-----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, Dzn2KWXCwR1p/LPTmSHzlYSzjHtvz77GRXK6k6mnZ6IpA7CmuZ+EBen5kkOXu6zr A+5LgQzOMbAVoB8srWIqJw== 0000950169-96-000547.txt : 19961210 0000950169-96-000547.hdr.sgml : 19961210 ACCESSION NUMBER: 0000950169-96-000547 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961102 FILED AS OF DATE: 19961209 SROS: NASD 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: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23874 FILM NUMBER: 96677826 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-Q 1 JOSEPH A. BANK, CLOTHIERS 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 November 2, 1996 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 December 2,1996 Common stock. $.01 par value 6,790,152 Jos. A. Bank Clothiers, Inc. Index Part I. Financial Information Page No. Item 1. Financial Statements Condensed Consolidated Statements 3 of Income (Loss) - Three and Nine Months ended November 2, 1996 and October 28, 1995 Condensed Consolidated Balance 4 Sheets - as of November 2, 1996 and February 3, 1996 Condensed Consolidated Statements 5 of Cash Flows - Nine months ended November 2, 1996 and October 28, 1995 Notes to Condensed Consolidated 6-7 Financial Statements Item 2. Management's Discussion and Analysis 7-11 of Results of Operations and Financial Condition Part II. Other Information Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 (a) Exhibits - Exhibit 27-Financial Data Schedule (EDGAR filing only) Signatures 13 -2- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES Condensed consolidated statements of operations (In thousands except per share data) (Unaudited)
Three Months Ended Nine Months Ended -------------------------- ------------------------ Nov. 2, Oct. 28, Nov. 2, Oct. 28, 1996 1995 1996 1995 ------- -------- -------- -------- Net sales (Note 1) $36,817 $37,838 $107,933 $123,532 Costs and expenses: Cost of goods sold 19,542 21,798 58,599 74,149 General and administrative 3,588 3,395 11,806 13,012 Sales and marketing 12,847 15,009 36,478 47,325 ------- ------- -------- -------- 35,977 40,202 106,883 134,486 ------- ------- -------- -------- Operating income (loss) 840 (2,364) 1,050 (10,954) Interest expense, net 662 986 1,414 2,548 ------- ------- -------- -------- Income (loss) before provision (benefit) for income taxes 178 (3,350) (364) (13,502) Provision (benefit) for income taxes 69 (1,307) (142) (5,266) ------- ------- -------- -------- Net income (loss) $ 109 $(2,043) $ (222) $ (8,236) ======= ======= ========= ======== Per share information: Net income (loss) per share $ 0.02 $ (0.30) $ (0.03) $ (1.21) ======= ======= ========= ======== Weighted average number of shares outstanding 6,828 6,790 6,790 6,790 ======= ======= ========= ========
See accompanying notes. -3- JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY Condensed consolidated balance sheets (In thousands) (Unaudited)
November 2, February 3, 1996 1996 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 263 $ 644 Accounts receivable 5,770 3,866 Inventories: Raw materials 3,948 5,292 Work-in-process 3,616 2,331 Finished goods 36,193 35,650 ------ ------ Total inventories 43,757 43,273 ------ ------ Prepaid expenses and other current assets 4,414 4,333 Deferred and refundable income taxes 2,600 5,200 ----- ----- Total current assets 56,804 57,316 ------ ------ Property, plant and equipment, at cost 47,835 48,871 Accumulated depreciation and amortization (25,340) (23,200) -------- ------- Net property, plant and equipment 22,495 25,671 ------ ------- Deferred income taxes 4,948 5,967 Other assets 1,455 1,717 ----- ----- Total Assets $ 85,702 $ 90,671 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 13,141 $ 8,929 Accrued expenses 10,174 10,896 Current portion of long-term debt 1,750 1,769 ----- ----- Total current liabilities 25,065 21,594 Long-term liabilities 25,414 33,632 ------ ------ Total liabilities 50,479 55,226 ------ ------ Shareholders' equity: Common stock 70 70 Additional paid-in capital 56,333 56,333 Accumulated deficit (19,260) (19,038) ------- -------- 37,143 37,365 Less treasury stock (1,920) (1,920) ------- ------- Total shareholders' equity 35,223 35,445 ------ ------ Total liabilities and shareholders' equity $ 85,702 $ 90,671 ====== ======
See accompanying notes. -4- JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES Condensed consolidated statements of cash flows (In thousands) (Unaudited)
Nine Months Ended -------------------------------------- November 2, October 28, 1996 1995 ----------- ----------- Cash flows from operating activities: Net loss $ (222) $ (8,236) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: (Increase) decrease in deferred taxes 3,619 (4,954) Depreciation and amortization 2,929 3,501 Net increase in operating working capital 1,537 (1,293) ----- ------- Net cash provided by (used in) operating activities 7,863 (8,396) ----- ------- Cash flows from investing activities: Additions to property, plant and equipment (599) (1,773) Proceeds from disposal of assets 873 -- ------ -------- Net cash provided by (used in) investing activities 274 (1,773) ------ ------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 21,527 44,600 Repayment under long-term Credit Agreement (28,629) (34,090) Changes in other long-term debt, net (1,269) (802) Payments related to debt financing (147) (225) ------- -------- Net cash provided by (used in) financing activities (8,518) 9,483 ------ ----- Net decrease in cash and cash equivalents (381) (686) Cash and cash equivalents - beginning of period 644 737 --- --- Cash and cash equivalents - end of period $ 263 $ 51 === ==
See accompanying notes. -5- Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 11/2/96 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION Jos. A. Bank Clothiers, Inc. (the Company) is a manufacturer and nationwide retailer of classic men's clothing through conventional retail stores and catalog direct marketing. In 1995, the Company discontinued its women's product line to concentrate solely on its men's business. Sales from the women's product line were $7.0 million and $24.7 million in the third quarter and first nine months of fiscal 1995, respectively. 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 reclassifications have been made to the October 28, 1995 statements of cash flows in order to conform with the November 2, 1996 presentation. 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 February 3, 1996 Annual Report on Form 10-K. 2. SIGNIFICANT ACCOUNTING POLICIES Inventories are stated at the lower of first-in, first-out, cost or market. The company capitalizes into inventories certain warehousing and delivery costs associated with getting its manufactured and purchased inventory to the point of sale. Costs related to mail order catalogs and promotional materials are included in prepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, not to exceed six months. The company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS 109). This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates attributable to deductible temporary differences between financial statement and income tax basis of assets and liabilities and to tax net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. -6- Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 11/2/96 3. WORKING CAPITAL The net change in operating working capital is composed of the following:
Nine Months Ended ----------------- Nov. 2, Oct. 28, 1996 1995 --------- -------- (in thousands) (Increase) in accounts receivable $(1,904) $(1,857) (Increase) in inventories (484) (187) Decrease in prepaids and other assets 103 2,843 Increase in accounts payable 4,212 372 Increase (decrease) in accrued expenses and other liabilities (390) 122 ----- --- Net increase in operating working capital $ 1,537 $ 1,293 ===== =====
4. FINANCING In April 1996, the Company extended its credit agreement (the "Credit Agreement") to April 1999 which changed the maximum borrowing under the revolver facility to $38,000,000 and provides a term loan facility of $2,000,000 payable in monthly installments over a five year amortization period, with the unpaid balance due in April 1999. The Credit Agreement also includes financial covenants concerning net worth and working capital, among others, and limitations on capital expenditures and additional indebtedness and a restriction on the payment of dividends. Interest rates under the amended agreement range from prime plus 1.5% to prime plus 2.0% or LIBOR plus 3.5%. The amended agreement also includes an early termination fee and provisions for a seasonal over-advance. Substantially all assets of the Company are collateralized under the Credit Agreement. -7- Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 11/2/96 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 February 3, 1996. Overview - During the quarter and nine months ended November 2, 1996, the Company continued to focus on its core men's business after discontinuing the women's business in 1995. Operating income for the nine months ended November 2, 1996 improved $12.1 million to an operating income of $1.1 million from an operating loss of $11.0 for the first nine months of 1995. The operating income of $.8 million in the third quarter reflects an improvement of $3.2 million compared to 1995. The turnaround in operating results for the nine months ended November 2, 1996 was due primarily to a) higher maintained margins which were driven by strong suit sales, b) the elimination of the unprofitable, lower margin women's business, c) comparable store men's sales increases of 11.2 percent and 19.3 percent for the nine months and quarter, respectively, d) lower operating expenses and e) the closure of several unprofitable stores. The Company has also restructured several leases to support its men's-only business, adjusted its manufacturing capacity, moved several stores and lowered its store selling expenses. The increased men's comparable store sales was generated on men's inventory levels that were approximately $7.5 million lower than the prior year as the Company improved its inventory turns. The Company has not completely replaced the volume generated by the women's division which generated sales of $7.0 million and $24.7 million in the third quarter and first nine months of fiscal 1995, respectively. To increase sales and improve the leverage of its assets, the Company is opening new stores including six stores that were opened in fall 1996. The Company also plans to open additional stores in 1997. The Company's availability under its Credit Agreement has increased to $19.7 million at December 2, 1996 compared to $5.0 million at the same time in 1995. Results of Operations - The following table is derived from the Company's condensed consolidated statements of income (loss) and sets forth, for the periods indicated, the items included in the condensed consolidated statements of income (loss), expressed as a percentage of net sales. - 8 - Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 11/2/96
Percentage of Net Sales Percentage of Net Sales Quarter Ended Nine Months Ended ------------------------- ------------------------- Nov. 2, Oct. 28, Nov. 2, Oct. 28, 1996 1995 1996 1995 -------- ------ ------- ------ Net Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 53.1 57.6 54.3 60.0 ---- ---- ---- ---- Gross profit 46.9 42.4 45.7 40.0 General and administrative expenses 9.7 9.0 10.9 10.5 Sales and marketing expenses 34.9 39.7 33.8 38.3 ---- ---- ---- ---- Operating income (loss) 2.3 (6.3) 1.0 (8.8) Interest expense, net 1.8 2.6 1.3 2.1 --- --- --- --- Income (loss) before income taxes .5 (8.9) (.3) (10.9) Provision (benefit) for income taxes and related items .2 (3.5) .1 (4.3) -- ----- -- ----- Net income (loss) .3% (5.4)% (.2)% (6.7)% === ====== ===== ======
Net Sales - Men's comparable store sales improved for the fourth straight quarter, with increases over the prior year of 19.3% and 11.2% during the quarter and nine months ended November 2, 1996, respectively. Total men's sales increased $6.0 million, or 19.5% during the quarter and $9.1 million, or 9.2% during the nine months ended November 2, 1996 compared to the prior year. The increased sales were driven primarily by strong suit sales. Total sales for the quarter ended November 2, 1996 decreased 2.7% to $36.8 million from $37.8 million in 1995 and decreased 12.6% to $107.9 million during the nine months from $123.5 million in 1995. These decreases were due to the Company's repositioning its merchandising to eliminate the women's product line which generated sales of $7.0 million and $24.7 million in the third quarter and first nine months of fiscal 1995, respectively. The Company reduced the number of catalogs mailed to prospects in the first six months of 1996 compared to the prior year to maximize catalog earnings, which resulted in a $2.5 million decrease in sales during the six months ended August 3, 1996. The Company increased the circulation of catalogs in the third quarter of 1996 compared to the prior year which resulted in a $1.1 million increase in men's catalog sales during such period. - 9 - Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 11/2/96 Cost of Goods Sold - Gross profit improved by 4.5 percentage points for the third quarter of 1996 and by 5.7 percentage points for the nine months ended November 2, 1996 compared to the same periods in the prior year. This improvement was due to the elimination of the women's product line and the improvement of margins in the continuing men's business, particularly in the higher margin suit and tie categories. Gross profit also improved as the Company consolidated its in-store tailoring operations into several Company-owned overflow shops. The nine months of 1996 operating income includes a non-recurring cost of approximately $.4 million relating to cost overruns associated with the manufacturing of formal wear on a contract basis, which the Company has discontinued. General and Administrative Expenses - General and administrative expenses increased $.2 million to $3.6 million in the quarter and decreased $1.2 million to $11.8 million in the nine months ended November 2, 1996 compared to 1995. Approximately $.7 million of the decrease for the first nine months was related to severance in the first quarter of 1995 for terminated employees. The remainder of the improvement was due primarily to lower professional fees and payroll and related expenses which reflects the Company's continued focus on controlling overhead costs. These reductions were partially offset by higher employee relocation expenses, particularly in the third quarter of 1996. Sales and Marketing Expenses - Sales and marketing expense continued to decrease in the third quarter both in dollars and as a percent of sales compared to 1995 due primarily to a) more efficient retail store advertising expenditures resulting from a shift in strategy putting a greater emphasis on direct mail, b) the elimination of the women's product line and its related costs, and c) the reduction of the number of catalogs mailed to prospects in the first half of 1996. The third quarter of 1996 operating income includes $.3 million of income from a lease settlement. Interest Expense - Interest expense was $.3 million lower in the third quarter ended November 2, 1996 compared to the same period in 1995 due primarily to lower inventories. Interest expense decreased $1.1 million for the nine months ended November 2, 1996 as a result of $.6 million interest income related to an income tax refund received from the Company's pre-1986 parent and lower inventories. Income Taxes - The Company has net tax operating loss carryforwards (NOLs) of approximately $20 million which expire through 2011. The NOLs were generated during periods in which the Company operated its women's business along with the men's business. 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 and its repositioning strategy that was discussed earlier, that future earnings of the Company will more likely than not be sufficient to utilize at least $16 million of the NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $5.7 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 1992 through 1994, as adjusted for unusual charges. Management believes that although the prior earnings and current year repositioning results might justify a higher amount, the $5.7 million represents a reasonable estimate of the future utilization of the NOLs and 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. - 10 - Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 11/2/96 Liquidity and Capital Resources - At December 2, 1996, the Company had outstanding borrowings of $15.1 million with $19.7 million of availability under its Credit Agreement compared to borrowings of $28.9 million and availability of $5.5 million at February 3, 1996. The Company's availability at December 2, 1996 has increased by $14.7 million compared to the same time in 1995. The cash was generated principally by a) the lower inventory levels, b) better terms with vendors, c) the tax refund from its pre-1986 parent and d) reduced letter of credit requirements from several landlords. In April, 1996 the Company extended its Credit Agreement to April 1999, which reduced the financial covenants and provides for a seasonal over-advance. The following table summarizes the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows: Nine Months Ended ------------------------- Nov. 2, Oct. 28, 1996 1995 -------- -------- Cash provided by (used in): Operating activities $ 7,863 $(8,396) Investing activities 274 (1,773) Financing activities (8,518) 9,483 ------- ----- Net (decrease) in cash and cash equivalents $ (381) $ (686) ====== ====== Cash provided by the Company's operating activities was due primarily to the income tax refund received from its pre-1986 parent and lower inventory levels in the first nine months of 1996. Cash used in investing activities relates primarily to leasehold improvements in stores and continued consolidation of the Company's tailoring operations, net of proceeds from the sale of one of the Company's three manufacturing plants. Cash used in financing activities represents primarily repayments of the revolving loan under the Credit Agreement. The Company spent $.6 million on capital expenditures through November 2, 1996 as it continues its program to reposition its existing store base, which includes opening four new stores in fall 1996 and relocating three stores. The Company also opened two new franchise stores in 1996. The Company expects to spend up to $2.1 million in the fourth quarter of 1996 as it completes the opening of its four new stores. The Company also closed two unprofitable full-line stores in 1996, as well as five catalog stores. These stores accounted for less than 1.6% of sales in 1995. The Company believes that its current liquidity and Credit Agreement will be adequate to maintain its currently anticipated working capital and investment needs. - 11 - Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 11/2/96 PART 2. OTHER INFORMATION Item 1. Legal Proceedings The Company has been named in an unfair labor practice charge filed by the Regional Joint Board, Union of Needletrades, Industrial and Textile Employees (Baltimore Regional Office, National Labor Relations Board Case No. 5-CA-26484). An arbitration to consider this matter is scheduled for February 17, 1997. The Company denies the charge and intends to vigorously defend its position. Item 6. Exhibit (a) Exhibit 27 - Financial Data Schedule -12- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 6, 1995 Jos. A. Bank Clothiers, Inc. (Registrant) _________________________________________ David E. Ullman Executive Vice President, Chief Financial Officer _________________________________________ Richard E. Pitts Assistant Vice President -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS FEB-01-1997 NOV-02-1996 263 0 5,770 0 43,757 56,804 47,835 25,340 85,702 25,065 0 0 0 70 35,153 85,702 36,817 36,817 19,542 16,435 0 0 662 178 69 109 0 0 0 109 0.02 0.02
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