement benefits. 2. DISCONTINUED OPERATIONS: In January, 1998 (fiscal 1997), the Company formalized a plan to dispose of its manufacturing operations. Accordingly, the consolidated financial statements have been restated 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 $2,479,000 was reported net of an income tax benefit of $967,000, for an after-tax loss of $1,512,000 for fiscal 1997. In addition, losses from operations have been reflected for each year presented. Summarized financial information for the discontinued operations is as follows (in thousands): Feb. 1, Jan.31, Jan. 30, 1997 1998 1999 ------ ------- ------- Loss before income taxes $ (708) $ (374) $ (84) Net loss $ (432) $ (266) $ (51) ------- ------- ------- Current assets $ 3,839 $ 1,159 Less current liabilities 4,502 1,926 ------- ------- ------- Net current liabilities $ (663) $ (767) ------- ------- ------- Noncurrent assets $ 1,028 $ 241 Noncurrent liabilities 245 241 ------- ------- ------- Net noncurrent assets $ 783 $ -- ------- ------- ------- Revenues of the manufacturing operations primarily represent intercompany sales which have been eliminated in consolidation other than external sales of $1,867,000, $0 and $0 for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, respectively. Net current and noncurrent assets/liabilities of discontinued operations noted above include receivables, inventories, plant and equipment, pension termination and other transaction costs associated with the discontinued manufacturing operations. 3. INVENTORIES: Inventories at January 31, 1998 and January 30, 1999, consist of the following (in thousands): Jan. 31, 1998 Jan. 30, 1999 ------------- ------------- Finished goods $ 33,120 $ 39,650 Raw materials 6,994 5,178 -------- -------- Total $ 40,114 $ 44,828 -------- -------- F-6 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment at January 31, 1998 and January 30, 1999, consists of the following (in thousands): Jan. 31, 1998 Jan. 30, 1999 Land $ 475 $ 475 Buildings and improvements 29,318 32,059 Equipment, furniture and fixtures 17,132 19,245 ------- ------- 46,925 51,779 Less: Accumulated depreciation and amortization (24,818) (27,232) ------- ------- Property, plant and equipment, net $ 22,107 $ 24,547 ------- ------- 5. ACCRUED EXPENSES: Accrued expenses at January 31, 1998 and January 30, 1999, consists of the following (in thousands): Jan. 31, 1998 Jan. 30, 1999 Accrued compensation and benefits $ 3,581 $ 5,007 Accrued advertising 1,776 1,216 Gift certificate payable 1,184 1,899 Other accrued expenses 3,233 4,382 ------- ------- Total $ 9,774 $12,504 ------- ------- Other accrued expenses consist primarily of liabilities related to interest, sales taxes, property taxes, customer deposits, and percentage rent. 6. LONG-TERM DEBT: Long-term debt at January 31, 1998 and January 30, 1999, consists of the following (in thousands): Jan. 31, Jan. 30, 1998 1999 -------- -------- Bank credit agreement- Borrowings under long-term revolving loan agreement, including term portion $ 12,096 $8,316 Notes related to lease- hold improvements, interest at 2% plus prime, 9.4%, 9.9% and 11.0%, respectively, payable in monthly installments through February 1, 2003 824 828 Notes related to building improvements, interest at 12% payable in monthly installments through June 10, 2000 18 11 Mortgage payable, interest at 3%, payable in monthly installments through September 1, 1999; secured by related land and building 61 22 -------- ------- Total debt 12,999 9,177 Less: Current maturities 1,448 1,111 -------- ------- Long-term debt $ 11,551 $ 8,066 -------- ------- Bank Credit Agreement - The Company maintains a bank credit agreement (the "Credit Agreement"), which provides for a revolving loan whose limit is determined by a formula based on the Company's inventories, accounts receivable and real estate and equipment values. In September, 1997, the Company extended the Credit Agreement to April, 2001. The amended Credit Agreement changed the maximum borrowing under the facility to approximately $43,000,000 including a new term loan facility of $4,000,000 payable in monthly installments based on a five-year amortization with any outstanding balance due in April 2001. The Credit Agreement also includes a) financial covenants concerning net worth, EBITDA coverage and working capital, among others, b) limitations on capital expenditures and additional indebtedness and c) a restriction on the payment of dividends. The Company is in compliance with all loan covenants. Interest rates under the amended agreement range from prime to prime plus 2.0% or LIBOR plus 2.0% to LIBOR plus 4.0%, depending upon financial performance. The amended agreement also includes an early termination fee and provisions for a seasonal over-advance. As of January 31, 1998 and January 30, 1999, the Company's availability in excess of outstanding borrowings under the formula was $24,019,000 and $28,732,000, respectively. Substantially all assets of the Company are collateralized under the Credit Agreement. During the years ended January 31, 1998 and January 30, 1999, borrowings under the Credit Agreement bore interest ranging from prime to prime plus .75% or LIBOR plus 2.0% to LIBOR plus 2.75%. Amounts outstanding under the Credit Agreement as of January 30, 1999, bear interest at rates ranging from 7.75% to 8.5% which may vary in the future depending upon prime and LIBOR rate fluctuations. The average daily outstanding balance under the Credit Agreement for the fiscal years ended January 31, 1998 and January 30, 1999 were $19,506,000 and $12,474,000, respectively. The highest month end outstanding balance under the Credit Agreement for the fiscal years ended January 31, 1998 and January 30, 1999 were $27,433,000 and $18,657,000, respectively. In addition to borrowings under the Credit Agreement, the Company has issued a letter of credit of $400,000 at January 30, 1999, to secure the payment of rent. The aggregate maturities of the Company's long-term debt as of January 30, 1999, are as follows: year ending 2000-$1,111,000; 2001-$994,000; 2002-$6,891,000 and 2003-$181,000. F-7 7. COMMITMENTS AND CONTINGENCIES: Litigation - Lawsuits and claims are filed from time to time against the Company in its ordinary course of business. Management, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the net assets of the Company or the accompanying consolidated financial statements taken as a whole. Employment Agreements - The Company has employment agreements with certain of its executives expiring in 2000, aggregating base compensation of $1,984,000 (not including annual adjustments) over the term. These executives would also be entitled to severance of approximately $2,837,000 (not including annual adjustments) if terminated without cause or if the executive left the Company for cause (as defined). The contracts also provide for additional incentive payments subject to performance standards. In addition, other employees are eligible for incentive payments based on performance. The Company expensed approximately $925,000, $1,393,000 and $1,885,000 in incentive payments in fiscal years 1996, 1997 and 1998, respectively. Lease Obligations - The Company has numerous noncancelable operating leases for retail stores, certain office space and equipment. Certain facility leases provide for annual base minimum rentals plus contingent rentals based on sales. Renewal options are available under the majority of the leases. Future minimum lease payments under noncancelable operating leases at January 30, 1999, are as follows (in thousands): Year Ending Amount ----------- ------ 2000 $12,803 2001 11,529 2002 10,729 2003 10,036 2004 9,519 2005 and thereafter 27,410 ------- Total $82,026 ------- The minimum rentals above do not include additional payments for percentage rent, insurance, property taxes and maintenance costs that may be due as provided for in the leases. Many of the noncancelable operating leases include scheduled rent increases. Total rental expense for operating leases, including contingent rentals and net of sublease payments received, was $10,224,000, $11,364,000 and $12,839,000 for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, respectively. Minimum rentals were $9,986,000, $11,049,000 and $12,435,000, respectively. Contingent rentals, which are based on a percentage of sales, approximated $395,000, $389,000 and $423,000, respectively. Additionally, sublease payments received approximated $157,000, $74,000 and $19,000, respectively. Inventories - The Company ordinarily commits to purchases of inventory at least one to two seasons in advance. The Company has committed to a substantial portion of its purchases for fiscal 1999 and has also committed to approximately 15% to 20% of its purchases for fiscal 2000 and 2001. Other - During fiscal 1997, the Company signed a five-year agreement with David Leadbetter, a golf professional, to produce golf and other apparel under his name. Payments are based on sales volumes. The minimum annual commitment under this agreement is $150,000. 8. BENEFIT PLANS: Multi-Employer Pension Plan - Through the year ended January 29, 1994, the Company's employees, covered by a collective bargaining agreement, participated in plans with pension and post-retirement benefits administered by the national and local Union of Needletrades Industrial & Textile Employees. The Company made contributions to the plans in accordance with the collective bargaining agreement. During the year ended January 29, 1994, the Company's Board of Directors and management decided to terminate the Company's participation in the multi-employer pension plan at a cost of $3.3 million which was recorded in fiscal 1993. The related liability was repaid in installments over four years through October, 1998. Defined Benefit Pension & Post-Retirement Plans - In connection with the above termination, the Company adopted a new noncontributory defined benefit pension plan and a new post-retirement benefit plan to cover the above-mentioned union employees with equivalent benefits to the multi-employer plan. The Company's contributions are intended to provide for both benefits attributed to service to date and for benefits expected to be earned in the future. The annual contributions are not less than the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974, as amended. The plan provides for eligible employees to receive benefits based principally on years of service with the Company. The Company does not pre-fund the benefits from the post-retirement benefit plan. In accordance with SFAS No. 106, "Employers' Accounting for Post-Retirement Benefits Other than Pensions", the Company records the expected cost of these benefits as expense during the years that employees render service. The Company has adopted the standards on a prospective basis as permitted. As such, the Company amortizes the related transition liability over 20 years. The following table sets forth the plan's funded status as of December 31, 1997 and 1998, the date of the latest actuarial valuations (in thousands): F-8
Other Post-retirement Pension Benefits Benefits --------------- ------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Change in benefit obligation: Benefit obligation at beginning of year $ 177 $ 209 $ 300 $ 259 Service cost 24 28 9 22 Interest cost 10 13 10 19 Actuarial (gain) loss (44) (41) 32 -- Benefits paid (11) (32) -- -- ----- ----- ----- ----- Benefit obligation at end of year $ 156 $ 177 $ 351 $ 300 ----- ----- ----- ----- Change in plan assets: Fair value of plan assets at beginning of year $ 186 $ 141 $ -- $ -- Actual return on plan assets 19 48 -- -- Employer contribution 12 29 -- -- Benefits paid (11) (32) -- -- ----- ----- ----- ----- Fair value of plan assets at end of year $ 206 $ 186 $ -- $ -- ----- ----- ----- ----- Funded status $ 50 $ 8 $(351) $(300) Unrecognized net actuarial loss (gain) (19) 32 (93) (56) Unrecognized initial net liability at transition 48 82 143 178 ----- ----- ----- ----- Prepaid (accrued) benefit cost $ 79 $ 122 $(301) $(178) ----- ----- ----- ----- Discount rate 7.25% 7.75% 7.25% 7.75% Expected return on plan assets 8.00% 8.00% -- -- Components of net periodic benefit cost: Service cost $ 24 $ 28 $ 22 $ 22 Interest cost 10 13 21 19 Amortization of net liability at transition 5 7 10 11 Expected return on plan assets (11) (14) -- -- Recognized net actuarial gain (1) -- (10) (3) ----- ----- ----- ----- Net periodic benefit cost $ 27 $ 34 $ 43 $ 49 ----- ----- ----- -----
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have less than a $12,000 effect on total service and interest costs and post-retirement benefit obligation. Profit Sharing Plan - The Company maintains a defined contribution 401(k) profit sharing plan for its employees. All non-union and certain union employees are eligible to participate after one year of service. Employee contributions to the plan are limited based on applicable sections of the Internal Revenue Code. The Company is required to match a portion of employee contributions to the plan and may make additional contributions at the discretion of the directors of the Company. Contributions by the Company to the plan were approximately $223,000, $238,000 and $321,000 for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, respectively. The Company also established a non-qualified, unfunded deferred Compensation plan effective October 1, 1998. This plan is designed to provide a select group of management and highly-compensated employees with retirement benefits. All assets of the plan are fully subject to the Company's creditors. The Company's matching contributions are equal to $.25 for each $1.00 the participant contributes. Contributions by the Company for the year ended January 30, 1999 were $10,000. 9. INCOME TAXES: At January 30, 1999, the Company had approximately $6.0 million of tax net operating loss carryforwards (NOLs) which expire in 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 fiscal year 1998, the Company had a deferred tax asset of $4.6 million related to NOLs and an offsetting valuation allowance of approximately $1.4 million. Management has determined, based on the Company's F-9 recent history of earnings, that future earnings of the Company will more likely than not be sufficient to utilize the NOLs prior to their expiration. Accordingly, during the third quarter of 1998, the Company eliminated the $1.4 million valuation reserve. During the year ended January 29, 1994, the Company filed for a prior year net operating loss carryback to a year in which the Company was included in the consolidated federal income tax return of its pre-1986 parent and the Company recorded a deferred tax asset of $3.0 million in anticipation of collecting the refund. In March, 1996, the refund plus interest was collected. Included in the consolidated statement of income for the year ended February 1, 1997 is $.6 million of interest income related to the refund. The provision for income taxes for continuing operations was comprised of the following (in thousands): Years Ended -------------------------------- Feb. 1, Jan. 31, Jan. 30, 1997 1998 1999 ---- ---- ---- Federal: Current $ (41) $ (110) $ (712) Deferred (346) (1,289) (651) State: Current -- -- -- Deferred (50) (191) (176) ------- ------- ------- Provision for income taxes $ (437) $(1,590) $(1,539) ------- ------- ------- The differences between the recorded income tax provision and the "expected" tax provision based on the statutory federal income tax rate is as follows (in thousands): Years Ended --------------------------------- Feb. 1, Jan. 31, Jan. 30, 1997 1998 1999 ------ ------- -------- Computed federal tax provision at statutory rates $ (381) $(1,383) $(2,532) State income taxes, net of federal income tax effect (60) (203) (372) Valuation allowance -- -- 1,365 Other, net 4 (4) -- ------- ------- ------- Provision for income taxes $ (437) $(1,590) $(1,539) ------- ------- ------- Temporary differences between the financial reporting carrying amounts and tax basis of assets and liabilities give rise to deferred income taxes. Total deferred tax assets and deferred tax liabilities stated by sources of the differences between financial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets and deferred tax liabilities are as follows (in thousands): Jan. 31, Jan. 30, 1998 1999 --------- --------- Deferred Tax Assets: Long-term pension liability $ 171 $ -- Inventories 646 717 Property, plant and equipment 151 844 Accrued liabilities 2,175 2,514 Operating loss carryforwards and carrybacks 4,559 1,525 Valuation allowance (1,365) -- ------- ------- 6,337 5,600 Deferred Tax Liabilities: Prepaid expenses and other current assets (627) (717) ------- ------- Net Deferred Tax Asset $ 5,710 $ 4,883 ------- ------- 10. INCENTIVE OPTION PLAN: Effective January 28, 1994, the Company adopted an Incentive Plan (the Plan). The Plan generally provides for the granting of stock, stock options, stock appreciation rights, restricted shares or any combination of the foregoing to the eligible participants, as defined. Approximately 953,000 shares of Common Stock have been reserved for issuance under the Plan. The exercise price of an option granted under the Plan may not be less than the fair market value of the underlying shares of Common Stock on the date of grant and employee options expire at the earlier of termination of employment or ten years from the date of grant. All options covered under the Plan vest in full upon a change of control of the Company. As of January 30, 1999, options outstanding for 883,097 shares had been granted under the plan at exercise prices ranging from $1.63 to $7.38 per share and options for 427,199 shares were exercisable at January 30, 1999. In addition, there are 209,415 options outstanding at $9.17 per share which were issued in fiscal 1993 under employment agreements. The Company has computed for pro forma disclosure purposes the value of all compensatory options granted during fiscal year 1996, 1997 and 1998, using the Black-Scholes option pricing model as prescribed by SFAS No. 123. Assumptions used for the pricing model include 4.5% to 7.9% for the risk-free interest rate, expected stock option lives of 2-10 years, expected dividend yield of 0% each year and expected volatility of 69% each year. Options were assumed to be exercised upon vesting for the purposes of this valuation. Adjustments are made for options forfeited prior to vesting. Had compensation costs for compensatory options been determined consistent with SFAS No. 123, the Company's pro forma net income would have been net income of $223,000 in 1996, net income of $542,000 in 1997 and net income of $5,680,455 in 1998. Pro forma basic earnings per share would have been $.03 in 1996, $.08 in 1997 and $.84 in 1998. Pro forma diluted earnings per share would have been $.03 in 1996, $.08 in 1997 and $.81 in 1998. F-10 Transactions with respect to the plans were as follows (shares in thousands):
January 30, 1999 January 31, 1998 February 1, 1997 ---------------- ---------------- ---------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ -------- ------ -------- ------ -------- Outstanding at beginning of year 1,081 $ 6.45 1,036 $ 6.57 771 $ 7.63 Granted 36 $ 6.57 189 $ 6.10 266 $ 3.48 Exercised (1) $ 4.00 -- $ -- (1) $ 3.25 Canceled (23) $ 6.65 (144) $ (688) -- $ -- ----- ------ ----- Outstanding at end of year 1,093 $ 6.48 1,081 $ 6.45 1,036 $ 6.57 ===== ====== ===== Exercisable at end of year 637 $ 7.14 475 $ 7.71 409 $ 7.34 ===== ====== =====
The following table summarizes information about stock options outstanding at January 30, 1999 (shares in thousands):
Options Outstanding Options Exercisable ------------------- ------------------- Number Weighted Average Weighted Number Weighted Range of Exercise Outstanding Remaining Average Exercisable at Average Prices Jan. 30, 1999 Contractual Life Exercise Price Jan. 30, 1999 Exercise Price - ----------------- ------------- ---------------- -------------- -------------- --------------- $1.63 - $4.00 281 7.28 $ 3.45 115 $2.98 $4.01 - $7.38 603 6.37 6.95 313 7.30 $7.39 - $9.17 209 5.02 9.16 209 9.16 ----- --- 1,093 6.34 6.48 637 7.14 ===== ===
The weighted average fair value of options granted for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, was $1.78, $4.80 and $5.06, respectively. 11. RIGHTS OFFERING: In September, 1997, the Company adopted a Stockholder Rights Plan in which preferred stock purchase rights were distributed as a dividend at the rate of one Right for each share of Jos. A. Bank's outstanding Common Stock held as of the close of business on September 30, 1997. Each Right will entitle stockholders to buy one one-hundredth of a share of the newly designated Series A Preferred Stock of Jos. A. Bank at an exercise price of $40. The Rights will be exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the Company's outstanding Common Stock (without the approval of the board of directors) or commences a tender or exchange offer upon consummation of which a person or group would beneficially own 20 percent or more of the Company's outstanding Common Stock. If any person becomes the beneficial owner of 20 percent or more of the Company's outstanding common stock (without the approval of the board of directors), or if a holder of 20 percent or more of the Company's Common Stock engaged in certain self-dealing transactions or a merger transaction in which the Company is the surviving corporation and its Common Stock remains outstanding, then each Right not owned by such person or certain related parties will entitle its holder to purchase, at the Right's then-current exercise price, units of the Company's Series A Preferred Stock (or, in certain circumstances, Common Stock, cash, property or other securities of the Company) having a market value equal to twice the then-current exercise price of the Rights. In addition, if the Company is involved in a merger or other business combination transaction with another person after which its Common Stock does not remain outstanding, or sells 50 percent or more of its assets or earning power to another person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, shares of common stock of such other person having a market value equal to twice the then-current exercise price of the Rights. The Company will generally be entitled to redeem the Rights at $.01 per Right at any time until the tenth business day following the public announcement that a person or group has acquired 20 percent or more of the Company's Common Stock. F-11 12. RELATED PARTY TRANSACTIONS: The Company has an executive who is the Chairman of the Board of a consulting group. The Company paid the group approximately $31,000, $0 and $0 for the years ended February 1, 1997, January 31, 1998 and January 30, 1999, respectively, for professional services rendered. The Company has also made loans of $314,000 to three of its officers. The balance as of January 30, 1999 included in other noncurrent assets in the accompanying consolidated balance sheet was approximately $205,000. 13. SEGMENT REPORTING (Unaudited): The Company has two reportable segments: full line stores and catalog 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 summary of significant policies. 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), 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 customer receives a catalog in his or her home or office and either calls, mails or faxes an order to the Company. The merchandise is then shipped to the customer. The detail segment data is presented in the following table (in thousands):
Fiscal 1998 Full line Catalog direct (in thousands) stores marketing Other Total ----- --------- ----- ----- Net sales $159,283 $ 20,354 $ 7,526(a) $187,163 Depreciation and amortization 2,817 15 1,273 4,105 Operating income (b) 26,057 2,746 (19,593) 9,210 Identifiable assets (c) 47,562 9,192 25,761 82,515 Capital expenditures (d) 4,811 14 1,494 6,319 Fiscal 1997 Full line Catalog direct (in thousands) stores marketing Other Total ------ --------- ----- ----- Net sales $ 143,564 $ 19,774 $ 8,836(a) $172,174 Depreciation and amortization 2,499 26 1,056 3,581 Operating income (b) 21,753 3,311 (18,496) 6,568 Identifiable assets (c) 39,477 8,537 29,130 77,144 Capital expenditures (d) 3,939 2 115 4,056 Fiscal 1996 Full line Catalog direct (in thousands) stores marketing Other Total ------ --------- ----- ----- Net sales $127,836 $ 16,863 $ 8,492 (a) $153,191 Depreciation and amortization 2,326 28 1,291 3,645 Operating income (b) 16,686 2,008 (15,628) 3,066 Capital expenditures (d) 1,908 6 223 2,137
a) Revenue from segments below the quantitative thresholds are attributable primarily to four operating segments of the Company. Those segments include outlet stores, franchise, regional tailor shops and showroom stores. None of these segments has ever met any of the quantitative thresholds for determining reportable segments. b) Operating income represents profit before allocations of overhead from corporate office and the distribution center, interest and income taxes. c) Identifiable assets include cash, accounts receivable, inventories, prepaid expenses and fixed assets residing in or related to the reportable segment. 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. F-12 14. QUARTERLY FINANCIAL INFORMATION (Unaudited):
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL (In Thousands, Except Per Share Amounts) FISCAL 1998 Net sales $ 43,383 $ 41,947 $ 44,584 $ 57,249 $187,163 Gross profit 21,232 20,190 22,316 27,144 90,882 Operating income 1,794 1,415 1,966 4,035 9,210 Income from continuing operations 828 597 2,238 2,246 5,909 Net Income $ 777 $ 597 $ 2,238 $ 2,246 $ 5,858 Income from continuing operations per share (diluted) $ 0.12 $ 0.09 $ 0.32 $ 0.32 $ 0.85 Net income per share (diluted) $ 0.11 $ 0.09 $ 0.32 $ 0.32 $ 0.84 FISCAL 1997 Net sales $ 38,655 $ 39,530 $ 41,536 $ 52,453 $172,174 Gross profit 18,862 18,158 20,027 23,126 80,173 Operating income 1,315 1,108 1,513 2,632 6,568 Income from continuing operations 437 251 457 1,332 2,477 Net Income (Loss) $ 382 $ 196 $ 402 $ (281) $ 699 Income from continuing operations per share (diluted) $ 0.06 $ 0.04 $ 0.07 $ 0.19 $ 0.36 Net income (loss) per share (diluted) $ 0.06 $ 0.03 $ 0.06 $ (0.04) $ 0.10
F-13 EX-10 2 EXHIBIT 10.7(B) FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT (this "Amendment") is made this 9th day of February, 1999, by and between FRANK TWORECKE ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer") to that certain Amended and Restated Employment Agreement, dated as of September 19, 1998 (the "Employment Agreement"). FOR GOOD AND VALUATION CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Executive and Employer, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement as follows: 1. In Section 3.1, lines 2 and 7-8, delete the phrase "Chief Merchandising Officer" and insert in lieu thereof the phrase "Chief Operating Officer." 2. In Section 5.2, paragraph d, line 4, delete the phrase "Chief Merchandising Officer" and insert in lieu thereof the phrase "Chief Operating Officer." 3. In Section 5.3, delete clause (ii) and insert in lieu thereof the clause "(ii) the occurrence of a change in control (as hereinafter defined) of Employer provided that not more than 90 days shall have elapsed subsequent to Executive's becoming aware of the occurrence of the change in control." Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. /s/ Frank Tworecke ------------------------------- FRANK TWORECKE JOS. A. BANK CLOTHIERS, INC. By: /s/ Timothy F. Finley ---------------------------------- Name: Timothy F. Finley Title: CEO EX-10 3 EXHIBIT 10.13(A) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT (this "Amendment") is made as of the 14th day of February, 1999, by and between CHARLES D. FRAZER ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer") to that certain Employment Agreement, dated as of September 19, 1997 (the "Employment Agreement"). FOR GOOD AND VALUATION CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Executive and Employer, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement by increasing Executive's Base Salary (as set forth in Section 4.1 of the Employment Agreement) to $150,000.00. Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. /s/ Charles D. Frazer ------------------------------- CHARLES D. FRAZER JOS. A. BANK CLOTHIERS, INC. By: /s/ Timothy F. Finley ---------------------------------- Name: Timothy F. Finley Title: Chairman & CEO EX-10 4 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 2/29/98 -------------------------------- J.F. TIMOTHY CARROLL 8 EX-27 5 EXHIBIT 27
5 1,000 3-MOS 3-MOS 3-MOS YEAR JAN-30-1999 JAN-30-1999 JAN-30-1999 JAN-30-1999 MAY-02-1998 AUG-01-1998 OCT-31-1998 JAN-30-1999 677 774 889 748 0 0 0 0 3,466 3,601 4,199 2,808 0 0 0 0 46,954 46,488 51,862 44,828 59,876 60,101 67,022 55,456 47,674 49,356 50,413 51,779 24,917 25,581 25,991 27,232 85,303 86,102 94,369 82,515 29,279 27,121 30,051 28,394 0 0 0 0 0 0 0 0 0 0 0 0 70 70 70 70 37,122 37,731 39,984 42,243 85,303 86,102 93,369 82,515 43,383 41,947 44,584 187,163 43,383 41,947 44,584 187,163 22,151 21,757 22,268 96,281 19,438 18,775 20,350 81,672 0 0 0 0 0 0 0 0 437 437 535 1,762 1,357 978 1,431 7,448 529 381 (807) 1,539 828 597 2,238 5,909 (51) 0 0 (51) 0 0 0 0 0 0 0 0 777 597 2,238 5,858 0.11 0.09 0.33 0.86 0.11 0.09 0.32 0.84
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