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Table of Contents
 
United States Securities and Exchange Commission
Washington, DC 20549
 
 
FORM 10-Q
 
x
 
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
For the quarterly period ended November 2, 2002
 
or
 
¨
 
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
For the transition period from                      to                     .
 
Commission File Number      0-23874
 
 
Jos. A. Bank Clothiers, Inc.
(Exact Name of Registrant as specified in its charter)
 
 
Delaware
  
5611
  
36-3189198
(State of Incorporation)
  
(Primary Standard Industrial
Classification Code Number)
  
(I.R.S. Employer
Identification Number)
 
500 Hanover Pike, Hampstead, MD
  
21074-2095
(Address of Principal Executive Offices)
  
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code:    (410) 239-2700
 
 
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 10, 2002
Common Stock, $.01 par value per share
  
6,198,848
 

Table of Contents
Jos. A. Bank Clothiers, Inc.
 
Index
 
          
Page No.
Part I. Financial Information
       
Item 1.
  
Financial Statements
       
        
3
        
4
        
5
        
6-10
Item 2.
       
10-15
Item 3.
       
15
Item 4.
       
16
Part II. Other Information
       
Item 4.
       
17
Item 6.
       
17
        
18
    
19-20

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Table of Contents
 
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)
 
    
Three Months Ended
   
Nine Months Ended
    
November 3, 2001
   
November 2, 2002
   
November 3, 2001
   
November 2, 2002
Net sales
   
$
50,243
   
$
57,866
   
$
143,755
   
$
165,494
    
  
  
  
Costs and expenses:
                            
Cost of goods sold
   
 
23,187
   
 
25,391
   
 
70,401
   
 
76,219
General and administrative
   
 
5,800
   
 
6,583
   
 
14,700
   
 
17,872
Sales and marketing
   
 
18,564
   
 
22,187
   
 
53,760
   
 
62,516
Store opening costs
   
 
168
   
 
201
   
 
364
   
 
401
One-time charge
   
 
—  
   
 
—  
   
 
210
   
 
—  
    
  
  
  
    
 
47,719
   
 
54,362
   
 
139,435
   
 
157,008
    
  
  
  
Operating income
   
 
2,524
   
 
3,504
   
 
4,320
   
 
8,486
Interest expense, net
   
 
435
   
 
290
   
 
966
   
 
835
    
  
  
  
Income before provision for income taxes
   
 
2,089
   
 
3,214
   
 
3,354
   
 
7,651
Provision for income taxes
   
 
773
   
 
1,350
   
 
1,241
   
 
3,114
    
  
  
  
Net income
   
$
1,316
   
$
1,864
   
$
2,113
   
$
4,537
    
  
  
  
Earnings per share:
                            
Net income:
                            
Basic
   
$
0.22
   
$
0.30
   
$
0.35
   
$
0.74
Diluted
   
$
0.21
   
$
0.26
   
$
0.34
   
$
0.65
Weighted average shares outstanding:
                            
Basic
   
 
5,956
   
 
6,188
   
 
5,956
   
 
6,134
Diluted
   
 
6,172
   
 
7,122
   
 
6,184
   
 
7,007
 
See accompanying notes
 

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Table of Contents
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets
(In thousands)
 
    
February 2, 2002
     
November 2, 2002
  
           
(Unaudited)
  
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
827
 
   
$
906
 
Accounts receivable
   
 
2,364
 
   
 
4,871
 
Inventories:
                  
Raw materials
   
 
5,018
 
   
 
4,791
 
Finished goods
   
 
59,624
 
   
 
72,375
 
    
  
Total inventories
   
 
64,642
 
   
 
77,166
 
    
  
Prepaid expenses and other current assets
   
 
7,126
 
   
 
7,732
 
    
  
Total current assets
   
 
74,959
 
   
 
90,675
 
    
  
Property, plant and equipment, at cost
   
 
64,559
 
   
 
71,539
 
Accumulated depreciation and amortization
   
 
(32,018
)
   
 
(36,077
)
    
  
Net property, plant and equipment
   
 
32,541
 
   
 
35,462
 
Other assets
   
 
957
 
   
 
955
 
    
  
Total assets
   
$
108,457
 
   
$
127,092
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Accounts payable
   
$
16,528
 
   
$
27,012
 
Accrued expenses
   
 
19,930
 
   
 
20,556
 
Current portion of long-term debt
   
 
744
 
   
 
1,204
 
    
  
Total current liabilities
   
 
37,202
 
   
 
48,772
 
Noncurrent Liabilities:
                  
Long-term debt
   
 
15,894
 
   
 
16,044
 
Accrued rent
   
 
3,109
 
   
 
3,034
 
    
  
Total liabilities
   
 
56,205
 
   
 
67,850
 
    
  
Shareholders’ equity:
                  
Common stock
   
 
71
 
   
 
73
 
Additional paid-in capital
   
 
56,558
 
   
 
59,009
 
Retained earnings
   
 
681
 
   
 
5,218
 
    
  
    
 
57,310
 
   
 
64,300
 
Less treasury stock
   
 
(5,058
)
   
 
(5,058
)
    
  
Total shareholders’ equity
   
 
52,252
 
   
 
59,242
 
    
  
Total liabilities and shareholders’ equity
   
$
108,457
 
   
$
127,092
 
    
  
 
See accompanying notes

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Table of Contents
 
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
    
Nine Months Ended
  
    
November 3, 2001
     
November 2,
2002
  
Cash flows from operating activities:
                  
Net income
   
$
2,113
 
   
$
4,537
 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                  
Depreciation and amortization
   
 
3,466
 
   
 
4,144
 
Loss on disposition of assets
   
 
140
 
   
 
—  
 
Net increase in operating working capital
   
 
(25,428
)
   
 
(4,600
)
    
  
Net cash (used in) provided by operating activities
   
 
(19,709
)
   
 
4,081
 
    
  
Cash flows from investing activities:
                  
Additions to property, plant and equipment
   
 
(9,425
)
   
 
(7,065
)
    
  
Net cash used in investing activities
   
 
(9,425
)
   
 
(7,065
)
    
  
Cash flows from financing activities:
                  
Borrowings under long-term Credit Agreement
   
 
59,341
 
   
 
37,204
 
Repayment under long-term Credit Agreement
   
 
(37,846
)
   
 
(40,569
)
Borrowing of other long-term debt
   
 
5,500
 
   
 
4,675
 
Repayment of other long-term debt
   
 
(474
)
   
 
(700
)
Net proceeds from issuance of common stock through exercise of options
   
 
5
 
   
 
2,453
 
    
  
Net cash provided by financing activities
   
 
26,526
 
   
 
3,063
 
    
  
Net (decrease) increase in cash and cash equivalents
   
 
(2,608
)
   
 
79
 
Cash and cash equivalents—beginning of period
   
 
3,126
 
   
 
827
 
    
  
Cash and cash equivalents—end of period
   
$
518
 
   
$
906
 
    
  
 
 
See accompanying notes

5

Table of Contents
 
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/internet direct marketing. The condensed 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 presented 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 2, 2002 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 inventory certain warehousing and delivery costs associated with shipping its merchandise 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 (SFAS) No. 109—Accounting for Income Taxes. 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 3, 2001 financial statements in order to conform with the November 2, 2002 presentation.

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Table of Contents
 
3.
 
WORKING CAPITAL
 
The net change in operating working capital is composed of the following (in thousands):
 
    
Nine Months Ended
  
    
November 3, 2001
     
November 2, 2002
  
Increase in accounts receivable
   
$
(1,509
)
   
$
(2,507
)
Increase in inventories
   
 
(25,228
)
   
 
(12,524
)
Increase in prepaids and other assets
   
 
(2,522
)
   
 
(604
)
Increase in accounts payable
   
 
4,889
 
   
 
10,484
 
(Decrease) increase in accrued expenses and other liabilities
   
 
(1,058
)
   
 
551
 
    
  
Net increase in operating working capital
   
$
(25,428
)
   
$
(4,600
)
    
  
 
4.
 
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 (in thousands):
 
      
Three Months Ended
     
Nine Months Ended
      
November 3, 2001
     
November 2, 2002
     
November 3, 2001
     
November 2, 2002
Weighted average shares outstanding for basic EPS
     
5,956
     
6,188
     
5,956
     
6,134
Diluted EPS:
                            
Dilutive effect of common stock equivalents
     
216
     
934
     
228
     
873
      
    
    
    
Weighted average shares outstanding for diluted EPS
     
6,172
     
7,122
     
6,184
     
7,007
      
    
    
    
 
Weighted average shares outstanding for calculating diluted earnings per share include basic shares outstanding, plus shares issuable upon the exercise of stock options, using the treasury stock method.

7

Table of Contents
 
5.
 
SEGMENT REPORTING
 
The Company has two reportable segments: full line stores and catalog/internet 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 February 2, 2002 Annual Report on Form 10-K. 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/internet), interest and income taxes. The Company’s segments are strategic business units that offer similar products to the retail customer by two distinctively different methods. In full line stores the typical customer travels to the store and purchases men’s clothing and/or alterations and takes their purchases with them. The catalog/internet direct marketing customer receives a catalog in his or her home, office and/or visits our web page via the internet and places an order via telephone, mail, fax or on-line. The merchandise is then shipped to the customer. The detail segment data is presented in the following table:
 
Quarter ended November 2, 2002
   
Full line Stores
     
Catalog/Internet Direct Marketing
   
Other
     
Total
(in thousands)
                        
Net sales
   
$
49,397
     
$
6,052
   
$
2,417
(a)
   
$
57,866
Depreciation and amortization
   
 
1,065
     
 
15
   
 
390
 
   
 
1,470
Operating income (loss)(b)
   
 
9,441
     
 
1,486
   
 
(7,423
)
   
 
3,504
Identifiable assets(c)
   
 
81,781
     
 
13,646
   
 
31,665
 
   
 
127,092
Capital Expenditures(d)
   
 
2,111
     
 
3
   
 
278
 
   
 
2,392
 
Quarter ended November 3, 2001
   
Full line Stores
     
Catalog/Internet Direct Marketing
   
Other
     
Total
(in thousands)
                        
Net sales
   
$
42,819
     
$
5,294
   
$
2,130
(a)
   
$
50,243
Depreciation and amortization
   
 
899
     
 
16
   
 
335
 
   
 
1,250
Operating income (loss)(b)
   
 
7,807
     
 
1,123
   
 
(6,406
)
   
 
2,524
Identifiable assets(c)
   
 
76,369
     
 
16,350
   
 
28,705
 
   
 
121,424
Capital expenditures(d)
   
 
2,803
     
 
—  
   
 
777
 
   
 
3,580
 

8

Table of Contents
 
Nine Months ended November 2, 2002
   
Full line Stores
     
Catalog/Internet Direct Marketing
   
Other
     
Total
(in thousands)
                        
Net sales
   
$
139,892
     
$
18,957
   
$
6,645
(a)
   
$
165,494
Depreciation and amortization
   
 
2,999
     
 
46
   
 
1,099
 
   
 
4,144
Operating income (loss)(b)
   
 
24,066
     
 
4,666
   
 
(20,246
)
   
 
8,486
Identifiable assets(c)
   
 
81,781
     
 
13,646
   
 
31,665
 
   
 
127,092
Capital expenditures(d)
   
 
4,597
     
 
11
   
 
2,457
 
   
 
7,065
 
Nine Months ended November 3, 2001
   
Full line Stores
     
Catalog/Internet Direct Marketing
   
Other
     
Total
(in thousands)
                        
Net sales
   
$
123,233
     
$
15,247
   
$
5,275
(a)
   
$
143,755
Depreciation and amortization
   
 
2,511
     
 
46
   
 
909
 
   
 
3,466
Operating income (loss)(b)
   
 
18,929
     
 
1,621
   
 
(16,230
)
   
 
4,320
Identifiable assets(c)
   
 
76,369
     
 
16,350
   
 
28,705
 
   
 
121,424
Capital expenditures(d)
   
 
5,903
     
 
400
   
 
3,122
 
   
 
9,425
 
(a)
 
Net sales from segments below the quantitative thresholds are attributable primarily to three operating segments of the Company. Those segments include factory/outlet stores, franchise stores and regional tailor shops. None of these segments has ever met any of the quantitative thresholds for determining reportable segments.
 
(b)
 
Operating income in the “Full Line Stores and Catalog/Internet” segment represents profit before allocations of overhead from “management company” and the distribution center, interest and income taxes.
 
(c)
 
Identifiable assets include cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets, and property, plant and equipment, net, residing in or related to the reportable segments. Assets included in Other are primarily fixed assets associated with the corporate office and distribution center, deferred tax assets, and inventories which have not been assigned to one of the reportable segments.
 
(d)
 
Capital expenditures include purchases of property, plant and equipment made for the reportable segment.

9

Table of Contents
 
6.
 
NEW TERM DEBT
 
The Company issued two long term notes during the second quarter of 2002. The first note of $1,575,000 is secured by the Company’s aircraft. It has a floating interest rate (4.2% as of November 2, 2002) tied to the London interbank offer rate. The floating interest rate can be converted to a fixed rate in the first 24 months of the term. The note has a five year term with equal monthly payments of approximately $20,000 and a final balloon payment of approximately $630,000 due at the end of the term. The Company also issued a $3,100,000 note secured by new equipment and construction in the Company’s distribution center. It has a floating interest rate (4.6% as of November 2, 2002) tied to 30 day commercial paper. The floating interest rate can be converted to a fixed rate in the first 24 months of the term. The note has a seven-year term with equal monthly payments of approximately $43,000. Both notes are cross defaulted with other indebtedness including the Credit Agreement.
 
7.
 
EXERCISE OF OPTIONS
 
In the nine month period ended November 2, 2002, options for the purchase of 273,495 shares of Company Common Stock were exercised resulting in net cash proceeds of $2,453,000 to the Company. The options that were exercised had exercise prices ranging from $1.88 to $9.17. The transactions increased shareholders’ equity in the accompanying condensed consolidated balance sheet.
 
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 consolidated financial statements and notes thereto for the fiscal year ended February 2, 2002.
 
Overview—For the third quarter of the Company’s fiscal year ending February 1, 2003 (“fiscal 2002”), the Company’s net income increased 42% compared with the third quarter of the Company’s fiscal year ended February 2, 2002 (“fiscal 2001”). The Company earned $.26 per diluted share in the third quarter of fiscal 2002 compared with $.21 per diluted share in the third quarter of fiscal 2001. As such, earnings per share increased 24% compared with the prior year.

10

Table of Contents
 
The Company generated increased profits in both the full line stores and catalog/internet segments in the third quarter driven by a 15.2% increase in sales over the third quarter of fiscal 2001 and higher gross profit margins. Gross profit margin increased 220 basis points in the third quarter of fiscal 2002 as compared with the third quarter of 2001 as the Company continued to improve its sourcing of merchandise and management of markdowns.
 
The Company has opened 25 new stores in fiscal 2002, mostly in existing markets. Two of the new stores opened in the first quarter, six opened in the second quarter, 16 opened in the third quarter and the twenty-fifth store opened in November. The Company expects to open approximately 50 stores next year.
 
Inventories at the end of the third quarter of fiscal 2002 were approximately $77.2 million, or $1.5 million (2%) higher than the same time last year. The increase relates almost entirely to stocking the 27 new stores that were opened since the end of the third quarter of fiscal 2001. Inventories in comparable stores decreased approximately 12% at the end of the third quarter of fiscal 2002 compared with the same time last year as sales were better than expected in the first half of fiscal 2002 and the Company opened more stores than originally planned. The Company expects to increase inventories approximately 10% to 15% over last year’s amounts in the fourth quarter of fiscal 2002 to support new stores and anticipated sales growth.
 
The Company has a $60 million bank line of credit (the “Credit Agreement”) that extends until April 30, 2005. As of November 2, 2002, there was $43.1 million of availability and $6.5 million of borrowings under the Credit Agreement. The Company had $16.3 million of total debt (excluding cash) outstanding as of the end of the third quarter compared with $32.9 million at the same time last year. As such, total debt (excluding cash) decreased $16.6 million since the end of the third quarter of 2001 despite opening 27 new stores during the last 12 months.
 
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.
 
      
Percentage of Net Sales
Three Months Ended
       
Percentage of Net Sales
Nine Months Ended
  
      
November 3,
       
November 2,
       
November 3,
       
November 2,
  
      
2001
       
2002
       
2001
       
2002
  
Net sales
     
100.0
%
     
100.0
%
     
100.0
%
     
100.0
%
Cost of goods sold
     
46.1
 
     
43.9
 
     
49.0
 
     
46.1
 
      
    
    
    
Gross profit
     
53.9
 
     
56.1
 
     
51.0
 
     
53.9
 
General and administrative expenses
     
11.5
 
     
11.4
 
     
10.2
 
     
10.8
 
Sales and marketing expenses
     
37.0
 
     
38.3
 
     
37.4
 
     
37.8
 
Store opening costs
     
.4
 
     
.3
 
     
.3
 
     
.2
 
One-time charge
     
—  
 
     
—  
 
     
.1
 
     
—  
 
      
    
    
    
Operating income
     
5.0
 
     
6.1
 
     
3.0
 
     
5.1
 
Interest expense, net
     
.8
 
     
.5
 
     
.7
 
     
.5
 
      
    
    
    
Income before income taxes
     
4.2
 
     
5.6
 
     
2.3
 
     
4.6
 
Provision for income taxes
     
1.6
 
     
2.3
 
     
.8
 
     
1.9
 
      
    
    
    
Net income
     
2.6
%
     
3.2
%
     
1.5
%
     
2.7
%
      
    
    
    

11

Table of Contents
 
Net Sales—Net sales for the third quarter of fiscal 2002 increased 15.2%, to $57.9 million, compared with $50.2 million in the third quarter of fiscal 2001. Comparable store sales increased 7.0% in the third quarter of fiscal 2002 as compared with the third quarter of fiscal 2001. Total sales for the first nine months of fiscal 2002 increased 15.1%, to $165.5 million, compared with $143.8 million in the first nine months of fiscal 2001. Comparable store sales increased 5.6% in the first nine months of fiscal 2002 as compared with the first nine months of fiscal 2001. The increase in total sales was driven by increases in sales of suits, shirts, ties and sportswear throughout the first nine months of the year, and increases in sales of suits, shirts and ties in the third quarter. For the first nine months of fiscal 2002 and fiscal 2001, suits represented approximately 30% of total sales as the suit business has begun to stabilize. Sales also increased as a result of the opening of new stores as follows: (in thousands except the number of stores)
 
    
Three Months Ended
   
Nine Months Ended
    
November 3,
2001
     
November 2,
2002
   
November 3,
2001
     
November 2,
2002
    
Stores
     
Square
Feet
     
Stores
   
Square
Feet
   
Stores
     
Square
Feet
     
Stores
   
Square
Feet
Stores open at the end of the period
   
125
 
   
684
 
   
143
   
773
   
116
 
   
642
 
   
135
   
735
Opened
   
8
 
   
38
 
   
16
   
69
   
18
 
   
85
 
   
24
   
107
Closed
   
(1
)
   
(4
)
   
—  
   
—  
   
(2
)
   
(9
)
   
—  
   
    —  
    
  
  
  
  
  
  
  
Stores open at the end of the period
   
132
 
   
718
 
   
159
   
842
   
132
 
   
718
 
   
159
   
842
    
  
  
  
  
  
  
  
 
Comparable store sales discussed earlier include merchandise sales generated in full line and factory stores, excluding stores that had new stores opened in their immediate market area (within zero to ten miles) in the past 12 months. New stores are added to the comparable store base at the beginning of the second fiscal year after they open. As such, a new store may be excluded from comparable store sales for up to the first 23 months of operation. Franchise stores are not included in comparable store sales.
 
Gross Profit—Gross profit (net sales less cost of goods sold) as a percent of sales increased 220 basis points to 56.1% in the third quarter and 290 basis points to 53.9% in the nine months ended November 2, 2002. The increases relate primarily to a combination of lower merchandise cost and better management of markdowns. The Company expects gross profit as a percent of sales to increase at least 100 basis points in the fourth quarter of 2002 over the comparable amount in the fourth quarter of 2001.
 
General and Administrative Expenses—General and administrative expenses increased $.8 million to $6.6 million in the third quarter of fiscal 2002 and $3.2 million to $17.9 million in the nine months ended November 2, 2002 compared with the same periods last year. The increases in the third quarter and nine month period ended November 2, 2002 relate primarily to increases of $.5 million and $2.0 million, respectively, for payroll and overhead costs to build the infrastructure to support increased direct inventory sourcing and accelerated new store openings. For the third quarter and nine month period, incentive compensation expense was $.2 million and $1.1 million higher than in the same periods last year.

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General and administrative expenses consists primarily of senior management, corporate support staff including store site selection and construction, regional store management, inventory selection and sourcing personnel, other corporate overhead and distribution center operations.
 
Sales and Marketing Expenses—Sales and marketing expenses increased $3.6 million to $22.2 million in the third quarter of fiscal 2002 as compared with the third quarter of fiscal 2001 and increased $8.8 million to $62.5 million in the first nine months of fiscal 2002 as compared with the first nine months of fiscal 2001. The increased sales and marketing expenses primarily represent occupancy, payroll and other store variable costs for the 27 new stores opened since the end of the third quarter of fiscal 2001, as well as increases of $1.0 million and $2.4 million for marketing for all stores during the quarter and nine months, respectively. Sales and marketing expenses consist primarily of store occupancy, store payroll, other variable store costs and all advertising costs (including catalog marketing). The Company expects sales and marketing expenses to increase in the fourth quarter of 2002 compared with the same period in the prior year as it has opened 25 new stores in 2002.
 
Store Opening Costs—Store opening costs increased slightly during the third quarter and nine months of fiscal 2002 as the Company opened more new stores than in the prior year. The average store opening expense per store has declined since last year as the Company has spent lower amounts on advertising for the opening of new stores.
 
Interest Expense—Interest expense decreased $.1 million in the third quarter of fiscal 2002 compared with the same quarter of the prior year due primarily to a $12.4 million lower average outstanding debt balance in the current quarter. Interest expense decreased $.1 million for the nine month period ended November 2, 2002 compared with the same period last year as the average outstanding debt balance decreased $3.7 million and the average interest rate decreased.
 
One-Time Charge—The one-time charge in fiscal 2001 primarily represents professional fees incurred in the first quarter of fiscal 2001 in connection with a strategic action considered by the Board of Directors.
 
Income Taxes—The effective income tax rate for the first nine months of 2002 increased to 40.7% as compared with 37.0% for the same period last year as a result of higher estimated state taxes, higher estimated non-deductible compensation under Section 162 of the Internal Revenue Code and higher marginal federal income tax rates as income extends into higher tax brackets.
 
Liquidity and Capital Resources—The Company maintains a $60 million Credit Agreement which extends until April 30, 2005. At November 2, 2002, the Company had $6.5 million of outstanding borrowings and $43.1 million of availability under its Credit Agreement compared with borrowings of $23.7 million and availability of $21.3 million at the end of the third quarter last year. The Credit Agreement includes financial covenants which are in effect only if the Company’s availability in excess of outstanding borrowings is less than $5 million. The Company also has $10.7 million of term debt (the “Term Debt”) due to be repaid over the next 11 years.

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The Company issued two long term notes during the second quarter of 2002. The first note of $1,575,000 is secured by the Company’s aircraft. It has a floating interest rate (4.2% as of November 2, 2002) tied to the London interbank offer rate. The floating interest rate can be converted to a fixed rate in the first 24 months of the term. The note has a five year term with equal monthly payments of approximately $20,000 and a final balloon payment of approximately $630,000 due at the end of the term. The Company also issued a $3,100,000 note secured by new equipment and construction in the Company’s distribution center. It has a floating interest rate (4.6% as of November 2, 2002) tied to 30 day commercial paper. The floating interest rate can be converted to a fixed rate in the first 24 months of the term. The note has a seven-year term with equal monthly payments of approximately $43,000. Both notes are cross defaulted with other indebtedness including the Credit Agreement.
 
The Company had $16.3 million of total debt (excluding cash) outstanding as of the end of the quarter compared with $32.9 million at the same time last year. As such, total debt decreased $16.6 million since the end of the third quarter of 2001 despite opening 27 new stores during the last 12 months.
 
The following table summarizes the Company’s sources and uses of funds as reflected in the condensed consolidated statements of cash flows:
 
    
Nine Months Ended
  
    
November 3, 2001
     
November 2, 2002
  
Cash provided by (used in):
                  
Operating activities
   
$
(19,709
)
   
$
4,081
 
Investing activities
   
 
(9,425
)
   
 
(7,065
)
Financing activities
   
 
26,526
 
   
 
3,063
 
    
  
Net (decrease) increase in cash and cash equivalents
   
$
(2,608
)
   
$
79
 
    
  
 
Cash provided by operating activities during the first nine months of fiscal 2002 was primarily the result of net income plus depreciation ($8.7 million) and higher accounts payable balances ($10.5 million) partially offset by higher inventory ($12.5 million) and accounts receivable balances ($2.5 million). As noted earlier, the Company expects to increase inventories approximately 10% to 15% over last year’s amounts in the fourth quarter of 2002, which will use cash. Cash used in investing activities in 2002 primarily relates to opening new stores and the purchase of a corporate aircraft. Cash used in financing activities is primarily the result of repayments under the Credit Agreement while cash generated from financing activities is the result incurring $4.7 million of term debt and net proceeds of $2.5 million from the exercise of options to purchase Company Common Stock.
 
For fiscal 2002, the Company expects to spend approximately $10 million on capital expenditures primarily to open the 25 new stores opened in 2002, to renovate several stores and the purchase of the corporate aircraft.
 
The estimated capital expenditures are net of $5.4 million of negotiated landlord contributions to help fund the construction of leasehold improvements for new stores. Of the $5.4 million of landlord contributions, $.6 million have been received through November 2, 2002. The balance is expected to be received within the next six months. These amounts are typically paid by the landlords after the completion of construction by the Company and the receipt of appropriate lien waivers from contractors.
 
For fiscal 2003, the Company expects to spend $15 million to $18 million, net of landlord contributions, on capital expenditures primarily to open approximately 50 stores, expand the capacity of the distribution center and to renovate several stores.

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The Company believes that its current liquidity and its availability under the Credit Agreement and long term debt will be adequate to support its current working capital and capital expenditure needs.
 
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 ability of the Company to finance its expansion plans, mix of goods sold, pricing, the market price of key raw materials such as wool and cotton, availability of lease sites for new stores, the ability to source product from the Company’s global supplier base and other competitive factors. Many of the risks are described in the Company’s reports filed with the Securities and Exchange Commission including the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2002, which should be carefully reviewed before making any investment decision.
 
Critical Accounting Policies—The Company believes the following critical accounting policy affects management’s significant judgments and estimates used in the preparation of the condensed consolidated financial statements. For a detailed discussion on the application of this and other accounting policies, see Note 1 in the Consolidated Financial Statements in the Company’s February 2, 2002 Annual Report on Form 10-K.
 
Inventory.    The Company records inventory at the lower of first-in, first-out, cost or market. The estimated market value is based on assumptions for future demand and related pricing. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.
 
Item 3.    Quantitative and Qualitative Disclosures about Market Risk
 
The Company did not use derivative financial instruments or derivative commodity instruments at any time during fiscal 2002. The Company does not believe it is materially at risk for foreign currency fluctuations, as all or substantially all of the Company’s transactions are in U.S. dollars. The company pays interest on most of its long-term debt at variable rates based on independent benchmarks (e.g., prime and LIBOR). The Company does not believe it is materially at risk for interest rate fluctuations due to the level of outstanding long-term debt.

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Item 4.    Controls and Procedures
 
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14 and 15d-14 as of December 16, 2002 (the “Evaluation Date”) and have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others with those entities.
 
No significant deficiencies or material weaknesses in the Company’s internal controls were identified during the quarterly period ended November 2, 2002 or subsequent to such quarter through the date of this Form 10-Q and there have been no significant changes in the Company’s internal controls or other factors that could significantly affect these controls during such quarter or subsequent period.

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PART II.    OTHER INFORMATION
 
Item 4. Submission of Matters to a Vote of Security Holders
 
There were no matters submitted to a vote of securities holders during the period covered by this report.
 
Item 6. Exhibits and reports on Form 8-K
 
A)
 
Exhibits
 
2.1 Restated Certificate of Incorporation.*
 
2.2 By-laws.*
 
99-1: Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to          Section 906 of the Sarbanes-Oxley Act of 2002.
 
99-2: Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to          Section 906 of the Sarbanes-Oxley Act of 2002.
 
*Incorporated by reference to the Company’s Registration Statement on Form S-1 filed May 3, 1994.
 
B)
 
Reports on Form 8-K
 
There were no reports filed on Form 8-K during the quarter.

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SIGNATURE
 
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 16, 2002
      
       Jos. A. Bank Clothiers, Inc.
       (Registrant)
           
/s/    David E. Ullman        
           
David E. Ullman
Executive Vice President, Chief Financial Officer

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CERTIFICATIONS
 
I, Robert N. Wildrick, certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of Jos. A. Bank Clothiers, Inc.;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
 
a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
 
c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:
 
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date: December 16, 2002
        
           
/s/     Robert N. Wildrick        
           
Robert N. Wildrick
Chief Executive Officer

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CERTIFICATIONS
 
I, David E. Ullman, certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of Jos. A. Bank Clothiers, Inc.;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
 
a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
 
c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:
 
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date: December 16, 2002
        
           
/s/    David E. Ullman        
           
David E. Ullman
Chief Financial Officer

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