-----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, SHXc3A9cz1xsVE1NOJU7TFR++QY03PGohoTe8/SYHbmGDCGM+9k+SMxFxdQNcFcZ 2+yr9uWnYuRK9gNt8JPeqA== 0000950169-97-000834.txt : 19970918 0000950169-97-000834.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950169-97-000834 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970915 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: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23874 FILM NUMBER: 97680369 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-Q 1 JOS. A. BANK CLOTHIERS, INC. 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 August 2, 1997 ------------------ 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 8, 1997 - ---------------------------- ----------------------------------- Common stock. $.01 par value 6,791,152 Jos. A. Bank Clothiers, Inc. Index ----- Part I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Condensed Consolidated Statements 3 of Income - Three and Six Months ended August 2, 1997 and August 3, 1996 Condensed Consolidated Balance 4 Sheets - as of August 2, 1997 and February 1, 1997 Condensed Consolidated Statements 5 of Cash Flows -Six Months ended August 2, 1997 and August 3, 1996 Notes to Condensed Consolidated 6-7 Financial Statements Item 2. Management's Discussion and Analysis 8-11 of Results of Operations and Financial Condition Part II. Other Information ----------------- 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 INCOME (In thousands except per share data) (Unaudited) Three Months Ended Six Months Ended -------------------- -------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- --------- Net sales $ 39,530 $ 33,770 $ 78,185 $ 71,116 Costs and expenses: Cost of goods sold 21,372 19,392 41,165 39,057 General and administrative 4,491 4,182 8,704 8,218 Sales and marketing 12,652 11,074 26,079 23,631 -------- -------- -------- -------- 38,515 34,648 75,948 70,906 -------- -------- -------- -------- Operating income (loss) 1,015 (878) 2,237 210 Interest expense, net 667 37 1,257 752 -------- -------- -------- -------- Income (loss) before provision for income taxes 348 (915) 980 (542) Provision for income taxes 152 (356) 402 (211) -------- -------- -------- -------- Net income (loss) $ 196 $ (559) $ 578 $ (331) ======== ======== ======== ======== Per share information: Net income per share $ 0.03 $ (0.08) $ 0.08 $ (0.05) ======== ======== ======== ======== Weighted average number of shares outstanding 6,825 6,790 6,825 6,790 ======== ======== ======== ======== See accompanying notes. 3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) August 2, February 1, 1997 1997 --------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 258 $ 719 Accounts receivable 3,130 3,300 Inventories: Raw materials 5,203 4,062 Work-in-process 6,972 4,717 Finished goods 34,806 32,104 -------- -------- Total inventories 46,981 40,883 -------- -------- Prepaid expenses and other current assets 4,678 4,874 Deferred and refundable income taxes 3,200 3,200 -------- -------- Total current assets 58,247 52,976 -------- -------- Property, plant and equipment, at cost 48,827 48,078 Accumulated depreciation and amortization (25,952) (25,238) -------- -------- Net property, plant and equipment 22,875 22,840 -------- -------- Deferred income taxes 3,711 4,083 Other assets 1,192 1,511 -------- -------- TOTAL ASSETS $ 86,025 $ 81,410 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 9,621 $ 12,357 Accrued expenses 9,551 10,484 Current portion of long-term debt 1,516 1,504 -------- -------- Total current liabilities 20,688 24,345 Long-term liabilities 29,060 21,366 -------- -------- Total liabilities 49,748 45,711 -------- -------- Shareholders' equity: Common stock 70 70 Additional paid-in capital 56,336 56,336 Accumulated deficit (18,209) (18,787) -------- -------- 38,197 37,619 Less treasury stock (1,920) (1,920) -------- -------- TOTAL SHAREHOLDERS' EQUITY 36,277 35,699 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 86,025 $ 81,410 ======== ======== See accompanying notes. 4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended --------------------- August 2, August 3, 1997 1996 --------- --------- Cash flows from operating activities: Net income (loss) $ 578 $ (331) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Decrease in deferred taxes 372 3,578 Depreciation and amortization 1,860 1,967 Net (increase) decrease in operating working capital (9,387) 2,260 -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,577) 7,474 -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (1,849) (193) Proceeds from disposal of assets -- 841 -------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,849) 648 -------- -------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 22,660 12,475 Repayment under long-term Credit Agreement (14,842) (20,278) Changes in other long-term debt, net 163 (330) Payments related to debt financing (16) (147) -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,965 (8,280) -------- -------- Net decrease in cash and cash equivalents (461) (158) Cash and cash equivalents - beginning of period 719 737 -------- -------- Cash and cash equivalents - end of period $ 258 $ 579 ======== ======== See accompanying notes. 5 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 8/2/97 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. 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 February 1, 1997 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, 8/2/97 3. WORKING CAPITAL The net change in operating working capital is composed of the following: Six Months Ended ------------------- August 2, August 3, 1997 1996 -------- -------- (in thousands) (Increase) in accounts receivable $ 170 $ (35) (Increase) decrease in inventories (6,098) 5,703 (Increase) decrease in prepaids and other assets 398 (172) Decrease in accounts payable (2,736) (1,365) Decrease in accrued expenses and other liabilities (1,121) (1,871) ------- ------- Net (increase) decrease in operating working capital $(9,387) $ 2,260 ======= ======= 4. FINANCING The Company has obtained a commitment from its primary lender to extend its credit agreement (the "Credit Agreement") to April 2001 and which includes an additional term loan facility of $4,000,000 payable in monthly installments plus interest based on a five-year amortization with any outstanding balance due in April 2001. The Credit Agreement also includes financial covenants concerning net worth and EBITDA coverage, among others, and limitations on capital expenditures and additional indebtedness and restriction on the payment of dividends. Interest rates under the amended agreement range from prime to prime plus 2.0% or LIBOR plus 2.0% to LIBOR plus 3.5% depending on the EBITDA coverage ratio. The amended agreement also includes an early termination fee and provisions for a seasonal over-advance. The Company expects to finalize the amendment in September, 1997. Substantially all assets of the Company are collateralized under the Credit Agreement. 5. NEW ACCOUNTING STANDARDS During early 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share," which becomes effective December 15, 1997, and as to which early adoption is not permitted. Under SFAS No. 128, a company will be required to disclose basic earnings per share (with the principal difference from current disclosure being that common stock equivalents will not be considered in the compilation of basic earnings per share) and diluted earnings per share. The adoption of this pronouncement will require restatement of all prior period earnings per share data presented; however, the Company does not expect this change to be material to the historical earnings per share. 7 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 8/2/97 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 1, 1997. OVERVIEW - The Company' net income for the quarter ended August 2, 1997 increased to $.2 million or $.03 per share compared to a net loss of $.6 million or $.08 per share for the same period last year. For the six months, net income increased to $.6 million compared to a net loss of $.3 million last year. This improvement was due primarily to higher gross profit and higher comparable store sales. The Company's expansion strategy, which includes clustering new stores in existing markets, continues to perform well. Two new stores were opened in existing markets during the second quarter, one each in the New Jersey and New York markets. The Company also opened three new stores during August, 1997 in Burlington, MA, Garden City, NJ and Gwinnett, GA and expects to open up to five additional new stores by year end. (Refer to "Liquidity and Capital Resources" for a discussion of the Company's store expansion strategy.) In September, 1997, the Company obtained a commitment letter from its primary lender which amended its Credit Agreement to extend the term to April, 2001 and obtained a $4 million term loan facility which will be used to finance the opening of new stores. RESULTS OF OPERATIONS - The following table is derived from the Company's condensed consolidated statements of income and sets forth, for the periods indicated, the items included in the condensed consolidated statements of income, expressed as a percentage of net sales.
Percentage of Net Sales Percentage of Net Sales Three Months Ended Six Months Ended -------------------- -------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 -------- --------- --------- ------- Net Sales.................................. 100.0% 100.0% 100.0% 100.0% Cost of goods sold......................... 54.1 57.4 52.7 54.9 ---- ---- ---- ---- Gross profit............................... 45.9 42.6 47.3 45.1 General and administrative expenses........ 11.4 12.4 11.1 11.6 Sales and marketing expenses............... 32.0 32.8 33.4 33.2 ---- ---- ---- ---- Operating income (loss).................... 2.6 (2.6) 2.9 0.3 Interest expense, net...................... 1.7 0.1 1.6 1.1 ---- ---- ---- ---- Income (loss) before income taxes.......... 0.9 (2.7) 1.3 (0.8) Provision for income taxes and related items........................ 0.4 (1.0) 0.5 (0.3) ---- ---- ---- ---- Net income (loss).......................... 0.5% (1.7)% 0.7% (0.5)% ==== ==== ==== ====
8 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q 8/2/97 NET SALES - Total sales increased to $39.5 million in the second quarter of 1997 from $33.8 million in the same period last year. Total sales for the first six months of 1997 increased 9.9 percent to $78.2 million compared to $71.1 million in the sale period last year. Comparable store sales increased 10.8 percent during the second quarter and 4.3 percent for the six months. Catalog sales increased approximately 40 percent during the quarter and six months ended August 2, 1997, primarily from increase circulation and strong response rates. COST OF GOODS SOLD - Gross profit improved by 330 and 220 basis points for the second quarter and first six months of 1997 compared to the same periods in the prior year, with all product categories showing improved results. This improvement was due primarily to strong consumer demand, improved aging of inventory and improved sourcing of products. GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses decreased as a percentage of sales in the second quarter as the Company is beginning to leverage its infrastructure. Such expenses increased $.3 million to $4.5 million in the second quarter and $.5 million in the first six months of 1997 compared to 1996. The increases were primarily related to higher costs resulting from increased sales volume and number of stores and professional fees related to the extension of the contract with the Company's union that represents its manufacturing and distribution employees. These expenses were partially offset by lower employee relocation costs. SALES AND MARKETING EXPENSES - Sales and marketing expenses increased $1.6 million and $2.4 million in the second quarter and six months ended August 2, 1997, respectively, compared to 1996 primarily as a result of higher catalog circulation, a national image advertising campaign and operating expenses from additional stores. The Company expects to continue to increase catalog circulation in 1997. The national image campaign is to be run throughout the year on CNN Headline News and is designed to increase the awareness of the Jos. A. Bank name. INTEREST EXPENSE - Excluding $.6 million of interest income related to an income tax refund received in the second quarter of 1996 from the Company's pre-1996 parent, interest expense was comparable in the second quarter and $.1 million lower in the six months ended August 2, 1997, respectively, compared to the same periods in 1996. In connection with the extension of its Credit Agreement, the Company negotiated a reduction of up to 150 basis points off its interest rate, depending upon the achievement of certain EBITDA targets. 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, 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 $16 million of the NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $6.1 million relating to the NOLs. 9 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q 8/2/97 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 recent earnings and estimated future earnings might justify a higher amount, the $6.1 million represents a reasonable estimate of the future utilization of the NOLs and will continue to evaluate the likelihood of futur 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 - At August 2, 1997 the Company had outstanding borrowings of $25.8 million with $9.9 million of availability under its Credit Agreement compared to borrowings of $21.1 million and availability of $7.3 million at the same time last year. The increase in outstanding borrowings was generated primarily by higher inventory levels and capital expenditures to support new store openings. Availability under the Credit Agreement will increase by $4.0 million when the Company finalizes the amendment to its Credit Agreement in September, 1997. To date, the Company has obtained a commitment letter from its primary bank to amend the Credit Agreement. 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 --------------------- August 2, August 3, Cash provided by (used in): 1997 1996 ------- ------- Operating activities $(6,577) $ 7,474 Investing activities (1,849) 648 Financing activities 7,965 (8,280) ------- ------- Net increase (decrease) in cash and cash equivalents $ (461) $ (158) ======= ======= Cash used by operating activities was due primarily to higher inventory levels to support new stores and to add product categories. Cash used in investing activities relates primarily to the opening of new stores and for display fixtures to improve merchandise presentations in our existing stores. Cash provided by financing activities represents primarily borrowings on the revolving loan under the Credit Agreement. The Company expects to spend between $4.0 and $4.5 million in capital expenditures to open up to ten new stores and to renovate and relocate existing stores in 1997. The store expansion program is being financed through operations and the Company's Credit Agreement. The Company believes that its current liquidity and its recently extended Credit Agreement will be adequate to support its current working capital and investment needs. The Company also expects to open up to 20 additional stores in 1998 and 1999, mostly in existing markets. The Company believes that its existing markets can support these additional stores which will provide leverage for its management, distribution, advertising and sourcing infrastructure. Further expansion beyond 1998 may necessitate revised financing arrangements for the Company. To support this growth, the Company expects to upgrade certain information systems in 1998 and 1999. 10 The Company's plans and beliefs concerning 1997 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, including the availability of additional store sites, the performance of its suppliers, and general economic conditions. 11 PART 2. OTHER INFORMATION Item 6. Exhibit - ---------------- (a) Exhibit 27 - Financial Data Schedule 12 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q 8/2/97 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 15, 1997 Jos. A. Bank Clothiers, Inc. (Registrant) ________________________________ David E. Ullman Executive Vice President, Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-31-1998 AUG-02-1997 258 0 3,130 0 46,981 58,247 48,827 25,592 86,025 20,688 0 0 0 70 36,207 86,025 39,530 39,530 21,372 17,143 0 0 667 348 152 196 0 0 0 196 0.03 0.03
-----END PRIVACY-ENHANCED MESSAGE-----