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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
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
-------- --------- --------- -------
<S> <C>
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)%
==== ==== ==== ====
</TABLE>
8
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
PART 2. OTHER INFORMATION
Item 6. Exhibit
- ----------------
(a) Exhibit 27 - Financial Data Schedule
12
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-02-1997
<CASH> 258
<SECURITIES> 0
<RECEIVABLES> 3,130
<ALLOWANCES> 0
<INVENTORY> 46,981
<CURRENT-ASSETS> 58,247
<PP&E> 48,827
<DEPRECIATION> 25,592
<TOTAL-ASSETS> 86,025
<CURRENT-LIABILITIES> 20,688
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 36,207
<TOTAL-LIABILITY-AND-EQUITY> 86,025
<SALES> 39,530
<TOTAL-REVENUES> 39,530
<CGS> 21,372
<TOTAL-COSTS> 17,143
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 667
<INCOME-PRETAX> 348
<INCOME-TAX> 152
<INCOME-CONTINUING> 196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
