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 July 31, 1999
-------------
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 13, 1999
---------------------------- ------------------------------------
Common stock. $.01 par value 6,792,027
<PAGE>
<TABLE>
<CAPTION>
Jos. A. Bank Clothiers, Inc.
Index
-----
Part I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Statements 3
of Operations - Three and Six Months
ended July 31, 1999 and
August 1, 1998
Condensed Consolidated Balance 4
Sheets - as of July 31, 1999 and
January 30, 1999
Condensed Consolidated Statements 5
of Cash Flows -Six Months
ended July 31, 1999 and
August 1, 1998
Notes to Condensed Consolidated 6-9
Financial Statements
Item 2. Management's Discussion and Analysis 10-14
of Results of Operations and
Financial Condition
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 14
(a) Exhibits - Exhibit 27-Financial Data
Schedule (EDGAR filing only)
Signatures 15
- ----------
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 44,203 $ 41,947 $ 87,810 $ 85,330
Costs and expenses:
Cost of goods sold 22,927 21,757 44,426 43,908
General and administrative 4,296 4,278 8,640 8,806
Sales and marketing 15,861 14,376 32,470 29,046
Store opening costs 9 121 62 361
One-time charge:
Executive payout and other costs 2,177 -- 2,177 --
-------- -------- -------- --------
45,270 40,532 87,775 82,121
-------- -------- -------- --------
Operating income (loss) (1,067) 1,415 35 3,209
Interest expense, net 247 437 575 874
-------- -------- -------- --------
Income (loss) from continuing operations
before provision for income taxes (1,314) 978 (540) 2,335
Provision (benefit) for income taxes (512) 381 (211) 910
-------- -------- -------- --------
Income (loss) from continuing operations (802) 597 (329) 1,425
Loss from discontinued operations (net of tax) -- -- -- (51)
-------- -------- -------- --------
Net income (loss) $ (802) $ 597 $ (329) $ 1,374
======== ======== ======== ========
Earnings per share:
Income (loss) from continuing operations:
Basic $ (0.12) $ .09 $ (0.05) $ .21
Diluted $ (0.12) $ .09 $ (0.05) $ .20
Discontinued operations (net of tax):
Basic $ -- $ -- $ -- $ (.01)
Diluted $ -- $ -- $ -- $ (.01)
Net income (loss):
Basic $ (0.12) $ .09 $ (0.05) $ .20
Diluted $ (0.12) $ .09 $ (0.05) $ .20
Weighted average shares outstanding:
Basic 6,792 6,791 6,792 6,791
Diluted 6,792 7,010 6,792 6,974
</TABLE>
See accompanying notes.
3
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
July 31, January 30,
1999 1999
ASSETS ------- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 838 $ 748
Accounts receivable 2,611 2,808
Inventories:
Raw materials 5,553 5,178
Finished goods 41,578 39,650
------ ------
Total inventories 47,131 44,828
------ ------
Prepaid expenses and other
current assets 4,561 4,189
Deferred income taxes 3,399 2,883
------ ------
Total current assets 58,540 55,456
------ ------
Property, plant and equipment,
at cost 54,822 51,779
Accumulated depreciation and
amortization (28,627) (27,232)
-------- --------
Net property, plant and equipment 26,195 24,547
------ ------
Deferred income taxes 1,985 2,000
Other assets 407 512
------- ------
TOTAL ASSETS $ 87,127 $ 82,515
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 15,041 $ 14,012
Accrued expenses 11,553 12,504
Current portion of long-term debt 1,057 1,111
Net current liabilities of
discontinued operations 769 767
------- -------
Total current liabilities 28,420 28,394
Long-term liabilities 16,681 11,808
------ -------
TOTAL LIABILITIES 45,101 40,202
------ ------
Shareholders' equity:
Common stock 70 70
Additional paid-in capital 56,435 56,393
Accumulated deficit (12,559) (12,230)
-------- -------
43,946 44,233
Less treasury stock (1,920) (1,920)
------ ------
TOTAL SHAREHOLDERS' EQUITY 42,026 42,313
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 87,127 $ 82,515
====== ======
See accompanying notes.
4
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Six Months Ended
July 31, August 1,
1999 1998
-------- --------
Cash flows from operating activities:
Net income (loss) $ (329) $ 1,374
Loss from discontinued operations -- 51
-------- --------
Income (loss) from continuing operations (329) 1,425
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
(Increase) decrease in deferred taxes (501) 614
Depreciation and amortization 1,916 1,862
Stock based compensation 42 29
Net increase in operating working capital (2,348) (5,804)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES
OF CONTINUING OPERATIONS (1,220) (1,874)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,564) (3,428)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES
OF CONTINUING OPERATIONS (3,564) (3,428)
-------- --------
Cash flows from financing activities:
Borrowings under long-term Credit Agreement 28,334 19,452
Repayment under long-term Credit Agreement (23,298) (13,635)
Borrowings of other long-term debt -- 277
Repayment of other long-term debt (164) (153)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES
OF CONTINUING OPERATIONS 4,872 5,941
-------- --------
Net cash provided by (used in) discontinued operations 2 (429)
-------- --------
Net increase in cash and cash equivalents 90 210
Cash and cash equivalents - beginning of period 748 564
-------- --------
Cash and cash equivalents - end of period $ 838 $ 774
======== ========
</TABLE>
See accompanying notes.
5
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 7/31/99
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
and internet 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 30, 1999 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
August 1, 1998 financial statements in order to conform with the July
31, 1999 presentation.
6
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 7/31/99
3. WORKING CAPITAL
The net change in operating working capital is composed of the
following:
<TABLE>
<CAPTION>
Six Months Ended
----------------
July 31, August 1,
1999 1998
---- -----
<S> <C> <C>
Increase (decrease) in accounts receivable $ 197 $ (864)
Increase in inventories (2,303) (6,374)
Increase in prepaids and other assets (372) (665)
Increase (decrease) in accounts payable 1,029 1,055
Increase (decrease) in accrued expenses and
other liabilities (899) 1,044
------- -------
Net increase in operating working capital $ (2,348) $ (5,804)
======= =======
</TABLE>
4. EARNINGS PER SHARE
Earnings Per Share - Statement of Financial Accounting Standards (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 Six Months Ended
------------------ ----------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares
outstanding for basic EPS 6,792 6,791 6,792 6,791
Diluted EPS:
Dilutive effect of
common stock equivalents -- 219 -- 183
----- ----- ----- -----
Weighted average shares
outstanding for diluted EPS 6,792 7,010 6,792 6,974
===== ===== ===== =====
</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, 7/31/99
5. DISCONTINUED OPERATIONS
Summarized financial information for the discontinued operations is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ---------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
------- -------- ------- -------
<S> <C> <C> <C> <C>
Loss before income taxes $ -- $ -- $ -- $ (84)
Net loss $ -- $ -- $ -- $ (51)
As of As of
July 31, January 30,
1999 1999
------- -------
Current assets $ 492 $ 1,159
Less current liabilities 1,261 1,926
------- -------
Net current (liabilities) $ (769) $ (767)
===== ======
Noncurrent assets $ 241 $ 241
Noncurrent liabilities 241 241
------- -------
Net noncurrent assets $ -- $ --
======= =======
</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.
6. SEGMENT REPORTING
The Company has two reportable segments: full line stores and catalog direct
marketing. While each segment offers a similar mix of men's clothing to the
retail customer, the full line stores also provide alterations.
The accounting policies of the segments are the same as those described in the
Company's January 30, 1999 Annual report on Form 10K. The Company evaluates
performance of the segments based on "four wall" contribution which excludes any
allocation of "management company" costs, distribution center costs (except
order fulfillment costs which are allocated to catalog), interest and income
taxes. Certain segment data is presented in the following table:
8
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, 1999 Full line Catalog Direct
(in thousands) Stores Marketing Other Total
------ ----------- ----- -----
<S> <C> <C> <C> <C>
Net sales $ 36,895 $ 5,501 $ 1,807(a) $ 44,203
Depreciation and amortization 765 3 211 979
Operating income (b) 5,003 396 (6,466) (1,067)
THREE MONTHS ENDED AUGUST 1, 1998
(in thousands)
Net sales $ 34,414 $ 5,714 $ 1,819(a) $ 41,947
Depreciation and amortization 697 -- 215 912
Operating income (b) 4,882 925 (4,392) 1,415
SIX MONTHS ENDED JULY 31, 1999 Full line Catalog Direct
(in thousands) Stores Marketing Other Total
------ --------- ----- -----
Net sales $ 73,616 $ 10,892 $ 3,302(a) $ 87,810
Depreciation and amortization 1,506 7 403 1,916
Operating income (b) 10,006 1,145 (11,116) 35
SIX MONTHS ENDED AUGUST 1, 1998
(in thousands)
Net sales $ 71,250 $ 10,619 $ 3,461 (a) $ 85,330
Depreciation and amortization 1,349 7 506 1,862
Operating income (b) 10,716 1,629 (9,136) 3,209
</TABLE>
(a) Revenue from segments below the quantitative thresholds are attributable
primarily to four operating segments of the Company. Those segments include
outlet stores, franchise and regional tailor shops. None of these segments has
ever met any of the quantitative thresholds for determining reportable segments.
(b) Operating income for the reported segments represents profit before
allocations of overhead from corporate office and the distribution center,
interest and income taxes.
7. EXECUTIVE PAYOUT AND OTHER COSTS
During the second quarter of 1999, the Company's Chairman and CEO retired and
the Company recorded a one-time charge of approximately $2.2 million associated
with that event. The one-time charge includes a payout to the former
Chairman/CEO of approximately $1.8 million and professional fees -- primarily
recruiting and related expenses -- that were incurred in the second quarter of
1999. This charge reduced basic earnings per share by $.20.
9
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
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 30, 1999.
OVERVIEW - In the second quarter of 1999, the Company reversed a negative sales
trend that occurred in the first quarter of 1999. Total sales increased 5
percent and comparable store sales increased two percent in the second quarter
of 1999. Despite the positive sales trends, second quarter net income excluding
a $2.2 million one-time charge was $.01 per share lower than the prior year. The
lower income resulted from a carryover effect of a failed marketing promotion in
March 1999 and certain other expenses. Specifically, the Company increased its
advertising spending by approximately $.5 million in the second quarter of 1999
to build traffic in its stores and was more promotional to clear excess
inventories that were left after the weak March results.
The Company also incurred approximately $80,000 to upgrade its Internet site and
to advertise on several web sites and incurred approximately $.1 million in its
final phases to make its systems Y2K compliant. Excluding the one-time charge,
income from continuing operations for the quarter ended July 31, 1999 was $.5
million or $.08 per share compared to $.6 million or $.09 per share for the same
period in 1998.
The one-time charge of $2.2 million in the second quarter of 1999 relates to the
payout to the Company's former Chairman/CEO who retired and certain professional
fees -- primarily recruiting and related expenses -- that were incurred in the
second quarter of 1999. This charge reduced primary earnings per share by $.20.
Including the one-time charge, the Company generated a net loss of $.8 million
or $.12 per share in the second quarter of 1999 compared to net income of $.6
million or $.09 per share in the same period last year.
For the first six months of 1999, the Company generated a loss of $.3 million or
$.05 per share. Excluding the one-time charge of $2.2 million, income from
continuing operations was $1.0 million or $.14 per share compared to $1.4
million or $.20 per share last year. The decreased earnings from 1998 relate
principally to the results from the first quarter of 1999 which were negatively
impacted by a new promotion that was run in March 1999 and failed to drive
traffic into the stores. The promotion was discontinued in late March and the
Company reversed the negative sales trend.
Catalog profitability declined in the second quarter of 1999 primarily as a
result of costs incurred to convert to the Company's new automated catalog
information system, investments in the internet and weak performance of the post
Father's Day clearance book.
The Company continued to pursue its expansion strategy of opening new stores in
existing markets and has opened 33 new stores since late 1996. The Company has
opened three new stores through July 31, 1999 and closed one store whose lease
had expired. The Company opened two additional stores in August, 1999 which
should complete its store openings for 1999. The Company has 108 stores as of
September 1999.
The Company's availability under the Credit Agreement increased to $24.6 million
as of July 31, 1999, which was $.9 million higher than the same time last year.
Total debt was $4.9 million lower than the same time last year despite opening
the new stores and investing in a new $2.1 million point-of-sale system.
RESULTS OF OPERATIONS - The following table is derived from the Company's
condensed consolidated statements of operations and sets forth, for the periods
indicated, the items included in the condensed consolidated statements of
operations, expressed as a percentage of net sales.
10
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Six Months Ended
------------------ ----------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales................................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................ 51.9 51.9 50.6 51.5
---- ---- ---- ----
Gross profit.............................................. 48.1 48.1 49.4 48.5
General and administrative expenses....................... 9.7 10.2 9.8 10.3
Sales and marketing expenses.............................. 35.9 34.3 37.0 34.0
---- ---- ---- ----
Store opening costs....................................... -- 0.3 0.1 0.4
Executive payout and other costs.......................... 4.9 -- 2.5 --
---- ---- ---- ----
Operating income (loss)................................... (2.4) 3.4 -- 3.8
Interest expense, net..................................... 0.6 1.1 0.7 1.1
---- ---- ---- ----
Income from continuing operations
before income taxes.................................... (3.0) 2.3 (0.7) 2.7
Provision (benefit) for income taxes ..................... (1.2) 0.9 (0.2) 1.0
---- ---- ---- ----
Income from continuing operations......................... (1.8) 1.4 (0.5) 1.7
---- ---- ---- ----
Loss from discontinued operations, net.................... -- -- -- (0.1)
---- ---- ---- ----
Net income (loss)......................................... (1.8)% 1.4% (0.5)% 1.6%
==== ==== ==== ====
</TABLE>
NET SALES - In the second quarter of 1999, the Company reversed a negative
comparable store sales trend which occurred in the first quarter of 1999. Net
sales increased over 5 percent to $44.2 million in the second quarter of 1999
compared to $41.9 million in 1998. Comparable store sales increased 2 percent
for the second quarter of 1999. The increased sales were driven by strong sales
in sportcoats, slacks and sportswear.
Catalog sales for the second quarter of 1999 decreased 4 percent compared to the
same period last year on a planned circulation decrease of 3 percent. Internet
activity, which is included in catalog sales, continues to increase as the
Company has upgraded its E-Commerce site and has created links with several
major portals.
For the six months ended July 31, 1999, net sales increased 3 percent and
comparable store sales decreased 4 percent. For the six months ended July 31,
1999, catalog sales increased 3 percent on a circulation increase of 4 percent.
COST OF GOODS SOLD - Gross profit percentage remained strong and was comparable
to the prior year in the second quarter and has increased .9 percent of sales
for the first six months of 1999. The gross profit improvement was primarily the
result of higher maintained margins in nearly all product categories (except
suits) and strong inventory management. Gross profit percent increased in the
stores and decreased slightly in the catalog business.
The gross profit increase of 1.8 percent of sales that was generated in the
first quarter of 1999 did not continue into the second quarter of 1999. The
Company was more promotional in the second quarter as it was clearing excess
inventories that remained after the weak March (first quarter) promotion. As a
result of this clearance activity, the Company's comparable store inventory
levels are lower than last year. The Company expects gross profit percentage to
be strong in the second half of 1999.
11
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
decreased as a percent of sales in the second quarter and six months ended July
31, 1999 compared to the same period in 1998. The decrease relates primarily to
reductions in travel expense, insurance and incentive compensation. During the
periods, the Company had increases in payroll to support new stores and in the
new Corporate Sales Division.
SALES AND MARKETING EXPENSES - Sales and marketing expense increased in the
second quarter and six months ended July 31, 1999 compared to last year due
primarily to an increase in marketing expense and additional store occupancy and
payroll costs in new stores. The higher marketing expense was primarily
attributable to increased radio and newspaper advertising as the Company
determined that it was necessary to build momentum of traffic in the stores
after the weak March promotion. The higher store occupancy and payroll costs
relate to additional stores opened since the second quarter of 1998. These costs
were not adequately leveraged as the new stores have not fully matured.
STORE OPENING COSTS - Store opening costs decreased in the second quarter and
six months ended July 31, 1999 as the Company opened three stores during the
first six months of 1999 compared to nine in the same period in 1998.
ONE-TIME CHARGE - During the second quarter of 1999, the Company's Chairman and
CEO retired and the Company recorded a one-time charge of approximately $2.2
million associated with that event. The one-time charge includes a payout to the
former Chairman/CEO of approximately $1.8 million and professional fees --
primarily recruiting and related expenses -- that were incurred in the second
quarter of 1999. Additional expenses may be incurred beyond the second quarter
of 1999 related to recruiting, hiring and potential relocation of a new CEO.
INTEREST EXPENSE - Interest expense was lower during the second quarter and six
months ended July 31, 1999 compared to the same period in 1998. This improvement
was due primarily to a reduction of approximately $5 million in total debt
outstanding during 1999 compared to the same period in 1998.
INCOME TAXES - At July 31, 1999, the Company had approximately $6 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.
LIQUIDITY AND CAPITAL RESOURCES - At July 31, 1999 the Company had outstanding
borrowings of $10.0 million with $24.6 million of availability under its Credit
Agreement compared to borrowings of $17.9 million and availability of $23.7
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.
12
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
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
July 31, August 2,
Cash provided by (used in): 1999 1998
---- ----
Operating activities $ (1,220) $ (1,874)
Investing activities (3,564) (3,428)
Financing activities 4,872 5,941
Discontinued operations 2 (429)
----- -----
Net increase in cash and cash equivalents $ 90 $ 210
===== =====
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, renovation and relocation of existing stores and
initial payments on the Company's new $2.1 million Point-of-Sale (POS) system
which is to be installed in 1999. Cash provided by financing activities
represents primarily borrowings on the revolving portion of the Credit
Agreement. The net cash provided by discontinued operations was due primarily to
a reduction in the trade receivable partially offset by payments for severance
and vacation.
The Company expects to spend between $6.5 million and $7.0 million on capital
expenditures in 1999, primarily to open 5 new stores in 1999, to relocate or
renovate 10 existing stores and install a new $2.1 million POS system. The
Company expects that the new POS system will significantly enhance customer
service and will ultimately improve the Company's ability to target direct
mailing advertising to its customers.
The capital expenditures are being financed through operations, the Credit
Agreement and fixture leasing arrangements. The Company believes that its
current liquidity and its Credit Agreement will be adequate to support its
current working capital and investment needs.
The Company expects to continue to devote significant efforts for the balance of
this 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.
In 1998 the Company performed an assessment of its systems in order to identify
Y2K issues and 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.
13
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
The Company completed the installation of the latest versions of its systems in
June 1999. 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). In May 1999, the Company installed the latest
version of its Catalog system and the system is operating well. The payroll and
human resources system has also been upgraded to a Y2K compliant version. While
the current POS system is Y2K compliant, the Company is installing a new POS
system which is expected to be installed by the end of September 1999. The
Company expects to finalize the related Y2K testing for all applications
throughout the remainder 1999.
The Company has identified certain third parties who supply product to the
Company. These parties do not expect to have any significant disruptions to
deliveries as a result of Y2K issues. However, to minimize the risk of delivery
shortages, the Company has scheduled early deliveries to receive between $3
million to $4 million of additional inventory for the Spring 2000 season prior
to yearend.
The Company has also reviewed its less critical and non-Information Technology
areas such as security and phone systems, etc., and has determined that these
items are substantially Y2K compliant and does not anticipate any major
disruptions.
The Company estimates that it will spend approximately $1.0 million
(representing a combination of capital and expense) on these upgrades between
1998 and 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. The full year 1999 expense is estimated to be approximately $.3
million which is about the same as in 1998.
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 is developing a formal contingency plan should
any of its critical systems not operate in the Year 2000 and expects to complete
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 II. OTHER INFORMATION
Item 6. Exhibit
- ----------------
(a) Exhibit 27 - Financial Data Schedule
14
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 7/31/99
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 13, 1999 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/ David E. Ullman
-------------------------------
David E. Ullman
Executive Vice President, Chief
Financial Officer
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-29-2000 JAN-29-2000
<PERIOD-END> MAY-01-1999 JUL-31-1999
<CASH> 815 838
<SECURITIES> 0 0
<RECEIVABLES> 4084 2611
<ALLOWANCES> 0 0
<INVENTORY> 48385 47131
<CURRENT-ASSETS> 60598 58540
<PP&E> 53500 54822
<DEPRECIATION> 28104 28627
<TOTAL-ASSETS> 88420 87127
<CURRENT-LIABILITIES> 30950 28420
<BONDS> 0 0
0 0
0 0
<COMMON> 70 70
<OTHER-SE> 42736 41956
<TOTAL-LIABILITY-AND-EQUITY> 88420 87127
<SALES> 43607 44203
<TOTAL-REVENUES> 43607 44203
<CGS> 21499 22927
<TOTAL-COSTS> 21006 22343
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 328 247
<INCOME-PRETAX> 774 (1314)
<INCOME-TAX> 302 (512)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 472 (802)
<EPS-BASIC> $0.07 ($0.12)
<EPS-DILUTED> $0.07 ($0.12)
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