United States Securities and Exchange Commission
Washington, DC 20549
FORM 10 - Q
x Quarterly report pursuant to Section 13 or 14(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 3, 1996
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number 33-76282
Jos. A. Bank Clothiers, Inc.
Delaware 5611 36-3189198
(State of other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Number)
organization) 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 12, 1996
Common stock. $.01 par value 6,790,152
<PAGE>
Jos. A. Bank Clothiers, Inc.
Index
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements 3
of Income (Loss)--Three and six months ended
August 3, 1996 and July 29, 1995
Condensed Consolidated Balance 4
Sheets--as of August 3, 1996 and July 29, 1995
Condensed Consolidated Statements 5
of Cash Flows--Six months ended
August 3, 1996 and July 29, 1995
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 11
Signature 12
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed consolidated statements of income (loss)
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C>
Net sales (Note 1) $ 33,770 $ 41,271 $ 71,116 $ 85,694
Costs and expenses:
Cost of goods sold 19,392 24,378 39,057 52,351
General and administrative 4,182 4,293 8,218 9,617
Sales and marketing 11,074 15,022 23,631 32,316
34,648 43,693 70,906 94,284
Operating income (loss) (878) (2,422) 210 (8,590)
Interest expense, net 37 840 752 1,562
Income (loss) before provision
(benefit) for income taxes (915) (3,262) (542) (10,152)
Provision (benefit) for income taxes (356) (1,272) (211) (3,959)
Net income (loss) ($559) ($1,990) ($331) ($6,193)
Per share information:
Net income (loss) per share ($0.08) ($0.29) ($0.05) ($0.91)
Weighted average number of
shares outstanding 6,790 6,790 6,790 6,790
</TABLE>
See accompanying notes
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<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY
Condensed consolidated balance sheets
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
August 3, February 3,
1996 1996
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 486 $ 644
Accounts receivable 3,901 3,866
Inventories:
Raw materials 3,935 5,292
Work-in-process 2,399 2,331
Finished goods 31,236 35,650
Total inventories 37,570 43,273
Prepaid expenses and other
current assets 4,647 4,333
Deferred and refundable income taxes 2,600 5,200
Total current assets 49,204 57,316
Property, plant and equipment,
at cost 47,765 48,871
Accumulated depreciation and
amortization (24,728) (23,200)
Net property, plant and equipment 23,037 25,671
Deferred income taxes 4,989 5,967
Other assets 1,585 1,717
Total Assets $ 78,815 $ 90,671
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,564 $ 8,929
Accrued expenses 9,061 10,896
Current portion of long-term debt 1,816 1,769
Total current liabilities 18,441 21,594
Long-term liabilities 25,260 33,632
Total liabilities 43,701 55,226
Shareholders' equity:
Common stock 70 70
Additional paid-in capital 56,333 56,333
Accumulated deficit (19,369) (19,038)
37,034 37,365
Less treasury stock (1,920) (1,920)
Total shareholders' equity 35,114 35,445
Total liabilities and shareholders' equity $ 78,815 $ 90,671
</TABLE>
See accompanying notes.
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<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY
Condensed consolidated statements of cash flows
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
August 3, July 29,
1996 1995
<S> <C>
Cash flows from operating activities:
Net loss $ (331) $ (6,193)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
(Increase) decrease in deferred taxes 3,578 (3,979)
Depreciation and amortization 1,967 2,321
Net increase in operating
working capital 2,617 1,677
Net cash provided by (used in) operating activities 7,831 (6,174)
Cash flows from investing activities:
Additions to property, plant and equipment, net (193) (1,018)
Proceeds from disposal of assets 841 --
Net cash flows provided by (used in) 648 (1,018)
investing activities
Cash flows from financing activities:
Borrowings (repayments) under long-term revolving loan
agreement, net (7,803) 7,250
Changes in long-term debt (687) (522)
Payments related to debt financing (147) (225)
Net cash provided by (used in) financing activities (8,637) 6,503
Net decrease in cash and cash equivalents (158) (689)
Cash and cash equivalents - beginning of period 644 737
Cash and cash equivalents - end of period $ 486 $ 48
</TABLE>
See accompanying notes.
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<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/3/96
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 $9.5 million and $17.7 million in the second
quarter and first six months of 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 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.
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<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/3/96
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
<TABLE>
<CAPTION>
Six Months Ended
August 3, July 29,
1996 1995
(in thousands)
<S> <C>
(Increase) decrease in accounts receivable $ (35) $ 1,453
(Increase) decrease in inventories 5,703 (2,816)
(Increase) decrease in prepaids and other assets (172) 2,936
Increase (decrease) in accounts payable (1,365) 927
(Decrease) in accrued expenses and other liabilities (1,514) (823)
Net increase in operating working capital $ 2,617 $ 1,677
</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 period. 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, 8/3/96
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 six months ended August 3, 1996, the Company
continued to focus on its core men's business after discontinuing the women's
business in 1995. Operating income for the six months ended August 3, 1996
improved $8.8 million to an operating income of $.2 million from an operating
loss of $8.6 for the first six months of 1995. The operating loss of $.9
million in the second quarter reflects an improvement of $1.5 million compared
to 1995.
This improvement was due primarily to higher maintained margins, higher men's
comparable store sales and lower operating expenses. The second quarter
operating income was negatively impacted by 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.
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.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Quarter Ended Six Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 57.4 59.1 54.9 61.1
Gross profit 42.6 40.9 45.1 38.9
General and administrative expenses 12.4 10.4 11.6 11.2
Sales and marketing expenses 32.8 36.4 33.2 37.7
Operating income (loss) (2.6) (5.9) 0.3 (10.0)
Interest expense, net 0.1 2.0 1.1 1.8
Income (loss) before income taxes (2.7) (7.9) (0.8) (11.8)
Provision (benefit) for income taxes
and related items (1.0) (3.1) (0.3) (4.6)
Net income (loss) (1.7)% (4.8)% (0.5)% (7.2)%
</TABLE>
- 8 -
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 8/3/96
Net Sales - Men's sales increased for the third straight quarter. Men's
comparable store sales increased over the prior year by 5.1% and 6.9% during the
quarter and six months ended August 3, 1996, respectively. Total men's sales,
excluding catalog sales, increased $2.4 million, or 8.4% during the quarter and
$5.6 million, or 9.6% during the six months ended August 3, 1996 compared to the
prior year. Total sales decreased 18.1% to $33.8 million in the quarter from
$41.3 million in 1995 and 17.0% to $71.1 million during the six months from
$85.7 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
$9.5 million and $17.7 million in the second quarter and first six months of
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 $0.4 million reduction in sales during the quarter and a $2.5
million decrease during the six months ended August 3, 1996. The Company
expects to increase the circulation of catalogs in the second half of 1996
compared to the first half.
Cost of Goods Sold - The operating results of the second quarter of 1996
included a non-recurring cost of approximately $.4 million related to production
of formal wear on a contract basis which has been discontinued. Excluding these
costs, cost of goods sold improved by 2.9 percentage points for the second
quarter of 1996 and by 6.8 percentage points for the six months ended August 3,
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.
General and Administrative Expenses - General and administrative expenses
decreased $.1 million to $4.2 million in the quarter and by $1.4 million to $8.2
million in the six months ended August 3, 1996 compared to 1995. Approximately
$.7 million of the decrease for the first six months was related to severance
accrued 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.
Sales and Marketing Expenses - Sales and marketing expense continued to decrease
in the second quarter both in dollars and as a percent of sales compared to 1995
due primarily to the elimination of the women's product line and its related
costs, the reduction of the number of catalogs mailed to prospects and a
reduction in advertising expense resulting from a shift in strategy putting a
greater emphasis on direct mail.
Interest Expense - Interest expense was $0.8 million lower in both the quarter
and six months ended August 3, 1996 compared to 1995 due primarily to $.6
million interest income related to an income tax refund received from the
Company's pre-1996 parent and reduced borrowing levels in the second quarter.
-9-
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 8/3/96
Income Taxes - The Company has net tax operating loss carryforwards (NOLs) of
approximately $14.7 million which expire through 2011. Realization of the future
tax benefits 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 prior operating earnings and its expectations for the
future, that future operating income of the Company will more likely than not be
sufficient to utilize fully the NOLs prior to their expiration. Accordingly, the
Company has recorded a deferred tax asset of $5.7 million relating to the NOLs.
No assurance can be given that sufficient taxable income will be generated for
full utilization of NOLs.
Liquidity and Capital Resources - Net working capital was $30.4 million at
August 3, 1996 compared to $35.7 million at February 3, 1996, due primarily to
the Company's improved efficiencies in inventory management which has allowed it
to operate with lower inventory levels. The cash generated by the lower
inventory levels was used to pay down the revolving loan, which is a non-current
liability. At August 3, 1996, the Company had outstanding borrowings of $21.1
million under its revolving loan agreement as compared to $28.9 million at
February 3, 1996.
The following table summarizes the Company's sources and uses of funds as
reflected in the condensed consolidated statement of cash flows:
Six Months Ended
August 3, July 29,
1996 1995
Cash provided by (used in):
Operating activities $ 7,831 $(6,174)
Investing activities 648 (1,018)
Financing activities (8,637) 6,503
Net decrease in cash and cash equivalents $ (158) $ (689)
Cash provided by the Company's operating activities was due primarily to an
income tax refund received from its pre-1986 parent and lower inventory levels
in the first six months of 1996. Cash used in investing activities relates
primarily to continued consolidation of the Company's tailoring operations and
improvements in stores, net of proceeds from the sale of one of the Company's
three manufacturing plants. Cash used in financing activities represented
primarily repayments of the revolving loan.
The Company expects to increase its rate of capital expenditures in 1996 as it
continues its program to reposition its existing store base, which includes
opening four new stores in the fourth quarter of 1996 and relocating three
stores.
- 10 -
<PAGE>
In April, 1996 the Company extended its Credit Agreement to April 1999, which
reduced the financial covenants and provides for a seasonal over-advance. At
September 12, 1996, the Company had outstanding borrowings of $22.7 million with
$7.8 million of availability compared to borrowings of $28.9 million and
availability of $5.5 million at February 3, 1996. The Company believes that its
current liquidity and revolving loan facility will be adequate to maintain its
currently anticipated working capital and investment needs.
PART 2. OTHER INFORMATION
Not applicable.
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<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: , 1996 Jos. A. Bank Clothiers, Inc.
(Registrant)
David E. Ullman
Executive Vice President and Chief
Financial Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-03-1996
<CASH> 486
<SECURITIES> 0
<RECEIVABLES> 3,901
<ALLOWANCES> 0
<INVENTORY> 37,570
<CURRENT-ASSETS> 49,204
<PP&E> 47,765
<DEPRECIATION> 24,728
<TOTAL-ASSETS> 78,815
<CURRENT-LIABILITIES> 18,441
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 35,044
<TOTAL-LIABILITY-AND-EQUITY> 78,815
<SALES> 33,770
<TOTAL-REVENUES> 33,770
<CGS> 19,392
<TOTAL-COSTS> 15,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> (915)
<INCOME-TAX> (356)
<INCOME-CONTINUING> (559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (559)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
