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
<PAGE>
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-
<PAGE>
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)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- ------------------------
Nov. 2, Oct. 28, Nov. 2, Oct. 28,
1996 1995 1996 1995
------- -------- -------- --------
<S> <C>
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
======= ======= ========= ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY
Condensed consolidated balance sheets
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
November 2, February 3,
1996 1996
----------- -----------
<S> <C>
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
====== ======
</TABLE>
See accompanying notes.
-4-
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed consolidated statements of cash flows
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------
November 2, October 28,
1996 1995
----------- -----------
<S> <C>
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
=== ==
</TABLE>
See accompanying notes.
-5-
<PAGE>
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-
<PAGE>
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:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Nov. 2, Oct. 28,
1996 1995
--------- --------
(in thousands)
<S> <C>
(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
===== =====
</TABLE>
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-
<PAGE>
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 -
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 11/2/96
<TABLE>
<CAPTION>
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
-------- ------ ------- ------
<S> <C>
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)%
=== ====== ===== ======
</TABLE>
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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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-
<PAGE>
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-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 263
<SECURITIES> 0
<RECEIVABLES> 5,770
<ALLOWANCES> 0
<INVENTORY> 43,757
<CURRENT-ASSETS> 56,804
<PP&E> 47,835
<DEPRECIATION> 25,340
<TOTAL-ASSETS> 85,702
<CURRENT-LIABILITIES> 25,065
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 35,153
<TOTAL-LIABILITY-AND-EQUITY> 85,702
<SALES> 36,817
<TOTAL-REVENUES> 36,817
<CGS> 19,542
<TOTAL-COSTS> 16,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 662
<INCOME-PRETAX> 178
<INCOME-TAX> 69
<INCOME-CONTINUING> 109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
