<PAGE>
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 October 31, 1998
------------------
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 Number)
Classification
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 8, 1998
---------------------------- ----------------------------------
Common stock. $.01 par value 6,792,027
<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 Nine Months
ended October 31, 1998 and
November 1, 1997
Condensed Consolidated Balance 4
Sheets - as of October 31, 1998 and
November 1, 1998
Condensed Consolidated Statements 5
of Cash Flows -Nine Months
ended October 31, 1998 and
November 1, 1997
Notes to Condensed Consolidated 6-8
Financial Statements
Item 2. Management's Discussion and Analysis 9-13
of Results of Operations and
Financial Condition
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 13
(a) Exhibits - Exhibit 27-Financial Data
Schedule (EDGAR filing only)
Signatures 14
- ----------
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)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 44,584 $ 41,536 $129,914 $119,721
Costs and expenses:
Cost of goods sold 22,268 21,509 66,176 62,674
General and administrative 4,618 4,464 13,424 12,982
Sales and marketing 15,552 13,821 44,598 39,900
Store opening costs 180 229 541 229
-------- -------- -------- --------
42,618 40,023 124,739 115,785
-------- -------- -------- --------
Operating income 1,966 1,513 5,175 3,936
Interest expense, net 535 738 1,409 1,995
-------- -------- -------- --------
Income from continuing operations
before provision for income taxes 1,431 775 3,766 1,941
Provision for (benefit from) income taxes (807) 318 103 796
-------- -------- -------- --------
Income from continuing operations 2,238 457 3,663 1,145
Loss from discontinued operations (net of tax) -- (55) (51) (165)
-------- -------- -------- --------
Net income $ 2,238 $ 402 $ 3,612 $ 980
======== ======== ======== ========
Earnings per share:
Income from continuing operations:
Basic $ .33 $ .07 $ .54 $ .17
Diluted $ .32 $ .07 $ .53 $ .17
Discontinued operations (net of tax):
Basic $ .00 $ (.01) $ (.01) $ (.02)
Diluted $ .00 $ (.01) $ (.01) $ (.02)
Net income:
Basic $ .33 $ .06 $ .53 $ .14
Diluted $ .32 $ .06 $ .52 $ .14
Weighted average shares outstanding:
Basic 6,791 6,791 6,791 6,791
Diluted 6,946 6,889 6,958 6,846
</TABLE>
See accompanying notes.
3
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
October 31, January 31,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 889 $ 564
Accounts receivable 4,199 2,737
Inventories:
Raw materials 4,939 6,994
Finished goods 46,923 33,120
-------- --------
Total inventories 51,862 40,114
-------- --------
Prepaid expenses and other current assets 5,762 4,338
Deferred income taxes 4,310 4,030
-------- --------
Total current assets 67,022 51,783
-------- --------
Property, plant and equipment, at cost 50,413 46,925
Accumulated depreciation and amortization (25,991) (24,818)
-------- --------
Net property, plant and equipment 24,422 22,107
-------- --------
Deferred income taxes 1,699 1,680
Other assets 593 791
Net noncurrent assets of discontinued operations 633 783
-------- --------
Total Assets $ 94,369 $ 77,144
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 14,753 $ 13,319
Accrued expenses 13,469 9,774
Current portion of long-term debt 1,456 1,885
Net current liabilities of discontinued operations 373 663
-------- --------
Total current liabilities 30,051 25,641
Long-term liabilities 24,264 15,105
-------- --------
Total liabilities 54,315 40,746
-------- --------
Shareholders' equity:
Common stock 70 70
Additional paid-in capital 56,380 56,336
Accumulated deficit (14,476) (18,088)
-------- --------
41,974 38,318
Less treasury stock (1,920) (1,920)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 40,054 36,398
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 94,369 $ 77,144
======== ========
</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
--------------------------
Oct. 31, Nov. 1,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,612 $ 980
Loss from discontinued operations 51 165
-------- --------
Income from continuing operations 3,663 1,145
Adjustments to reconcile net income to net cash
used in operating activities:
(Increase) decrease in deferred taxes (299) 627
Depreciation and amortization 2,854 2,647
Net increase in operating working capital (9,646) (8,477)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES
OF CONTINUING OPERATIONS (3,428) (4,058)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (5,012) (3,155)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES
OF CONTINUING OPERATIONS (5,012) (3,155)
-------- --------
Cash flows from financing activities:
Borrowings under long-term Credit Agreement 33,416 31,379
Repayment under long-term Credit Agreement (24,540) (22,756)
Borrowings of other long-term debt 277 324
Repayment of other long-term debt (241) (231)
Other 44 --
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES
OF CONTINUING OPERATIONS 8,956 8,716
Net cash used in discontinued operations (191) (172)
-------- --------
Net increase in cash and cash equivalents 325 1,331
Cash and cash equivalents - beginning of period 564 719
-------- --------
Cash and cash equivalents - end of period $ 889 $ 2,050
======== ========
</TABLE>
See accompanying notes.
5
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/31/98
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. BASIS OF PRESENTATION
Jos. A. Bank Clothiers, Inc. (the Company) is a 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 January 31, 1998 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 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.
Reclassifications - Certain reclassifications have been made to the November 1,
1997 financial statements in order to conform with the October 31, 1998
presentation.
6
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/31/98
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
Oct. 31, Nov. 1,
1998 1997
--------- ---------
<S> <C> <C>
Increase in accounts receivable $ (1,462) $ (1,223)
Increase in inventories (11,748) (9,199)
(Increase) decrease in prepaids and other assets (1,395) 491
Increase in accounts payable 1,434 2,160
Increase (decrease) in accrued expenses and
other liabilities 3,525 (706)
--------- ---------
Net increase in operating working capital $ (9,646) $ (8,477)
========= =========
</TABLE>
4. NEW ACCOUNTING STANDARDS
Earnings Per Share - During 1997, the Financial Accounting Standards Board
(FASB) issued Statement No. 128 (SFAS No. 128), "Earnings Per Share," which
establishes new standards for computing and presenting earnings per share.
The Company has adopted SFAS No. 128 and restated earnings per share data
presented to reflect the new standard. SFAS No. 128 requires presentation of
basic earnings per share and diluted earnings per share. The weighted
average shares used to calculate basic and diluted earnings per share in
accordance with SFAS No. 128 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- -----------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding for basic EPS 6,791 6,791 6,791 6,791
Diluted EPS:
Dilutive effect of
common stock equivalents 155 98 167 55
----- ----- ----- -----
Weighted average shares
outstanding for diluted EPS 6,946 6,889 6,958 6,846
===== ===== ===== =====
</TABLE>
Weighted average shares outstanding for calculating dilutive EPS include
basic shares outstanding, plus shares issuable upon the exercise of stock
options, using the treasury stock method.
7
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/31/98
5. DISCONTINUED OPERATIONS
In January 1998, the Company formalized a plan to dispose of its manufacturing
operations. Accordingly, the consolidated financial statements have been
presented to reflect the disposition of the manufacturing operations as
discontinued operations. The revenues, costs and expenses, assets and
liabilities, and cash flows of the manufacturing operations have been excluded
from the respective captions in the Consolidated Statements of Income,
Consolidated Balance Sheets and Consolidated Statements of Cash Flows and the
related footnotes included herein.
In April 1998, the Company entered into an agreement which included the
disposition of the Company's manufacturing operations. Based upon the agreement,
an estimated loss on disposal of $2.5 million was reported net of an income tax
benefit of $1.0 million for an after-tax loss of $1.5 million during the fourth
quarter of fiscal year ended January 31, 1998.
Summarized financial information for the discontinued operations is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- ---------------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Loss before income taxes $ -- $ (93) $ (84) $ (279)
Net loss $ -- $ (55) $ (51) $ (165)
</TABLE>
<TABLE>
<CAPTION>
As of As of
Oct. 31, Jan. 31,
1998 1998
------------- -------------
<S> <C> <C>
Current assets $ 1,686 $ 3,839
Current liabilities 2,059 4,502
------------- -------------
Net current (liabilities) $ (373) $ (663)
============= =============
Noncurrent assets $ 874 $ 1,028
Noncurrent liabilities 241 245
------------- -------------
Net noncurrent assets $ 633 $ 783
============= =============
</TABLE>
Revenues of the manufacturing operations primarily represent intercompany sales
which have been eliminated in consolidation.
Net current and noncurrent assets/liabilities of discontinued operations noted
above includes inventories, receivables, plant and equipment, pension
termination and other transaction costs associated with the discontinued
manufacturing operations.
8
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/31/98
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 January 31, 1998.
Overview - The Company delivered its eleventh consecutive quarter of improved
- --------
profits. Income from continuing operations for the quarter ended October 31,
1998 increased to $2.2 million or $.32 per share compared to $.5 million or
$.07 per share for the same period in 1997. For the nine months, income from
continuing operations increased to $3.7 million or $.53 per share compared to
$1.1 million or $.17 per share for the same period last year. This improvement
was due primarily to higher sales attributable to the opening of 16 new stores
since November 1, 1997 and improved margins resulting from strong inventory
management and a shift toward higher-end products. The results for the third
quarter and nine months ended October 31, 1998 included a one-time $1.4 million
($.20 per share) benefit relating to tax loss carryforwards which were generated
in prior years and recognized in the current period.
The Company continues to pursue its expansion strategy of opening new stores in
existing markets and has opened 26 new stores in the last two years, including
14 during 1998. This will provide the Company with greater leverage of selling,
marketing and general and administrative expenses as these new stores mature.
The Company recently opened its 100th store and had 102 stores as of October 31,
1998.
The Company's availability under the Credit Agreement increased to $24.3 million
as of October 31, 1998, which was $7.6 million higher than the same time last
year and borrowings are $7.4 million lower than at the same time last year
despite opening the 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.
9
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/31/98
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Sales....................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.............................. 49.9 51.8 50.9 52.4
------ ----- ----- -----
Gross profit.................................... 50.1 48.2 49.1 47.6
General and administrative expenses............. 10.4 10.7 10.3 10.8
Sales and marketing expenses.................... 34.9 33.3 34.3 33.3
Store opening costs............................. 0.4 0.6 0 .4 0.2
------ ----- ----- -----
Operating income................................ 4.4 3.6 4.0 3.3
Interest expense, net........................... 1.2 1.8 1.1 1.7
------ ----- ----- -----
Income from continuing operations
before income taxes.......................... 3.2 1.9 2.9 1.6
Provision (benefit) for income taxes ........... (1.8) 0.8 -- 0.7
------ ----- ----- -----
Income from continuing operations............... 5.0 1.1 2.9 0.9
Loss from discontinued operations, net.......... -- (0.1) (0.1) (0.1)
------ ----- ----- -----
Net income...................................... 5.0% 1.0% 2.8% 0.8%
====== ===== ===== =====
</TABLE>
NET SALES - Net sales increased 7.3% to $44.6 million in the third quarter of
- ---------
1998 compared to $41.5 million in 1997. For the nine months ended October 31,
1998, net sales increased 8.5 percent, to $129.9 million, compared to
$119.7 million in 1997. Comparable store sales were even for the third quarter
and first nine months of 1998, compared to increases of 2.0 percent and
3.5 percent, respectively, for the third quarter and first nine months of 1997.
The opening of 16 stores in existing markets since November 1, 1997 has
temporarily slowed comparable store sales growth as new stores are not included
in comparable sales. Gross margin dollars in comparable stores increased during
the third quarter and nine months, resulting in greater profits in these stores.
Catalog sales for the third quarter of 1998 were comparable to the same period
last year despite a 4% reduction in circulation, while catalog sales increased
1% for the nine months ended October 31, 1998 on a 5% reduction in circulation.
COST OF GOODS SOLD - Gross profit increased by $2.3 million to $22.3 million in
- ------------------
the third quarter and increased by $6.7 million to $63.7 million in the first
nine months of 1998 compared to the same periods in the prior year. Gross profit
as a percent of sales remained strong and increased 1.9 and 1.5 percentage
points in the quarter and nine months respectively. The gross margin improvement
was primarily the result of higher maintained margins in nearly all product
categories, the shift toward higher end products and strong inventory
management.
10
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/31/98
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
- -----------------------------------
decreased to 10.4 percent of sales in the third quarter and 10.3 percent of
sales during the nine months ended October 31, 1998 compared to 10.7 percent and
10.8 percent of sales during the same periods in 1997, as the Company continues
to leverage its infrastructure. The decrease relates primarily to a reduction in
professional fees and the Company's continued emphasis to control overhead costs
while growing the business.
SALES AND MARKETING EXPENSES - Sales and marketing expenses increased 1.6 and
- ----------------------------
1.0 percent of sales due primarily to higher new store fixed occupancy costs as
a percent of sales as the stores take several years to mature. The increased
store base has enabled the Company to spend more on marketing in existing
markets to strengthen all stores.
STORE OPENING COSTS - Store opening costs increased $.3 million in the nine
- -------------------
months ended October 31, 1998 due to the addition of 14 new stores during 1998
compared to 6 new stores in the first nine months of 1997.
INTEREST EXPENSE - Interest expense was $.2 million lower during the quarter and
- ----------------
$.6 million lower during the nine months ended October 31, 1998 compared to the
same periods in 1997. This improvement was due primarily to a $7 million
reduction in total debt outstanding during 1998.
INCOME TAXES - At October 31, 1998, the Company had approximately $10 million of
- ------------
tax net operating loss carryforwards (NOLs) which expire through 2010. SFAS No.
109 requires that the tax benefit of such NOLs be recorded as an asset to the
extent that management assesses the utilization of such NOLs to be "more likely
than not". Realization of the future tax benefits is dependent on the Company's
ability to generate taxable income within the carryforward period. Future levels
of operating income are dependent upon general economic conditions, including
interest rates and general levels of economic activity, competitive pressures on
sales and margins and other factors beyond the Company's control. Therefore no
assurance can be given that sufficient taxable income will be generated for full
utilization of the NOLs.
As of the beginning of the current fiscal year, the Company had a deferred tax
asset of $4.6 million and an offsetting valuation allowance of $1.4 million.
Management has determined, based on the Company's recent history of earnings,
that future earnings of the Company will more likely than not be sufficient to
utilize all of the NOLs prior to their expiration. Accordingly, during the third
quarter of 1998, the Company eliminated the $1.4 million valuation reserve
reflecting the Company's expectation that all of the NOLs will be utilized prior
to expiration.
LIQUIDITY AND CAPITAL RESOURCES - At October 31, 1998 the Company had
- -------------------------------
outstanding borrowings of $17.7 million with $24.3 million of availability under
its Credit Agreement compared to borrowings of $25.1 million and availability of
$16.7 million at the same time last year. The increase in availability was
generated principally by cash provided by operating activities during the
preceding twelve months and $3 million of additional availability created by
higher inventory levels to support the new stores.
11
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/31/98
The following table summarizes the Company's sources and uses of funds as
reflected in the condensed consolidated statements of cash flows:
<TABLE>
<CAPTION>
Nine Months Ended
--------------------
Oct. 31, Nov. 1,
Cash provided by (used in): 1998 1997
-------- --------
<S> <C> <C>
Operating activities $(3,428) $(4,058)
Investing activities (5,012) (3,155)
Financing activities 8,956 8,716
Discontinued operations (191) (172)
------- -------
Net increase in cash and cash equivalents $ 325 $ 1,331
======= =======
</TABLE>
Cash used by operating activities was due primarily to higher inventory levels
to support new stores. Cash used in investing activities relates primarily to
build-out costs for new stores. Cash provided by financing activities represents
primarily borrowings on the revolving loan. The net cash used in discontinued
operations was due primarily to certain costs related to the divestiture of the
manufacturing operations including payments of accrued severance, vacation,
professional fees and other selling costs partially offset by the sale of
manufacturing related inventories.
The Company expects to spend between $6.0 and $6.5 million on capital
expenditures in 1998, primarily to open 16 new stores and to relocate or
renovate four existing stores. The store expansion program is being financed
through operations, the Credit Agreement and fixture leasing arrangements. The
Company also expects to open up to 46 additional stores (including 12
relocations) beyond 1998, mostly in existing markets. The Company believes that
its existing markets can support these additional stores which will provide
additional leverage for its management, distribution, advertising and sourcing
infrastructure. To support this growth, the Company expects to upgrade certain
information systems and its existing distribution center in 1998 and 1999. The
Company believes that its current liquidity and its Credit Agreement will be
adequate to support its current working capital and investment needs. Further
expansion beyond 1999 may necessitate revised financing arrangements for the
Company.
The Company expects to devote significant efforts over the next year to ensure
that its business - critical systems are "Year 2000 compliant". The Year 2000
("Y2K") issue is the result of computer programs using a two-digit format, as
opposed to four digits, to indicate the year. Such computer systems will be
unable to accurately interpret dates beyond the year 1999, which could cause a
system failure or other computer errors, leading to disruptions in operations.
The Company has performed an assessment of its systems in order to identify Y2K
issues and has identified its business-critical area of exposure to be: (a)
merchandising and financial, (b) point-of-sale, (c) cash management, (d)
catalog, (e) warehouse management, and (f) third party relationships. Most of
the Company's applications operate on two IBM AS/400 hardware configurations and
are "off-the-shelf" packages with modifications and interfaces made by the
Company. The Company also relies on personal computers to prepare detailed
analysis. The Company believes that by installing the vendor-developed upgrades
to the latest versions of its existing systems and re-working its modifications
and interfaces, most of the Y2K issues should be corrected. The vendors for the
merchandising, general ledger and catalog applications have certified that the
updated versions of their systems are Y2K compliant.
12
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10Q, 10/31/98
The Company expects to install the latest versions of its systems by the middle
of 1999 with Y2K testing performed for each application installed. In accordance
with this plan, in August, 1998 the Company installed and implemented the latest
version of its merchandising, warehouse, sales audit, accounts payable and
general ledger system (which included many upgrades in addition to Y2K
compliance), and expects to finalize the related Y2K testing for these
applications early in 1999. The Company has identified certain third parties who
supply product to the Company and they do not expect to have any significant
disruptions to deliveries as a result of Y2K issues. However, the Company will
continue to monitor this situation.
The Company estimates that it will spend approximately $1.0 million
(representing a combination of capital and expense) on these upgrades through
the end of fiscal 1999, although an exact amount related to Y2K compliance
cannot be measured because many of the upgrades include increased functionality
as well as Y2K compliance.
Should these efforts not be successful, the Y2K problems could have a material
impact on the operations of the Company. Although there is a high level of
confidence that these efforts will be successful, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated. The Company has not developed a formal contingency plan
should any of its critical systems not operate in the Year 2000 and expects to
focus on this aspect of the Y2K project in the second half of 1999.
The Company's plans and beliefs concerning future operations 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 such as risks associated
with economic, weather and other factors affecting consumer spending, the mix of
goods sold, pricing, availability of lease sites for new stores and other
competitive factors.
PART 2. OTHER INFORMATION
Item 6. Exhibits
- -----------------
Exhibit 10.15 Employment Agreement, dated August 31, 1998, between J.F.
Timothy Carroll and Jos. A. Bank Clothiers, Inc.
Exhibit 27.0 Financial Data Schedule.
13
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/31/98
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 15, 1998 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/ David E. Ullman
-------------------------------------------------
David E. Ullman
Executive Vice President, Chief Financial Officer
14
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 31, 1998 between J.F. TIMOTHY
CARROLL ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer" or
"Company").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive, and Executive hereby agrees to
be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth. This Agreement is a contract for the personal services of
Executive and services pursuant hereto may only be performed by Executive.
2. EMPLOYMENT PERIOD
The term of Executive's employment under this Agreement (the "Employment
Period") shall commence as of the date hereof and shall, subject to earlier
termination as provided in Section 5, continue through August 31, 1999 and shall
continue thereafter for successive one-year periods unless, at least 180 days
before the end of the initial Employment Period or any subsequent one-year
period, either party gives notice to the other of his or its desire to terminate
the Employment Period, in which case the Employment Period shall terminate as of
the end of the then-current term.
3. DUTIES AND RESPONSIBILITIES
3.1 General. During the Employment Period, Executive (i) shall have the
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title of Senior Vice President - Corporate Sales and (ii) shall devote
substantially all of his business time and expend his best efforts, energies and
skills to the business of the Company. Executive shall perform such duties,
consistent with his status as Senior Vice President - Corporate Sales, as he may
be assigned from time to time by Employer's Chief Executive Officer (the "Chief
Executive Officer").
3.2 Location of Executive Office. The Company will maintain its principal
----------------------------
executive offices at a location in the Baltimore, Maryland metropolitan area.
Executive shall not be required to perform services for the Company at any other
location, except for services rendered in connection with required travel on the
Company's business.
4. COMPENSATION AND RELATED MATTERS
4.1 Base Salary. Employer shall pay to Executive during the Employment
-----------
Period an annual base salary (the "Base Salary") of $175,000. The Base Salary
shall be increased from to time to time upon mutual agreement of the parties
hereto; provided, that the Base Salary shall in all events be increased at least
once every twelve (12) months by a percentage not less than the percentage
increase in the Consumer Price Index (or any equivalent index in the event the
Consumer Price Index shall no longer be published). The Base Salary for each
year shall be payable in installments in accordance with the Company's policy on
payment to executives in effect from time to time.
<PAGE>
4.2 ADDITIONAL COMPENSATION.
-----------------------
a. Annual Bonus. For fiscal year 1999 (ending on or about January 31, 2000)
and for each fiscal year that begins during the Employment Period (each such
fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus of
40% of Base Salary (each, a "Bonus") conditioned upon the satisfaction of (a)
Company performance goals established by the Compensation Committee of the Board
of Directors of the Company (the "Committee") for such Bonus Year and (b)
personal performance goals submitted by the Executive to, and approved by, the
Company and the Committee for such Bonus Year. Company and personal performance
goals are herein referred to collectively as the "Performance Goals". In the
event the Performance Goals for any Bonus Year are not fully satisfied, the
Committee shall have the right, but not the obligation, to grant a partial Bonus
for such Bonus Year. Notwithstanding anything to the contrary contained herein,
the minimum Bonus payable to Executive for Bonus Year 1999 shall be $17,500 or
such lesser amount as may be calculated in accordance with this Section 4.2 in
the event the Employment Period shall expire or terminate prior to the last day
of Bonus Year 1999. The Performance Goals for each Bonus Year shall be
established as soon as possible following the beginning of such Bonus Year. The
Bonus earned for any Bonus Year shall be payable promptly following the
determination thereof, but in no event later than 90 days following the end of
each Bonus Year. If (a) the Employment Period shall expire or terminate and (b)
Employee is entitled to payment of a bonus pursuant to Section 6 hereof, the
Bonus payable for the Bonus Year in which the Employment Period terminates or
expires shall equal the Bonus that would have been paid had the Employment
Period not so terminated or expired, multiplied by a fraction, the numerator of
which shall be the number of days of the Employment Period within the Bonus Year
and the denominator of which shall be 365. For the purposes of determining the
amount of Bonus payable pursuant to the immediately preceding sentence, it shall
be assumed that all conditions to payment based upon performance by the
Executive (e.g. personal performance goals) have been satisfied. Notwithstanding
anything to the contrary contained herein or in the Employer's Bonus Plan, in
the event (y) the Employment Period shall end for any reason whatsoever on a day
prior to payment to Executive of a Bonus for the last full Bonus Year contained
within the Employment Period, and (z) Executive would have been entitled to
receive a Bonus for such last full Bonus Year had the Employment Period not
ended - then, Employer shall pay to Executive the Bonus for such last full Bonus
----
Year as and when such Bonus would have been paid had the Employment Period not
ended.
b. 1998 Bonus. The Company shall pay to Executive a bonus in the amount of
$10,000 on February 1, 1999 in compensation for a bonus which would or may have
been payable to Executive by his former employer, A.T. Cross Company ("Cross").
The Company shall have the right, but not the obligation, to also include
Executive in the Company's 1998 bonus program. The amount of any bonus payable
to Executive for fiscal year 1998 in excess of the aforementioned $10,000 shall
be determined by the Company in its sole discretion.
c. Cross Stock Buyout. The Company shall pay to Executive the amount of
$38,565 on February 1, 1999 as a buyout of certain options held or previously
held by Executive to purchase Cross stock. Such amount has been calculated as
the sum of (i) 14,596 multiplied by (A) $12.25 (the fair market value of one
share of Cross stock as of close of market on August 17, 1998) less (B) $9.96
(Executive's exercise price); plus (ii) 2,000 multiplied by (A) $12.25 less (B)
$9.68.
2
<PAGE>
4.3 Automobile. Throughout the Employment Period, Employer shall provide to
----------
Executive, at Employer's expense, an automobile in accordance with Employer's
policy in effect from time to time for the leasing of automobiles for use by
Employer's senior management or Employer shall pay to Executive a car allowance;
provided that such expense or allowance shall in no event exceed $900 per month.
Employer shall also be responsible for all expenses of use and operation of any
leased automobile.
4.4 Other Benefits. During the Employment Period, subject to, and to the
--------------
extent Executive is eligible under their respective terms, Executive shall be
entitled to receive such fringe benefits as are, or are from time to time
hereafter, generally provided by Employer to Employer's senior management
employees (other than those provided under or pursuant to separately negotiated
individual employment agreements or arrangements), including (but not limited
to) relocation expenses. Executive shall all be entitled to reimbursement of
reasonable initiation fees and dues at a social club.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause or Good Reason. Employer may terminate the
----------------------------------------
Employment Period at any time without cause. Executive may, by delivery of not
less than 60 days' notice to Employer at any time during the Employment Period,
terminate the Employment Period without good reason.
5.2 By Employer for Cause. Employer may terminate the Employment Period in
---------------------
accordance with this Section 5.2 at any time for cause. For the purpose of this
Section 5.2, "cause" shall mean any of the following:
a) the conviction of Executive in a court of competent jurisdiction of
a felony involving money or property of the Company or moral
turpitude;
b) the willful commission of an act not approved of or ratified by the
Chief Executive Officer involving a series of material conflicts of
interest or self-dealings relating to any material aspect of the
Company;
c) the willful commission of any act of fraud or misrepresentation
(including the omission of material facts) relating to the business
of the Company and materially and negatively impacting upon the
Company and its business; or
d) at any time prior to a change in control of the Company, the
willful and material failure of Executive to comply with the lawful
orders of the Chief Executive Officer, provided such orders are
consistent with Executive's duties, responsibilities and/or
authority as Senior Vice President Corporate Sales of the Company.
In the event Employer shall elect to pursue a termination for cause,
Employer shall deliver to Executive a written notice from the Chief Executive
Officer setting forth with reasonable particularity the grounds upon which the
Chief Executive Officer has found cause for termination. In the event
3
<PAGE>
such grounds are predicated upon acts or omissions as set forth in paragraphs
(b), (c) or (d) above, Executive shall have thirty (30) days, or such longer
period as may be necessary provided Executive has commenced and is diligently
proceeding, to cure or eliminate the cause for termination. In the event
Executive has failed to timely cure or eliminate the cause for termination as
set forth in the immediately preceding sentence, the Company shall have the
right to terminate Executive for cause.
5.3 By Executive for Good Reason. Executive may, at any time during the
----------------------------
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement "for good reason" effective immediately. For the purposes hereof,
"for good reason" means (i) any material breach by Employer of any provision of
this Agreement which, if susceptible of being cured, is not cured within 30 days
of delivery of notice thereof to Employer by Executive; it being agreed,
however, that the foregoing 30 day cure period shall not be applicable to any
failure timely to pay (or any reduction in) compensation or benefits paid or
payable to Executive pursuant to the provisions of Section 4 hereof or (ii) the
occurrence of a change in control (as hereinafter defined) of Employer, if, and
only if, any of the duties, responsibilities or perquisites of Executive as
provided in this Agreement are thereafter reduced. Without limitation of the
generality of the foregoing, each of the following shall be deemed to be a
material breach of this Agreement by Employer: (x) any failure timely to pay (or
any reduction in) compensation or benefits paid or payable to Executive pursuant
to the provisions of Section 4 hereof; (y) any reduction in the duties,
responsibilities or perquisites of Executive as provided in this Agreement; and
(z) any transfer of the Company's principal executive offices outside the
geographic area described in Section 3.2 hereof or requirement that Executive
principally perform his duties outside such geographic area.
For purposes of this Agreement, a "change in control" of the Company
shall be deemed to have occurred if, as a result of a single transaction or a
series of transactions, (A) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than a trustee or other fiduciary holding securities under any
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company ( including any nominee
corporation that holds shares of the Company on behalf of the beneficial owners
of such corporation), in substantially the same proportions as their ownership
of stock of the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 51% or more of the combined voting power of the Company's
then outstanding securities; or (B) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other
fiduciary holding securities under any employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company
(including any nominee corporation that holds shares of the Company on behalf of
the beneficial owners of such corporation), in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities and there are
at least a majority of directors serving on the Board of Directors of the
Company who were not serving in such capacity as of the date hereof or who were
not elected with the consent of the Executive; or (C) the shareholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 70%
4
<PAGE>
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
5.4 Death. The Employment Period shall end on the date of Executive's
-----
death.
6. TERMINATION COMPENSATION; NON-COMPETE
6.1 Termination Without Cause by Employer or for Good Reason by Executive.
---------------------------------------------------------------------
If the Employment Period is terminated by Employer pursuant to the provisions of
Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3
hereof, Employer will pay to Executive (a) Base Salary for the twelve (12) month
period following the date of termination, calculated at the applicable Base
Salary rate which would have been in effect from time to time during the balance
of Employment Period, assuming no termination, payable in equal installments at
the times Base Salary would have been paid had the Employment Period not been
terminated, (b) on the date bonuses for the Bonus Year in which the Employment
Period is terminated are generally paid by Employer to Employer's senior
management employees, the Bonus for such Bonus Year prorated as provided in
Section 4.2 and (c) if applicable, the Bonus for the last full Bonus Year
pursuant to Section 4.2. All other benefits provided for in Section 4.4 shall be
continued at the expense of Employer for the period that payments are required
to be made pursuant to the preceding provisions of this Section 6.1. Without
limiting the generality of the immediately preceding sentence, Employer agrees
that (x) the health benefits to be continued on behalf of the Executive (at
Company expense) during the severance period shall not be part of Executive's
optional COBRA period; (y) Executive shall have the right and option to continue
health coverage at Executive's expense after the severance period to the
greatest extent required to be offered by the Company pursuant to applicable
law; and (z) Executive shall be entitled to continue contributions into the
Company's 401k Plan during the severance period and the Company shall match a
share of such contributions in accordance with the Company's general policy
applicable to active employees. Notwithstanding termination of the Employment
Period, Executive shall continue to be entitled to discounts on purchases of
products from the Company in accordance with the discount program in effect from
time to time for active employees of the Company.
6.2 Certain Other Terminations. If the Employment Period is terminated by
--------------------------
Employer pursuant to the provisions of Section 5.2, by Executive pursuant to
Section 5.1 or as a result of the death of Executive as set forth in Section
5.4, Employer shall pay to Executive (a) Base Salary (calculated at its then
current rate per year) through the date of termination, (b) in the case of
termination as a result of the death of Executive as set forth in Section 5.4,
when due pursuant to provisions of Section 4.2 the Bonus for the Bonus Year in
which the date of termination occurred prorated as provided in said Section 4.2
and (c) if applicable, the Bonus for the last full Bonus Year pursuant to
Section 4.2. Employer shall have no obligation to continue any other benefits
provided for in Section 4 past the date of termination.
6.3 Expiration at Election of Employer. In the event the Employment Period
----------------------------------
expires because of an election by Employer to allow the Employment Period to
expire at the end of its then stated term as provided in Section 2 hereof,
Employer shall pay to Executive (a) Base Salary for the twelve (12) month period
following the date of termination (calculated at its then current rate per
5
<PAGE>
year), payable in equal installments at the times Base Salary would have been
paid had the Employment Period not been terminated, (b) when due pursuant to the
provisions of Section 4.2, the Bonus for the Bonus Year in which the Employment
Period expired prorated as provided in said Section 4.2 and (c) if applicable,
the Bonus for the last full Bonus Year pursuant to Section 4.2. Employer shall
have no obligation to continue any other benefits provided for in Section 4 past
the date of termination.
6.4 Mitigation. Executive shall not be required to mitigate the amount of
----------
any payments or benefits provided for hereunder upon termination of the
Employment Period by seeking employment with any other person, or otherwise, nor
shall the amount of any such payments or benefits be reduced by any
compensation, benefit or other amount earned by, accrued for or paid to
Executive as the result of Executive's employment by or consultancy or other
association with any other person, provided, that any medical, dental or
hospitalization insurance or benefits provided to Executive with his employment
by or consultancy with an unaffiliated person during such period shall be
primary to the benefits to be provided to Executive pursuant to this Agreement
for the purposes of coordination of benefits.
6.5 Non-Compete. For so long as any termination compensation is being paid
-----------
to Executive pursuant to this Section 6 or, in the event of termination of this
Agreement by Employer for cause or by Executive without good reason, for the
balance of what would have been the current Employment Period assuming no such
termination, Executive shall not, directly or indirectly, (i) engage in any
activities that are in competition with the Company in any geographic area where
the Company is engaged in business, (ii) solicit any customer of the Company or
(iii) solicit any person who is then employed by the Company or was employed by
the Company within one year of such solicitation to (a) terminate his or her
employment with the Company, (b) accept employment with anyone other than the
Company, or (c) in any manner interfere with the business of the Company.
Executive acknowledges and agrees that in the event of any violation or
threatened violation by Executive of his obligations under the preceding
sentence, Employer shall be entitled to injunctive relief without any necessity
to post bond.
6.6 Unused Vacation. Upon termination of Executive's employment pursuant to
---------------
Section 5 herein or non-renewal of the Employment period as provided for under
Section 2 herein, for any reason whatsoever, Employer shall pay Executive, in
addition to any termination compensation provided for under this Section 6, an
amount equivalent to Executive's per diem compensation at the then-current Base
Salary rate multiplied by the number of unused vacation days, including any
carry-over, accrued by Executive as of the date of termination.
7. INDEMNIFICATION
The Company shall indemnify and hold Executive harmless from and against
any expenses (including attorneys' fees of the attorneys selected by Executive
to represent him, which shall be advanced as incurred), judgements, fines and
amounts paid in settlement incurred by him by reason of his being made a party
or threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of any act or omission to act by Executive during the Employment Period
or otherwise by reason of the fact that he is or was a director or officer of
Employer or any subsidiary or affiliate included as a part of the
6
<PAGE>
Company, to the fullest extent and in the manner set forth and permitted by the
General Corporation Law of the State of Delaware and any other applicable law as
from time to time in effect. The provisions of this Section 7 shall survive any
termination of the Employment Period or any deemed termination of this
Agreement.
8. MISCELLANEOUS
8.1 Notices. Any notice, consent or authorization required or permitted to
-------
be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom intended, at the address of such party set forth below, by
registered or certified mail, postage paid (deemed given five days after deposit
in the U.S. mail) or personally or by facsimile transmission (deemed given upon
receipt), or at such other address as either party shall designate by notice
given to the other in the manner provided herein. Notices to Employer shall be
sent to: Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead, Maryland
21074-2095, Attn: Secretary. Notices to Executive shall be sent to: Mr. J.F.
Timothy Carroll, Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead,
Maryland 21074-2095.
8.2 Legal Fees. From and after any change in control of the Company,
----------
Employer shall, upon demand by Executive, pay directly or reimburse Executive
for all costs and expenses, including but not limited to attorneys' fees and
court costs, incurred by Executive (a) in the event of any breach or threatened
breach by Employer of any of the terms and conditions of this Agreement, (b) in
the event of any dispute under this Agreement between Employer and Executive,
(c) in connection with the enforcement of any right or remedy reserved to
Executive under this Agreement, (d) in connection with the defense of any claim
by Employer of a breach by Executive under this Agreement (regardless of whether
such claim is proven) or (e) in connection with any modification of or amendment
to this Agreement. Neither the institution of any lawsuit nor the rendering of
any particular judgement therein shall constitute a condition precedent to
Executive's rights under the immediately preceding sentence.
8.3 Taxes. Employer is authorized to withhold (from any compensation or
-----
benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgement of Employer to comply with applicable
laws and regulations.
8.4 Interpretation. This Agreement shall be governed by and construed and
--------------
enforced in accordance with the laws of the State of Maryland applicable to
agreements made and to be performed therein. All descriptive headings in this
Agreement are inserted for convenience only and shall be disregarded in
construing or applying any provision of this Agreement. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument. If any
provision of this Agreement, or any part thereof, is held to be unenforceable,
the remainder of such provision and this Agreement, as the case may be, shall
nevertheless remain in full force and effect.
8.5 Arbitration. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in Baltimore,
Maryland in accordance with the rules of the American Arbitration Association
then in effect. Judgement may be entered on the
7
<PAGE>
arbitration award in any court having jurisdiction; provided, however, that
-------- -------
Executive shall be entitled to seek specific performance of his right to be paid
until expiration of the Employment Period during the pendency of any
arbitration.
8.6 Entire Agreement and Representation. This Agreement contains the entire
-----------------------------------
agreement and understanding between Employer and Executive with respect to the
subject matter hereof. No representations or warranties of any kind or nature
relating to the Company or its several businesses, or relating to the Company's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
8.7 Successor and Assigns. This Agreement shall be binding upon and inure
---------------------
to the benefit of each of the parties hereto and their respective successors,
heirs (in the case of Executive) and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JOS. A. BANK CLOTHIERS, INC.
By: /s/ Timothy F. Finley
------------------------------------------
Timothy F. Finley, Chairman and
Chief Executive Officer
/s/ J.F. Timothy Carroll
------------------------------------------
J.F. TIMOTHY CARROLL
8
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