-----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, T4lmy60S3n/Xbe3SZvcO7t3zRNFdXV2vK4Zv9pgseYJYsP8SSGUlcQz7T+rQXqy3 qTjVjGvTZLLcuG1CUehITQ== 0000950168-99-002462.txt : 19990915 0000950168-99-002462.hdr.sgml : 19990915 ACCESSION NUMBER: 0000950168-99-002462 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 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: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23874 FILM NUMBER: 99711203 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-Q 1 JOS. A. BANK CLOTHIERS, INC. 10-Q United States Securities and Exchange Commission Washington, DC 20549 FORM 10 - Q x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 31, 1999 ------------- or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-23874 ------- Jos. A. Bank Clothiers, Inc. Delaware 5611 36-3189198 ------------------- --------------- --------------- (State incorporation) (Primary Standard (I.R.S. Employer Industrial Identification Classification Number) Code Number) 500 Hanover Pike, Hampstead, MD 21074-2095 ------------------------------- -------------- none ---------------------------------- (Former name or former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of September 13, 1999 ---------------------------- ------------------------------------ Common stock. $.01 par value 6,792,027
Jos. A. Bank Clothiers, Inc. Index ----- Part I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Condensed Consolidated Statements 3 of Operations - Three and Six Months ended July 31, 1999 and August 1, 1998 Condensed Consolidated Balance 4 Sheets - as of July 31, 1999 and January 30, 1999 Condensed Consolidated Statements 5 of Cash Flows -Six Months ended July 31, 1999 and August 1, 1998 Notes to Condensed Consolidated 6-9 Financial Statements Item 2. Management's Discussion and Analysis 10-14 of Results of Operations and Financial Condition Part II. Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K 14 (a) Exhibits - Exhibit 27-Financial Data Schedule (EDGAR filing only) Signatures 15 - ----------
2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Three Months Ended Six Months Ended July 31, August 1, July 31, August 1, 1999 1998 1999 1998 -------- -------- -------- -------- Net sales $ 44,203 $ 41,947 $ 87,810 $ 85,330 Costs and expenses: Cost of goods sold 22,927 21,757 44,426 43,908 General and administrative 4,296 4,278 8,640 8,806 Sales and marketing 15,861 14,376 32,470 29,046 Store opening costs 9 121 62 361 One-time charge: Executive payout and other costs 2,177 -- 2,177 -- -------- -------- -------- -------- 45,270 40,532 87,775 82,121 -------- -------- -------- -------- Operating income (loss) (1,067) 1,415 35 3,209 Interest expense, net 247 437 575 874 -------- -------- -------- -------- Income (loss) from continuing operations before provision for income taxes (1,314) 978 (540) 2,335 Provision (benefit) for income taxes (512) 381 (211) 910 -------- -------- -------- -------- Income (loss) from continuing operations (802) 597 (329) 1,425 Loss from discontinued operations (net of tax) -- -- -- (51) -------- -------- -------- -------- Net income (loss) $ (802) $ 597 $ (329) $ 1,374 ======== ======== ======== ======== Earnings per share: Income (loss) from continuing operations: Basic $ (0.12) $ .09 $ (0.05) $ .21 Diluted $ (0.12) $ .09 $ (0.05) $ .20 Discontinued operations (net of tax): Basic $ -- $ -- $ -- $ (.01) Diluted $ -- $ -- $ -- $ (.01) Net income (loss): Basic $ (0.12) $ .09 $ (0.05) $ .20 Diluted $ (0.12) $ .09 $ (0.05) $ .20 Weighted average shares outstanding: Basic 6,792 6,791 6,792 6,791 Diluted 6,792 7,010 6,792 6,974
See accompanying notes. 3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
July 31, January 30, 1999 1999 ASSETS ------- ------ Current Assets: Cash and cash equivalents $ 838 $ 748 Accounts receivable 2,611 2,808 Inventories: Raw materials 5,553 5,178 Finished goods 41,578 39,650 ------ ------ Total inventories 47,131 44,828 ------ ------ Prepaid expenses and other current assets 4,561 4,189 Deferred income taxes 3,399 2,883 ------ ------ Total current assets 58,540 55,456 ------ ------ Property, plant and equipment, at cost 54,822 51,779 Accumulated depreciation and amortization (28,627) (27,232) -------- -------- Net property, plant and equipment 26,195 24,547 ------ ------ Deferred income taxes 1,985 2,000 Other assets 407 512 ------- ------ TOTAL ASSETS $ 87,127 $ 82,515 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 15,041 $ 14,012 Accrued expenses 11,553 12,504 Current portion of long-term debt 1,057 1,111 Net current liabilities of discontinued operations 769 767 ------- ------- Total current liabilities 28,420 28,394 Long-term liabilities 16,681 11,808 ------ ------- TOTAL LIABILITIES 45,101 40,202 ------ ------ Shareholders' equity: Common stock 70 70 Additional paid-in capital 56,435 56,393 Accumulated deficit (12,559) (12,230) -------- ------- 43,946 44,233 Less treasury stock (1,920) (1,920) ------ ------ TOTAL SHAREHOLDERS' EQUITY 42,026 42,313 ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 87,127 $ 82,515 ====== ====== See accompanying notes. 4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended July 31, August 1, 1999 1998 -------- -------- Cash flows from operating activities: Net income (loss) $ (329) $ 1,374 Loss from discontinued operations -- 51 -------- -------- Income (loss) from continuing operations (329) 1,425 Adjustments to reconcile net income (loss) to net cash used in operating activities: (Increase) decrease in deferred taxes (501) 614 Depreciation and amortization 1,916 1,862 Stock based compensation 42 29 Net increase in operating working capital (2,348) (5,804) -------- -------- NET CASH USED IN OPERATING ACTIVITIES OF CONTINUING OPERATIONS (1,220) (1,874) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (3,564) (3,428) -------- -------- NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS (3,564) (3,428) -------- -------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 28,334 19,452 Repayment under long-term Credit Agreement (23,298) (13,635) Borrowings of other long-term debt -- 277 Repayment of other long-term debt (164) (153) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS 4,872 5,941 -------- -------- Net cash provided by (used in) discontinued operations 2 (429) -------- -------- Net increase in cash and cash equivalents 90 210 Cash and cash equivalents - beginning of period 748 564 -------- -------- Cash and cash equivalents - end of period $ 838 $ 774 ======== ========
See accompanying notes. 5 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 7/31/99 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) 1. BASIS OF PRESENTATION Jos. A. Bank Clothiers, Inc. (the Company) is a nationwide retailer of classic men's clothing through conventional retail stores and catalog and internet direct marketing. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. These adjustments are of a normal recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's January 30, 1999 Annual Report on Form 10-K. 2. SIGNIFICANT ACCOUNTING POLICIES Inventories are stated at the lower of first-in, first-out, cost or market. The Company capitalizes into inventories certain warehousing and delivery costs associated with getting its inventory to the point of sale. Costs related to mail order catalogs and promotional materials are included in prepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, not to exceed six months. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS 109). This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates attributable to deductible temporary differences between financial statement and income tax basis of assets and liabilities and to tax net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Reclassifications - Certain reclassifications have been made to the August 1, 1998 financial statements in order to conform with the July 31, 1999 presentation. 6 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 7/31/99 3. WORKING CAPITAL The net change in operating working capital is composed of the following:
Six Months Ended ---------------- July 31, August 1, 1999 1998 ---- ----- Increase (decrease) in accounts receivable $ 197 $ (864) Increase in inventories (2,303) (6,374) Increase in prepaids and other assets (372) (665) Increase (decrease) in accounts payable 1,029 1,055 Increase (decrease) in accrued expenses and other liabilities (899) 1,044 ------- ------- Net increase in operating working capital $ (2,348) $ (5,804) ======= =======
4. EARNINGS PER SHARE Earnings Per Share - Statement of Financial Accounting Standards (SFAS) No. 128 requires presentation of basic earnings per share and diluted earnings per share. The weighted average shares used to calculate basic and diluted earnings per share in accordance with SFAS No. 128 is as follows:
Three Months Ended Six Months Ended ------------------ ---------------- July 31, August 1, July 31, August 1, 1999 1998 1999 1998 ---- ---- ---- ---- Weighted average shares outstanding for basic EPS 6,792 6,791 6,792 6,791 Diluted EPS: Dilutive effect of common stock equivalents -- 219 -- 183 ----- ----- ----- ----- Weighted average shares outstanding for diluted EPS 6,792 7,010 6,792 6,974 ===== ===== ===== =====
Weighted average shares outstanding for calculating dilutive EPS include basic shares outstanding, plus shares issuable upon the exercise of stock options, using the treasury stock method. 7 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 7/31/99 5. DISCONTINUED OPERATIONS Summarized financial information for the discontinued operations is as follows (in thousands):
Three Months Ended Six Months Ended ------------------ --------------------- July 31, August 1, July 31, August 1, 1999 1998 1999 1998 ------- -------- ------- ------- Loss before income taxes $ -- $ -- $ -- $ (84) Net loss $ -- $ -- $ -- $ (51) As of As of July 31, January 30, 1999 1999 ------- ------- Current assets $ 492 $ 1,159 Less current liabilities 1,261 1,926 ------- ------- Net current (liabilities) $ (769) $ (767) ===== ====== Noncurrent assets $ 241 $ 241 Noncurrent liabilities 241 241 ------- ------- Net noncurrent assets $ -- $ -- ======= =======
Revenues of the manufacturing operations primarily represent intercompany sales which have been eliminated in consolidation. Net current and noncurrent assets/liabilities of discontinued operations noted above includes inventories, receivables, plant and equipment, pension termination and other transaction costs associated with the discontinued manufacturing operations. 6. SEGMENT REPORTING 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 Company's January 30, 1999 Annual report on Form 10K. 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. Certain segment data is presented in the following table: 8 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99
THREE MONTHS ENDED JULY 31, 1999 Full line Catalog Direct (in thousands) Stores Marketing Other Total ------ ----------- ----- ----- Net sales $ 36,895 $ 5,501 $ 1,807(a) $ 44,203 Depreciation and amortization 765 3 211 979 Operating income (b) 5,003 396 (6,466) (1,067) THREE MONTHS ENDED AUGUST 1, 1998 (in thousands) Net sales $ 34,414 $ 5,714 $ 1,819(a) $ 41,947 Depreciation and amortization 697 -- 215 912 Operating income (b) 4,882 925 (4,392) 1,415 SIX MONTHS ENDED JULY 31, 1999 Full line Catalog Direct (in thousands) Stores Marketing Other Total ------ --------- ----- ----- Net sales $ 73,616 $ 10,892 $ 3,302(a) $ 87,810 Depreciation and amortization 1,506 7 403 1,916 Operating income (b) 10,006 1,145 (11,116) 35 SIX MONTHS ENDED AUGUST 1, 1998 (in thousands) Net sales $ 71,250 $ 10,619 $ 3,461 (a) $ 85,330 Depreciation and amortization 1,349 7 506 1,862 Operating income (b) 10,716 1,629 (9,136) 3,209
(a) Revenue from segments below the quantitative thresholds are attributable primarily to four operating segments of the Company. Those segments include outlet stores, franchise and regional tailor shops. None of these segments has ever met any of the quantitative thresholds for determining reportable segments. (b) Operating income for the reported segments represents profit before allocations of overhead from corporate office and the distribution center, interest and income taxes. 7. EXECUTIVE PAYOUT AND OTHER COSTS During the second quarter of 1999, the Company's Chairman and CEO retired and the Company recorded a one-time charge of approximately $2.2 million associated with that event. The one-time charge includes a payout to the former Chairman/CEO of approximately $1.8 million and professional fees -- primarily recruiting and related expenses -- that were incurred in the second quarter of 1999. This charge reduced basic earnings per share by $.20. 9 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto and with the Company's audited financial statements and notes thereto for the fiscal year ended January 30, 1999. OVERVIEW - In the second quarter of 1999, the Company reversed a negative sales trend that occurred in the first quarter of 1999. Total sales increased 5 percent and comparable store sales increased two percent in the second quarter of 1999. Despite the positive sales trends, second quarter net income excluding a $2.2 million one-time charge was $.01 per share lower than the prior year. The lower income resulted from a carryover effect of a failed marketing promotion in March 1999 and certain other expenses. Specifically, the Company increased its advertising spending by approximately $.5 million in the second quarter of 1999 to build traffic in its stores and was more promotional to clear excess inventories that were left after the weak March results. The Company also incurred approximately $80,000 to upgrade its Internet site and to advertise on several web sites and incurred approximately $.1 million in its final phases to make its systems Y2K compliant. Excluding the one-time charge, income from continuing operations for the quarter ended July 31, 1999 was $.5 million or $.08 per share compared to $.6 million or $.09 per share for the same period in 1998. The one-time charge of $2.2 million in the second quarter of 1999 relates to the payout to the Company's former Chairman/CEO who retired and certain professional fees -- primarily recruiting and related expenses -- that were incurred in the second quarter of 1999. This charge reduced primary earnings per share by $.20. Including the one-time charge, the Company generated a net loss of $.8 million or $.12 per share in the second quarter of 1999 compared to net income of $.6 million or $.09 per share in the same period last year. For the first six months of 1999, the Company generated a loss of $.3 million or $.05 per share. Excluding the one-time charge of $2.2 million, income from continuing operations was $1.0 million or $.14 per share compared to $1.4 million or $.20 per share last year. The decreased earnings from 1998 relate principally to the results from the first quarter of 1999 which were negatively impacted by a new promotion that was run in March 1999 and failed to drive traffic into the stores. The promotion was discontinued in late March and the Company reversed the negative sales trend. Catalog profitability declined in the second quarter of 1999 primarily as a result of costs incurred to convert to the Company's new automated catalog information system, investments in the internet and weak performance of the post Father's Day clearance book. The Company continued to pursue its expansion strategy of opening new stores in existing markets and has opened 33 new stores since late 1996. The Company has opened three new stores through July 31, 1999 and closed one store whose lease had expired. The Company opened two additional stores in August, 1999 which should complete its store openings for 1999. The Company has 108 stores as of September 1999. The Company's availability under the Credit Agreement increased to $24.6 million as of July 31, 1999, which was $.9 million higher than the same time last year. Total debt was $4.9 million lower than the same time last year despite opening the new stores and investing in a new $2.1 million point-of-sale system. RESULTS OF OPERATIONS - The following table is derived from the Company's condensed consolidated statements of operations and sets forth, for the periods indicated, the items included in the condensed consolidated statements of operations, expressed as a percentage of net sales. 10 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99
Percentage of Net Sales Percentage of Net Sales Three Months Ended Six Months Ended ------------------ ---------------- July 31, August 1, July 31, August 1, 1999 1998 1999 1998 ---- ---- ---- ---- Net Sales................................................. 100.0% 100.0% 100.0% 100.0% Cost of goods sold........................................ 51.9 51.9 50.6 51.5 ---- ---- ---- ---- Gross profit.............................................. 48.1 48.1 49.4 48.5 General and administrative expenses....................... 9.7 10.2 9.8 10.3 Sales and marketing expenses.............................. 35.9 34.3 37.0 34.0 ---- ---- ---- ---- Store opening costs....................................... -- 0.3 0.1 0.4 Executive payout and other costs.......................... 4.9 -- 2.5 -- ---- ---- ---- ---- Operating income (loss)................................... (2.4) 3.4 -- 3.8 Interest expense, net..................................... 0.6 1.1 0.7 1.1 ---- ---- ---- ---- Income from continuing operations before income taxes.................................... (3.0) 2.3 (0.7) 2.7 Provision (benefit) for income taxes ..................... (1.2) 0.9 (0.2) 1.0 ---- ---- ---- ---- Income from continuing operations......................... (1.8) 1.4 (0.5) 1.7 ---- ---- ---- ---- Loss from discontinued operations, net.................... -- -- -- (0.1) ---- ---- ---- ---- Net income (loss)......................................... (1.8)% 1.4% (0.5)% 1.6% ==== ==== ==== ====
NET SALES - In the second quarter of 1999, the Company reversed a negative comparable store sales trend which occurred in the first quarter of 1999. Net sales increased over 5 percent to $44.2 million in the second quarter of 1999 compared to $41.9 million in 1998. Comparable store sales increased 2 percent for the second quarter of 1999. The increased sales were driven by strong sales in sportcoats, slacks and sportswear. Catalog sales for the second quarter of 1999 decreased 4 percent compared to the same period last year on a planned circulation decrease of 3 percent. Internet activity, which is included in catalog sales, continues to increase as the Company has upgraded its E-Commerce site and has created links with several major portals. For the six months ended July 31, 1999, net sales increased 3 percent and comparable store sales decreased 4 percent. For the six months ended July 31, 1999, catalog sales increased 3 percent on a circulation increase of 4 percent. COST OF GOODS SOLD - Gross profit percentage remained strong and was comparable to the prior year in the second quarter and has increased .9 percent of sales for the first six months of 1999. The gross profit improvement was primarily the result of higher maintained margins in nearly all product categories (except suits) and strong inventory management. Gross profit percent increased in the stores and decreased slightly in the catalog business. The gross profit increase of 1.8 percent of sales that was generated in the first quarter of 1999 did not continue into the second quarter of 1999. The Company was more promotional in the second quarter as it was clearing excess inventories that remained after the weak March (first quarter) promotion. As a result of this clearance activity, the Company's comparable store inventory levels are lower than last year. The Company expects gross profit percentage to be strong in the second half of 1999. 11 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99 GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses decreased as a percent of sales in the second quarter and six months ended July 31, 1999 compared to the same period in 1998. The decrease relates primarily to reductions in travel expense, insurance and incentive compensation. During the periods, the Company had increases in payroll to support new stores and in the new Corporate Sales Division. SALES AND MARKETING EXPENSES - Sales and marketing expense increased in the second quarter and six months ended July 31, 1999 compared to last year due primarily to an increase in marketing expense and additional store occupancy and payroll costs in new stores. The higher marketing expense was primarily attributable to increased radio and newspaper advertising as the Company determined that it was necessary to build momentum of traffic in the stores after the weak March promotion. The higher store occupancy and payroll costs relate to additional stores opened since the second quarter of 1998. These costs were not adequately leveraged as the new stores have not fully matured. STORE OPENING COSTS - Store opening costs decreased in the second quarter and six months ended July 31, 1999 as the Company opened three stores during the first six months of 1999 compared to nine in the same period in 1998. ONE-TIME CHARGE - During the second quarter of 1999, the Company's Chairman and CEO retired and the Company recorded a one-time charge of approximately $2.2 million associated with that event. The one-time charge includes a payout to the former Chairman/CEO of approximately $1.8 million and professional fees -- primarily recruiting and related expenses -- that were incurred in the second quarter of 1999. Additional expenses may be incurred beyond the second quarter of 1999 related to recruiting, hiring and potential relocation of a new CEO. INTEREST EXPENSE - Interest expense was lower during the second quarter and six months ended July 31, 1999 compared to the same period in 1998. This improvement was due primarily to a reduction of approximately $5 million in total debt outstanding during 1999 compared to the same period in 1998. INCOME TAXES - At July 31, 1999, the Company had approximately $6 million of tax net operating loss carryforwards (NOLs) which expire through 2010. SFAS No. 109 requires that the tax benefit of such NOLs be recorded as an asset to the extent that management assesses the utilization of such NOLs to be "more likely than not". Realization of the future tax benefits is dependent on the Company's ability to generate taxable income within the carryforward period. Future levels of operating income are dependent upon general economic conditions, including interest rates and general levels of economic activity, competitive pressures on sales and margins and other factors beyond the Company's control. Therefore no assurance can be given that sufficient taxable income will be generated for full utilization of the NOLs. LIQUIDITY AND CAPITAL RESOURCES - At July 31, 1999 the Company had outstanding borrowings of $10.0 million with $24.6 million of availability under its Credit Agreement compared to borrowings of $17.9 million and availability of $23.7 million at the same time last year. The increase in availability was generated principally by cash provided by operating activities during the preceding twelve months. 12 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99 The following table summarizes the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows: Six Months Ended July 31, August 2, Cash provided by (used in): 1999 1998 ---- ---- Operating activities $ (1,220) $ (1,874) Investing activities (3,564) (3,428) Financing activities 4,872 5,941 Discontinued operations 2 (429) ----- ----- Net increase in cash and cash equivalents $ 90 $ 210 ===== ===== Cash used by operating activities was due primarily to higher inventory levels to support new stores. Cash used in investing activities relates primarily to build-out costs for new stores, renovation and relocation of existing stores and initial payments on the Company's new $2.1 million Point-of-Sale (POS) system which is to be installed in 1999. Cash provided by financing activities represents primarily borrowings on the revolving portion of the Credit Agreement. The net cash provided by discontinued operations was due primarily to a reduction in the trade receivable partially offset by payments for severance and vacation. The Company expects to spend between $6.5 million and $7.0 million on capital expenditures in 1999, primarily to open 5 new stores in 1999, to relocate or renovate 10 existing stores and install a new $2.1 million POS system. The Company expects that the new POS system will significantly enhance customer service and will ultimately improve the Company's ability to target direct mailing advertising to its customers. The capital expenditures are being financed through operations, the Credit Agreement and fixture leasing arrangements. The Company believes that its current liquidity and its Credit Agreement will be adequate to support its current working capital and investment needs. The Company expects to continue to devote significant efforts for the balance of this year to ensure that its business-critical systems are "Year 2000 compliant". The Year 2000 ("Y2K") issue is the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems will be unable to accurately interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. In 1998 the Company performed an assessment of its systems in order to identify Y2K issues and identified its business-critical area of exposure to be: (a) merchandising and financial, (b) point-of-sale, (c) cash management, (d) catalog, (e) warehouse management, and (f) third party relationships. Most of the Company's applications operate on two IBM AS/400 hardware configurations and are "off-the-shelf" packages with modifications and interfaces made by the Company. The Company also relies on personal computers to prepare detailed analysis. The Company believes that by installing the vendor-developed upgrades to the latest versions of its existing systems and re-working its modifications and interfaces, most of the Y2K issues should be corrected. The vendors for the merchandising, general ledger and catalog applications have certified that the updated versions of their systems are Y2K compliant. 13 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99 The Company completed the installation of the latest versions of its systems in June 1999. 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). In May 1999, the Company installed the latest version of its Catalog system and the system is operating well. The payroll and human resources system has also been upgraded to a Y2K compliant version. While the current POS system is Y2K compliant, the Company is installing a new POS system which is expected to be installed by the end of September 1999. The Company expects to finalize the related Y2K testing for all applications throughout the remainder 1999. The Company has identified certain third parties who supply product to the Company. These parties do not expect to have any significant disruptions to deliveries as a result of Y2K issues. However, to minimize the risk of delivery shortages, the Company has scheduled early deliveries to receive between $3 million to $4 million of additional inventory for the Spring 2000 season prior to yearend. The Company has also reviewed its less critical and non-Information Technology areas such as 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 between 1998 and 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. The full year 1999 expense is estimated to be approximately $.3 million which is about the same as in 1998. 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 is developing a formal contingency plan should any of its critical systems not operate in the Year 2000 and expects to complete this aspect of the Y2K project in the second half of 1999. The Company's plans and beliefs concerning future operations contained herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forecast due to a variety of factors that can adversely affect the Company's operating results, liquidity and financial condition such as risks associated with economic, weather and other factors affecting consumer spending, the mix of goods sold, pricing, availability of lease sites for new stores and other competitive factors. PART II. OTHER INFORMATION Item 6. Exhibit - ---------------- (a) Exhibit 27 - Financial Data Schedule 14 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 7/31/99 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: September 13, 1999 Jos. A. Bank Clothiers, Inc. (Registrant) /s/ David E. Ullman ------------------------------- David E. Ullman Executive Vice President, Chief Financial Officer EX-27 2 FDS
5 1000 3-MOS 3-MOS JAN-29-2000 JAN-29-2000 MAY-01-1999 JUL-31-1999 815 838 0 0 4084 2611 0 0 48385 47131 60598 58540 53500 54822 28104 28627 88420 87127 30950 28420 0 0 0 0 0 0 70 70 42736 41956 88420 87127 43607 44203 43607 44203 21499 22927 21006 22343 0 0 0 0 328 247 774 (1314) 302 (512) 0 0 0 0 0 0 0 0 472 (802) $0.07 ($0.12) $0.07 ($0.12)
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