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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act
of 1934 for the fiscal year ended January 29, 2000 ("Fiscal 1999").
[ ] 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 character)
Delaware 36-3189198
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(State of Incorporation) (I.R.S. Employer Identification No.)
500 Hanover Pike, Hampstead, MD 21074
------------------------------- -----
(Address of principal executive offices) (zip code)
(410) 239-2700
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(Registrant?s telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act: Securities registered pursuant to Section 12(b) of the Act:
Title of each class None
-------------------
Common Stock (the "Common Stock") par value $.01 per share
Rights to purchase units of Series A Preferred Stock
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant?s knowledge, in definitive proxy or information
statements incorporated by reference in Part III for this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of shares of Common Stock on the
National Association of Securities Dealers Automated Quotation (?NASDAQ?)
National Market System at April 20, 2000 was approximately $28,289,228.
The number of shares of Common Stock, par value $0.01 per share, outstanding on
April 20, 2000 was 5,955,627.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Definitive Proxy Statement for Annual Meeting of Shareholders to be
held on June 13, 2000 are incorporated by reference into Part III hereof.
Index to the exhibits appears on Pages 12 and 13.
PART I
Item 1. BUSINESS
--------
General
Jos. A. Bank Clothiers, Inc., ("Jos. A. Bank" or the "Company"),
established in 1905, is a multi-channel retailer of men's tailored and casual
clothing and accessories. The Company sells substantially all of its products
exclusively under the Jos. A. Bank label through its 100 Company-operated retail
stores and 10 franchise stores located throughout the Northeast, Midwest, South
and Mid-Atlantic regions of the U.S., as well as through the Company's
nationwide catalog and Internet (www.josbank.com) operations. The Company
initiated the Internet site in 1997 and has taken customer orders through the
Internet since August, 1998.
The Company's products are targeted at the male career professional,
and its marketing emphasizes the Jos. A. Bank line of quality tailored and
casual clothing and accessories, which is offered at price points typically
established at approximately 20% below those of its principal competitors for
items of comparable quality. The Company believes that it is able to achieve
this pricing advantage for its men's suits, sport coats and pants, primarily by
its design capability, and its sourcing leverage. In April, 1998, the Company
completed the disposition of its remaining manufacturing operations and now
sources all of its products through third party vendors. The Company has two
principal, wholly-owned subsidiaries, The Joseph A. Bank Mfg. Co., Inc., (the
"Manufacturer") and National Tailoring Services, Inc. ("NTS").
Strategy
The Company's strategy is to further enhance its competitive position
in men's proprietary label, updated apparel, and to capitalize on the strength
of the Jos. A. Bank name and reputation by offering its customers multiple
convenient channels to purchase product, including its 110 retail stores,
Internet site and catalog.
Multi-Channel Retailing. The Company's strategy is to operate its
three channels of selling as an integrated business and to provide the same
personalized service to its customers regardless of whether merchandise is
purchased through its stores, the Internet or catalog. The Company believes the
synergy between its stores, its Internet site and catalog offers an important
convenience to its customers and a competitive advantage to the Company. The
Company believes it has significant opportunity to leverage the three channels
of selling by promoting each channel together to create awareness of the brand.
For example, the Company recently began promoting its Internet site in its
stores, catalog and media advertising without incurring substantial costs to
create the promotions. Conversely, the Internet site provides store location
listings and will be used as a promotional source for the stores and catalog in
the future. The Company also uses its catalog to communicate the Jos. A. Bank
image, to provide customers with fashion guidance in coordinating outfits and to
generate store and Internet traffic.
Store Growth. The Company believes it has substantial opportunity to
increase its store base by adding stores in its existing markets and entering
new markets. The Company opened 32 new full-line stores, 3 factory stores and 3
franchise stores since Spring 1996 and expects to open approximately 75-100 new
stores through fiscal 2003. Substantially all of the stores to be opened in the
next two years will be placed in existing markets which allows the Company to
leverage its existing advertising, management, distribution and sourcing
infrastructure. Additional new stores would be opened in new markets such as
California, Washington, Arizona, etc., as well as existing markets.
Internet. The Company's success as a cataloger facilitated the
development of on-line selling capabilities in August, 1998, providing a
worldwide purchasing audience. While the Internet accounted for less than 1% of
the Company's sales in 1999, the Company expects its Internet sales volume to
continue to grow at a significant rate.
Sales Channels
Stores. At April 20, 2000, the Company operated 93 full-line retail
stores, 5 factory stores and 2 outlet stores and had 10 franchise locations in a
total of 28 states and the District of Columbia. The following table sets forth
the region and market of the stores that were open at such date.
1
JOS. A. BANK STORES
-------------------
Total # Total #
State Of Stores State Of Stores
- ----- --------- ----- ---------
Alabama 2 (a) Mississippi 1 (a)
Colorado 2 Missouri 1
Connecticut 3 New Jersey 7
Delaware 1 New York 9
Florida 5 North Carolina 6 (a)
Georgia 7 (a) (c) Ohio 4
Illinois 6 (a) Pennsylvania 5 (c)
Indiana 1 Rhode Island 1
Kansas 1 South Carolina 1
Kentucky 1 Tennessee 3 (a)
Louisiana 3 (a) Texas 11
Maryland 9 (b) (c) Virginia 9 (c)
Massachusetts 3 Washington, D.C 1
Michigan 4 Wisconsin 1
Minnesota 2 ---
TOTAL 110
===
(a) Indicates one or more franchise stores.
(b) Indicates one or more outlet stores.
(c) Indicates one or more factory stores.
The Company expects its 75-100 projected new stores to provide an
additional $90 million in annual sales by the final year (fiscal 2003) of their
plan. To increase the assurance that the future new stores would be successful,
the Company hired a firm that specializes in real estate selection to analyze
the performance of all of its existing store sites. The real estate specialist
identified a key factor that appears to point to success of a Jos. A. Bank
store -- that the Company's stores that are placed in high-end, specialty retail
centers significantly outperform stores that are in strip centers or are
freestanding. These specialty centers include current store sites such as
Reston, VA, Annapolis, MD and East Cobb, GA.
The Company has identified approximately 200 sites that fit the
profile of the specialty retail centers and expects many more to be developed
over the next four years. Jos. A. Bank has identified the first 50 targeted
locations and is aggressively pursuing them. The first target will include
several stores in Chicago. The Company is aiming to open between 75-100 stores
through 2003, including at least six stores in 2000 and up to 18 stores in 2001.
The Company's store design is based on the use of wooden fixtures with
glass shelving, numerous tables to feature fashion merchandise, carpet and
abundant accent lighting and is intended to promote a pleasant and comfortable
shopping environment. In the stores that have been opened in the last four
years, 80% of a store's space is dedicated to selling activities, with the rest
allocated to stockroom and other support areas. This compares favorably to other
Company stores where approximately 65% is dedicated to selling activities. The
full-line stores averaged 8,200 square feet at the beginning of fiscal 1997 and
averaged 6,400 square feet at the end of fiscal 1999. The Company expects that
future stores will vary in size from approximately 4,000 to 7,000 square feet
depending on the market.
The newer stores are designed to utilize regional overflow tailor
shops which allows the use of smaller tailor shops within each store. Each full
line store has a tailor shop which provides a range of tailoring services. The
Company guarantees all the tailoring work. Operating NTS, the company-owned
regional tailor shops, has allowed the Company to reduce the number of tailors
in the stores by sending all overflow work to NTS. These overflow shops
experience higher productivity as the tailors are not interrupted by store
personnel during the course of the day. In every store, the store manager and
certain additional staff have been trained to fit tailored clothing for
alterations.
The Company has 10 franchise locations. Generally, a franchise
agreement between the Company and the franchisee provides for a ten-year term
with an option, exercisable by the franchisee under certain circumstances, to
extend the term for an additional ten-year period. Franchisees pay the Company
an initial fixed franchise fee and then a percentage of sales. To assure that
customers at franchise locations receive the same personalized service offered
at Company operated stores, the Company typically requires certain franchisee
employees to attend a Company sponsored training program. In addition,
franchisees are required to present and sell merchandise according to the
Company standardized procedures and to maintain and protect the Company's
reputation for high quality, classic clothing. Franchisees purchase
substantially all merchandise offered for sale in their stores from the Company
at an amount above cost.
2
The Company has two outlet stores which are used to liquidate excess
merchandise and offer first quality products at a reduced price. Because of the
classic character of the Company's merchandise and aggressive store clearance
promotions, historically the Company has not had significant quantities of
merchandise to sell through its outlet stores.
The Company has five factory stores which operate in factory/outlet
centers and offer first quality product under the Jos. A. Bank name. Three of
the stores were opened since April 1999, while the other two stores were
converted outlet stores.
Catalog
The Company's catalogs offer potential and Existing customers
convenience in ordering the Company's merchandise. In fiscal 1999 and 1998 the
Company distributed approximately 7.8 and 7.6 million catalogs, respectively,
excluding catalogs sent to stores for display and general distribution. In both
fiscal 1999 and 1998, catalog sales represented approximately 13% of net sales.
The Company divides the year into two merchandise seasons, Spring and Fall, and
mails its catalog to active customers as often as every four weeks. Catalog
circulation has traditionally included base catalogs offering a representative
assortment of the Company's entire range of merchandise.
Catalogs offer potential and existing customers an easy way to order
the full range of Jos. A. Bank products. Catalogs are important tools in
communicating our high-quality image, providing customers with guidance in
coordinating outfits, generating store traffic and providing useful market data
on customers. Customers increasingly are becoming more comfortable purchasing
traditional business attire through the catalog.
To make catalog shopping as convenient as possible, the Company
maintains a toll-free telephone number accessible 24 hours a day, seven days a
week. The Company utilizes on-line computer terminals to enter customer orders
and to retrieve information about merchandise and its availability. Catalog
sales associates are generally able to help select merchandise and can provide
detailed information regarding size, color, fit and other merchandise features.
In most cases, sample merchandise is available for catalog sales associates to
view, thereby allowing them to better assist customers. Clothing purchased from
the catalog may be returned to any Company store or to the Company by mail.
To process catalog orders, sales associates enter orders on-line into
a computerized catalog order entry system which automatically updates all files,
including the Company's customer mailing list and permits the Company to measure
the response to individual merchandise and catalog mailings. Sales and inventory
information is available to the Company's buyers the next day. Computer
processing of orders is performed by the warehouse management system which
permits efficient picking of inventory from the warehouse. The Company's order
entry and fulfillment systems permit the shipment of most orders the following
day. Orders are shipped primarily by second day delivery or, if requested, by
expedited delivery services, such as UPS priority. The Company replaced its
Catalog system in May 1999 which facilitated easier order entry and provides
greater customer data, as well as being Y2K compliant.
Internet.
The Company is committed to growing its Internet business. The Company
is establishing solid on-line partnerships that will generate even more exposure
for the website. Through a partnership agreement with America Online, Inc.
(AOL), 16 million subscribers can now access the Company's website directly from
AOL's shopping page. The Company has also developed advertising and affiliate
programs with companies such as AOL, Fashionmall.com and CBS Storerunner, among
others. The Company recently committed approximately $1 million to develop a new
Internet site. The new site will provide many customer-friendly features such as
real-time inventory status, order confirmation, and product search capabilities,
among others. The Company expects to "go live" with the new site in the summer
of 2000.
The processing of orders for the Internet is similar to the catalog
orders. As such, the Company has an existing infrastructure to service customers
efficiently and quickly.
Merchandising
The Company believes it fills a niche of providing classic,
professional men's clothing with impeccable quality at a good price. The
Company's merchandising strategy focuses on achieving an updated classic look
with extreme attention to detail in quality materials and workmanship. The
Company offers a distinctive collection of clothing and accessories necessary to
dress the career man from head to toe, business dress and business casual, all
sold under the Jos. A. Bank label. Its product offering includes suits, tuxedos,
shirts, vests, ties, sport coats, pants, sportswear, overcoats, sweaters, belts
and braces, socks and underwear. The Company also sells branded shoes from Cole
Haan, Johnston & Murphy, and Allen-Edmonds.
3
The Company believes its merchandise offering is well positioned to
meet the changing trends of dress for its target customer. As the corporate work
environment has trended to casual wear, the Company's product offering has been
modified to meet the needs of the Jos. A. Bank customer. In 1999, casual wear
(which includes sport coats, slacks and sportswear) accounted for 36% of the
Company's sales.
The Company has added new suit styles to its top-of-the-line Signature
Collection made of Loro Piana Super 120s fabric, a new benchmark in quality and
style. The Company also offers its customers its Business Express line, a
concept for purchasing suits that allows customers to customize their wardrobe
by selecting separate, but perfectly matched, jackets and pants from one of
three coat styles, plain front or pleated pants, and numerous updated fabric
choices, including Super 100s wool and natural stretch wool. The Business
Express line allows a customer to buy a suit with minimal alteration and will
fit their unique body size, similar to a custom-made suit. Jos. A. Bank is one
of the few retailers in the country that has successfully developed this concept
which the Company believes is a competitive advantage.
Design and Purchasing
The Jos. A. Bank merchandise is designed through the coordinated
efforts of the Company's merchandising, buying and planning staffs working in
conjunction with finished goods suppliers and contract manufacturers.
Substantially all products are made to the Company's rigorous specifications,
thus ensuring consistent fit and feel for the customer. The merchandising buying
staff oversees the development of each product in terms of style, color and
fabrication. Because the Company's designs are focused on updated classic
clothing, the Company experiences much less fashion risk than other retailers.
The process of creating a new garment begins approximately nine months before
the product's expected in-stock date.
The Company believes that it gains a distinct advantage over many of
its competitors in terms of quality and price by effectively designing products,
sourcing piece goods and then having merchandise manufactured to its own
specifications by contract manufacturers, either domestically or abroad. The
Company buys its shirts from leading U.S. and overseas shirt manufacturers who
also supply shirts to many of the Company's competitors. All clothing
manufactured for the Company by contract manufacturers must conform to the
Company's rigorous specifications with respect to standardized sizing and
quality.
The Company's planning staff is responsible for providing each channel
of business with the correct amount of products at all times.
The Company transacts business on an order-by-order basis and does not
maintain any long-term or exclusive contracts, commitments or arrangements to
purchase from any piece goods vendor or contract manufacturer other than those
discussed in the "Manufacturing" section. During fiscal 1999, Burlington
Industries, Inc., Eighteen International 1981, Ltd., HMS International Fabrics
Corp. and Warren Corporation, accounted for over 89% of the piece goods
purchased by the Company. The Company does business with all of its vendors in
U.S. currency and has not experienced any material difficulties as a result of
any foreign political, economic or social instabilities. The Company believes
that it has good relationships with its piece goods vendors, finished goods
suppliers and contract manufacturers and that there will be adequate sources to
produce a sufficient supply of quality goods in a timely manner and on
satisfactory economic terms. Sourcing under the long-term contract noted in the
"Manufacturing" section accounted for 36% of finished product purchases in 1999,
of which 52% was paid to the sourcing vendor and the remainder was paid to piece
goods suppliers.
Marketing, Advertising and Promotion
Strategy. Historically, the Company pursued a traditional or mass
marketing print and radio approach in support of its retail locations. In 1996,
a portion of the print and radio medias was converted to direct mail usage to
achieve improved marketing efficiency. Core to each campaign, while primarily
promotional, is the identification of the Jos. A. Bank name as synonymous with
high quality, updated classic clothing offered at value price points. The
Company has a database of over 2.5 million names of people who have previously
made a purchase from either the Company's retail store, Internet site or catalog
or have requested a catalog from the Company. Of these, over 1.0 million
individuals have made such purchase or catalog request in the past 24 months.
The Company selects names from this database based on expectations of response
to specific promotions which allows the Company to more efficiently use its
advertising dollars.
In the past two years, the Company has made significant investments in
its systems which has improved its ability to capture customer purchasing data.
The Company plans to increase its use of this data to improve its marketing
efficiency.
4
Product Specific Sales and Promotional Events. Throughout each season,
the Company promotes specific items or categories at specific prices that are
below the normal retail price. Examples are the trade-in sale whereby a customer
receives a fixed dollar amount off the purchase of a suit by "trading-in" an old
suit which is donated to charity and the "$199 Suit Sale." These sales are used
to complement promotional events and to meet the needs of the customers. At the
end of each season, the Company stores conduct clearance sales to promote the
sale of that season's merchandise.
Corporate Card. Certain organizations and companies can participate in
our corporate card program, through which all of their employees receive a 20%
discount off regularly-priced Jos. A. Bank merchandise. The card is honored at
all stores as well as for catalog purchases. Over 6,300 companies nationally,
from privately-owned to large public companies, are now participating in the
program. Participating companies are able to promote the Card as a free benefit
to their employees.
Apparel Incentive Program. Jos. A. Bank Clothiers apparel incentive
gift certificates are used by various companies as a reward for achievement for
their employees. The Company also redeems proprietary gift certificates marketed
by major premium/incentive companies through its stores and catalogs.
Distribution
The Company uses a centralized distribution system, under which all
merchandise is received, processed and distributed through the Company's
distribution facility located in Hampstead, Maryland. Merchandise received at
the distribution center is promptly inspected to insure expected quality in
workmanship and conformity to Company sizing specifications. The merchandise is
then allocated to individual stores, packed for delivery and shipped to the
stores, principally by common carrier. Each store generally receives a shipment
of merchandise twice a week from the distribution center; however, when
necessary because of a store's size or volume, a store can receive shipments
more frequently. Inventory of basic merchandise in the Company stores is
replenished regularly based on sales tracked through its point-of-sale
terminals. Shipments to catalog customers are also made from the central
distribution facility.
Management Information Systems
In connection with the millennium and to retain a competitive edge,
many of the Company's systems have been updated in the last two years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein for a discussion on the systems.
Manufacturing
In fiscal 1997, the Company manufactured approximately 15% of its
merchandise requirements at its two facilities located in Maryland. Prior to the
end of fiscal 1997, the Company decided to discontinue its then remaining
manufacturing operations and focus on its retailing expertise. (See
"Consolidated Financial Statements - Note 12" for a discussion of discontinued
manufacturing operations). As of April 18, 1998 (the date of the sale),
approximately 370 employees worked at these manufacturing facilities. These
employees were transferred to the purchaser of the manufacturing operations (the
"Purchaser") and the Company was released from any future obligation to the
employees. The Company has agreed to buy certain clothing units from the
Purchaser at least through April, 2001 and under certain circumstances through
April, 2003, subject to certain conditions and performance criteria. The Company
purchased 36% of its merchandise requirements from the Purchaser in fiscal year
1999.
Competition
The Company competes primarily with other specialty retailers,
department stores and other catalogers engaged in the retail sale of apparel,
and to a lesser degree with other retailers of men's apparel. Among others, the
Company's store, Internet and catalog operations compete with Brooks Brothers,
Nordstrom and Lands End, as well as competitors in each store's market. Many of
these major competitors are considerably larger and have substantially greater
financial, marketing and other resources than the Company.
In general, the Company believes that it maintains its competitive
position based not only on its ability to offer its quality career clothing at
price points typically established at approximately 20% below those of its
principal competitors for items of comparable quality, but also on greater
selection of merchandise within the Company's focus on classic career clothing,
the quality, consistency and value of the Jos. A. Bank brand, and superior
customer service.
5
Trademarks
The Company is the owner in the United States of the trademark "Jos.
A. Bank" and "The Miracle Tie Collection". These trademarks are registered in
the United States Patent and Trademark Office. A federal registration is
renewable indefinitely if the trademark is still in use at the time of renewal.
The Company's rights in the trademarks are a significant part of the Company's
business. Accordingly, the Company intends to maintain its trademarks and the
related registrations. The Company is not aware of any claims of infringement or
other challenges to the Company's right to use its trademarks in the United
States.
In addition, the Company has registered "josbank.com" and various
other internet domain names. The Company intends to renew its domain names from
time to time for the conduct and protection of its e-commerce business.
Employees
As of April 20, 2000, the Company had 1,174 employees.
As of April 20, 2000, 168 employees worked in the tailoring and
distribution center, most of whom are represented by the Union of Needletrades
Industrial & Textile Employees. The current collective bargaining agreement was
recently extended to April 30, 2003. The Company believes that union relations
are good. During the past 50 years, the Company has had only one work stoppage,
which occurred approximately 20 years ago. The Company believes that its
relations with its non-union employees are also good. A small number of our
sales associates are union members.
Item 2. DESCRIPTION OF PROPERTY
-----------------------
The Company owns its distribution and corporate office facility
located in the Maryland area, subject to certain financing liens. (See
"Consolidated Financial Statements -- Note 5.") The Company believes that its
existing facility is well maintained and in good operating condition. The
Company also owns one manufacturing facility in Maryland. The table below
presents certain information relating to the Company's corporate properties as
of April 20, 2000:
Gross Owned/
Location Square Feet Leased Primary Function
- -------- ----------- ------ ----------------
Hampstead, Maryland................ 210,000 Owned Corporate offices, distribution center, catalog fulfillment and
regional tailoring overflow shop
Baltimore, Maryland./(1)/.......... 118,000 Owned Former coat and pants sewing plant and central pressing
- ------------------
(1) The property noted above that is located in Baltimore, MD, was sub-leased
in connection with the disposition of the manufacturing operations in April,
1998.
As of April 20, 2000, the Company had 100 Company-operated stores,
including its outlet and factory stores, all of which were leased. The full line
stores average 6,400 square feet as of the beginning of fiscal 2000, including
selling, storage, tailor shop and service areas. The full line stores range in
size from approximately 2,600 square feet to approximately 18,855 square feet.
The leases typically provide for an initial term of between 5 and 10 years, with
renewal options permitting the Company to extend the term for between 5 and 10
years thereafter. The Company generally has been successful in renewing its
store leases as they expire. In most cases the Company pays a fixed annual base
rent plus real estate taxes, insurance and utilities and, other than free
standing locations, to make contributions toward the common area operating
costs. Most of the Company's lease arrangements provide for an increase in
annual fixed rental payments during the lease term.
Item 3. LEGAL PROCEEDINGS
-----------------
The Company has been named as a defendant in legal actions arising
from its normal business activities. Although the outcome of these lawsuits or
other proceedings against the Company cannot be accurately predicted, the
Company does not expect that any such liability will have a material adverse
effect on the business, net assets or financial position of the Company.
On December 14, 1995, the Company filed a Verified Complaint in the
United States District Court for the Northern District of Maryland (case No. MJG
95-3826) against J.A.B. of Lexington, Inc. and its principals (the "Defendants")
alleging federal trademark infringement, common law trademark and service mark
infringement, statutory unfair competition, common law unfair competition,
breach of franchise agreement, breach of lease, breach of promissory note and
breach of security agreement. Damages sought in the Verified Complaint were
unspecified. The Defendants counterclaimed against the Company seeking
declaratory judgements, compensatory damages and punitive damages. In March,
2000, the Company settled the dispute at no cost to either party.
6
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the quarter ended January 29, 2000.
PART II
Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
----------------------------------------------------------------
MATTERS
- -------
The Company's Common Stock trades on The Nasdaq Stock Market
("NASDAQ") under the trading symbol "JOSB". The following table sets forth, for
the periods indicated, the range of high and low closing prices for the Common
Stock, as reported on NASDAQ. The approximate high and low closing prices for
the Common Stock tabulated below represent inter-dealer quotations which do not
include retail mark-ups, mark-downs or commissions. Such prices do not
necessarily represent actual transactions.
Fiscal 1998 Fiscal 1999
------------ ------------
High Low High Low
----- ----- ----- -----
1st Quarter $ 8.38 $ 5.75 $ 8.00 $ 6.00
2nd Quarter 9.13 6.50 8.13 5.25
3rd Quarter 8.00 5.88 5.50 3.00
4th Quarter 8.00 5.88 4.00 2.63
1st Quarter (through April 20, 2000) $ 4.88 $ 3.19
On April 20, 2000 the closing sale price of the Common Stock was $4.75.
(b) Holders of Common Stock
-----------------------
At April 20, 2000, there were 143 holders of record of the Company's
Common Stock.
(c) Dividend Policy
---------------
The Company intends to retain its earnings to finance the development
and expansion of its business and for working capital purposes, and therefore
does not anticipate paying any cash dividends in the foreseeable future. In
addition, the Company's Credit Agreement prohibits the Company from paying cash
dividends without prior approval.
7
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
The following selected consolidated financial data with respect to each
of the fiscal years in the five-year period ended January 29, 2000 have been
derived from the Company's audited Consolidated Financial Statements. Fiscal
year 1995 was a 53-week year and all other years consisted of 52-weeks, each of
which ended on the Saturday closest to the end of January of the respective
year. The information should be read in conjunction with the Consolidated
Financial Statements and Notes thereto that appear elsewhere in the 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Fiscal Years
1995 1996 1997 1998 1999
---- ---- ---- ----- ----
(in thousands, except per share data)
Consolidated Statements of Income (Loss) Information:
Net Sales:
Men's $143,459 $ 153,191 $ 172,174 $ 187,163 $193,529
Women's 25,908 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Sales (a) 169,367 153,191 172,174 187,163 193,529
Cost of goods sold 100,589 82,598 92,001 96,281 100,030
- -----------------------------------------------------------------------------------------------------------------------------
Gross Profit 68,778 70,593 80,173 90,882 93,499
- -----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
General and administrative 17,326 16,374 17,695 18,806 18,965
Sales and marketing 63,013 50,924 55,609 62,249 67,694
Store opening costs -- 229 301 617 153
Store repositioning costs 3,500 (b) -- -- -- --
Executive payouts and other one-time charges -- -- -- -- 3,102 (e)
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 83,839 67,527 73,605 81,672 89,914
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (15,061) 3,066 6,568 9,210 3,585
Interest expense, net (3,444) (1,946) (2,501) (1,762) (1,346)
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes (18,505) 1,120 4,067 7,448 2,239
(Provision) benefit for income taxes 5,640 (437) (1,590) (1,539)(d) (873)
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (12,865) 683 2,477 5,909 1,366
Loss on disposal of manufacturing operations,
net of tax (c) -- -- (1,512) -- --
Loss from discontinued operations, net of tax (c) (321) (432) (266) (51) --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(13,186)(a) $ 251 $ 699 $ 5,858 (d) $ 1,366
- -----------------------------------------------------------------------------------------------------------------------------
Per Share Information (diluted):
Income (loss) from continuing operations $ (1.89) $ 0.10 $ 0.36 $ 0.85 (d) $ 0.20
Loss on disposal of manufacturing operations -- -- (0.22) -- --
Loss from discontinued operations (0.05) (0.06) (0.04) (0.01) --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ (1.94)(a) $ 0.04 $ 0.10 $ 0.84 $ 0.20
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding (diluted) 6,790 6,824 6,864 6,976 6,892
Balance Sheet Information (As of End of Fiscal Year):
Working capital $ 35,722 $ 28,989 $ 26,142 $ 27,062 $ 26,492
Total assets 89,190 79,604 77,144 82,515 84,751
Total debt 30,220 18,415 12,999 9,177 9,366
Total long-term obligations (including debt) 33,373 21,472 15,105 11,808 11,725
Shareholders' equity 35,445 35,699 36,398 42,313 43,786
(a) In 1995, the Company discontinued its women's product line to concentrate
solely on its men's business.
(b) In fiscal 1995, the Company recorded an expense of $3.5 million related to
the early adoption of Statement of Financial Accounting Standards No. 121
(regarding the impairment of long-lived assets) and costs to exit certain
leases and reposition stores.
(c) Represents disposal of manufacturing operations in 1997. All years presented
herein have been restated to reflect this discontinued operations.
(d) Includes a benefit of $1,365 or $.20 per share related to the reversal of a
valuation allowance which had been recorded in 1995 related to tax net
operating losses.
(e) Represents payouts to the Company's former Chairman/CEO and President, costs
to hire and relocate successors, and the costs to discontinue an
unprofitable business.
8
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
- -------------
Overview
The Company's adjusted income of $.47 per share in fiscal 1999 (before
the $3.1 million one-time charges) decreased compared to $.65 per share
(excluding a $.20 per share tax benefit) in fiscal 1998. Prior to 1999, the
Company had generated increased profits from continuing operations each year
beginning in 1996. However, for the first nine months of fiscal 1999, the
Company's operating results were deteriorating and the Company generated a net
loss through the third quarter of 1999. The negative results for the first nine
months of fiscal 1999 resulted primarily from a comparable store sales decrease
of 4.6% and higher marketing costs. In November 1999, the Company hired a new
CEO/President who initiated an improved marketing focus for the Company. In the
fourth quarter of 1999, the Company generated record earnings (excluding one-
time charges) for one quarter. This performance resulted from the highest one
month sales in the Company's history in December 1999 and a solid 5.5%
comparable store sales increase in the fourth quarter.
The $3.1 million of one-time charges represent primarily payouts to the
Company's former Chairman/CEO and President, costs to hire and relocate
successors and the costs to discontinue an unprofitable business.
In the first two months of fiscal 2000, the Company has generated a 12.6%
comparable store sales increase and expects earnings to increase in 2000. The
Company expects to open between 4 to 8 new stores during 2000 and is embarking
on a plan to open between 75-100 new stores by the end of fiscal 2003. The new
stores that have been targeted are mostly in existing markets in specialty
retail centers. The Company has determined that its stores perform best in
specialty retail centers with co-tenancy of other higher-end retailers.
The Company is also committed to growing its Internet business, through
increased marketing and a state-of-the-art website. The new site is expected to
"go live" in the summer of 2000 and has many features that the current site
lacks, such as real-time inventory status, order confirmation and product search
capabilities.
The Company's Credit Agreement expires in April, 2001 based on its
original term. The Company expects to obtain extended financing prior to the end
of 2000 and does not anticipate any problems obtaining its financing however
there can be no assurance that such financing will be obtained on acceptable
terms. In April 2000, the Company repurchased 896,400 shares of its outstanding
Common Stock from a shareholder at a cost of $3.1 million ($3.50 per share). The
shares will be placed in treasury at cost. These shares represented
approximately 13% of the then-outstanding 6,852,000 shares. The purchase was
financed using funds borrowed under its Credit Agreement.
The Company's availability in excess of outstanding borrowings, as
supported by the existing borrowing base under its Credit Agreement, has
decreased to $26.4 million at April 20, 2000 compared to $28.4 million at the
same time in 1999. Total bank debt increased to $9.9 million at April 20, 2000
compared to $8.6 million at the same time in 1999.
Results of Operations
The following table is derived from the Company's Consolidated Statements
of Income and sets forth, for the periods indicated, the items included in the
Consolidated Statements of Income expressed as a percentage of net sales.
Percentage Of Net Sales
Fiscal Years
1997 1998 1999
---- ---- ----
Net Sales 100.0% 100.0% 100.0%
Cost of goods sold 53.4 51.4 51.7
----------------------------------------------------------------------------------------
Gross profit 46.6 48.6 48.3
General and administrative expenses 10.3 10.0 9.8
Sales and marketing expenses 32.3 33.3 35.0
Store opening costs 0.2 0.3 --
Executive payouts and other one-time charges -- -- 1.6
----------------------------------------------------------------------------------------
Operating income 3.8 4.9 1.9
Interest expense, net (1.5) (0.9) (0.7)
----------------------------------------------------------------------------------------
Income from continuing operations before income taxes 2.3 4.0 1.2
Income taxes (0.9) (0.8) (0.5)
----------------------------------------------------------------------------------------
Income from continuing operations, net of tax 1.4 3.2 0.7
Loss from discontinued operations, net of tax (1.0) (0.1) --
----------------------------------------------------------------------------------------
Net income 0.4% 3.1% 0.7%
----------------------------------------------------------------------------------------
9
Fiscal 1999 Compared to Fiscal 1998
Net Sales - Net sales increased 3.4% over the prior year to $193.5 million in
- ---------
fiscal 1999 from $187.2 million in fiscal 1998. The increase in net sales was
due primarily to new stores.
Gross Profit - Gross profit as a percent of sales decreased .3 percentage point
- ------------
to 48.3% in fiscal 1999 from 48.6% in fiscal 1998. The slight decrease was due
primarily to the mix of product sold.
General and Administrative Expenses - General and administrative expenses
- -----------------------------------
continued to decline as a percent of sales to 9.8% in fiscal 1999 from 10.0% and
10.3% in fiscal years 1998 and 1997, respectively, as the Company continues to
leverage its overhead while opening new stores. Total general and
administrative expenses increased to $19.0 million in fiscal 1999 compared to
$18.8 million in fiscal 1998. Increases in payroll, professional fees, travel
and other expenses were partially offset by a $1.6 million reduction in bonus
expense.
Sales and Marketing Expense - Sales and marketing expenses increased $5.4
- ---------------------------
million to $67.7 million in fiscal 1999 from $62.2 million in fiscal 1998. This
increase was primarily due 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 needed
to increase customer traffic in stores. The higher occupancy and payroll costs
relate to additional stores opened in 1998 and 1999.
Store Opening Costs - Store opening costs decreased $.5 million as the Company
- --------------------
opened 5 stores in fiscal 1999 compared to 16 in fiscal 1998.
Executive Payouts and Other One-Time Charges - Executive payouts consisted of a
- ---------------------------------------------
$2.2 million charge resulting from the retirement of the Company's Chairman and
CEO and a $.4 million charge related to the payout of its former President.
Other one-time charges included approximately $.3 million related to hiring and
relocation of new corporate officers and $.2 million resulting from
discontinuing an unprofitable business.
Interest Expense - Interest expense decreased $.4 million to $1.4 million in
- ----------------
fiscal 1999 compared to $1.8 million in fiscal 1998. This improvement was due
primarily to a reduction in the total debt outstanding in fiscal 1999 compared
to the prior year. The average daily bank debt balance decreased to $9.9 million
in 1999 from $12.5 million in 1998.
Income Taxes - The fiscal 1999 effective tax rate was 39% compared to 20.7% in
- ------------
fiscal year 1998. The fiscal year 1998 rate was positively impacted by the
elimination of the valuation reserve.
Fiscal 1998 Compared to Fiscal 1997
Net Sales - Net sales increased $15.0 million or 8.7% to $187.2 million in
- ---------
fiscal 1998 from $172.2 million in fiscal 1997. The increase in net sales was
provided primarily by the opening of 32 new stores since Spring of 1996.
Gross Profit - Gross profit as a percent of sales increased 2.0 percentage
- ------------
points to 48.6% from 46.6% due primarily to continued increases in sales of
higher quality products and improved inventory management resulting in reduced
markdowns.
General and Administrative Expenses - General and administrative expenses
- -----------------------------------
continued to decline as a percent of sales to 10.0% in fiscal 1998 from 10.3%
and 10.7% in fiscal years 1996 and 1997, respectively, as the Company is able to
leverage its overhead while opening new stores. Total general and
administrative expenses increased to $18.8 million in 1998 from $17.7 million in
1997. This increase was due primarily to higher personnel and travel costs
related to Company growth.
Sales and Marketing Expenses - Sales and marketing expenses increased $6.6
- ----------------------------
million to $62.2 million in fiscal 1998 from $55.6 million in fiscal 1997.
Nearly all of this increase was from costs associated with new stores (stores
which were open less than 24 months as of January, 1998). The Company expects
these costs to decrease as a percent of sales in the future as the new stores
mature.
Store Opening Costs - Store opening expenses, which include direct incremental
- -------------------
costs incurred to open new stores, increased in 1998 compared to 1997 as a
result of opening 16 new stores in 1998 compared to opening 9 new stores in
1997.
Interest Expense - Interest expense decreased $.7 million to $1.8 million in
- ----------------
fiscal 1998 from $2.5 million in 1997. This improvement was due primarily to
lower average borrowing on the Wells Fargo credit facility and lower interest
rates in fiscal 1998 compared to fiscal 1997. The Company's borrowing rates
may vary in the future depending upon prime and LIBOR rate fluctuations.
10
Income Taxes - At January 30, 1999, the Company had net operating loss
- ------------
carryforwards ("NOL's") which expire in 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 fiscal year 1998, the Company had a
deferred tax asset related to NOLs and an offsetting valuation allowance.
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 valuation reserve of $1.4 million.
The effective tax rate for fiscal year 1998 was 20.7% compared to 39.1% in
fiscal year 1997. The decrease in fiscal year 1998 was caused by the elimination
of the valuation reserve.
Liquidity and Capital Resources
The Company's availability in excess of outstanding borrowings, as
supported by the existing borrowing base under its Credit Agreement, has
decreased to $26.4 million at April 20, 2000 compared to $28.4 million at the
same time in 1999. The Company's availability at April 20, 2000 has decreased
compared to the same time in 1999 principally due to the common stock repurchase
(as discussed in Note 13) partially offset by improved operating results.
The following table summarizes the Company's sources and uses of funds as
reflected in the Condensed Consolidated Statements of Cash Flows:
Years Ended
---------------------
Jan. 30, Jan. 29,
1999 2000
------- -------
Cash provided by (used in):
Operating activities $ 9,484 $ 7,381
Investing activities (6,319) (6,780)
Financing activities (3,817) 251
Discontinued operations 836 (513)
------------------------------------------------------------
Net increase in
cash and cash equivalents $ 184 $ 339
------------------------------------------------------------
Cash provided by the Company's operating activities (net) was due primarily
to operating results and the use of tax net operating losses to reduce tax
payments. Cash used in investing activities relates primarily to leasehold
improvements in new, renovated and relocated stores. The Company spent
approximately $6.8 million on capital expenditures in fiscal year 1999 primarily
for the buildout of new, renovated and relocated stores and to install a new
$2.1 million point-of-sale ("POS") system. Cash used in financing activities
represents primarily to repayments/borrowings of the revolving loan under the
Credit Agreement.
The Company expects to spend between $3 and $4 million on capital
expenditures in 2000, primarily to open between 4 and 8 new stores, to relocate,
downsize or renovate at least two stores and to install a new e-commerce website
to replace its existing site and to install an inventory planning system. The
capital expenditures will be financed through operations, the Credit Agreement
and, perhaps, leasing arrangements.
The Company devoted significant efforts in 1998 and 1999 to ensure that its
business-critical systems are "Year 2000 compliant" and has been able to use its
systems in 2000 without failure. 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 completed the upgrade of its catalog system in
May, 1999. To improve customer service and customer database management, the
Company replaced its POS system in the second half of 1999. As a result of these
efforts, the Company's systems are very robust and are capable of supporting
future growth. By using these systems, the Company is able to capture greater
customer data and expects to increase its marketing efficiency using such data.
The Company estimates that it spent approximately $1.0 million
(representing a combination of capital and expense and excluding the POS system)
on these upgrades in fiscal 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.
11
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 expansion plans, 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,
the mix of goods sold, pricing, availability of lease sites for new stores and
other competitive factors. These risks should be carefully reviewed before
making any investment decision.
Seasonality
Unlike many other retailers, the Company's operations are not greatly
affected by seasonal fluctuations. Although variations in sales volumes do exist
between quarters, the Company believes the nature of its merchandise helps to
stabilize demand between the different periods of the year. The Company does not
expect seasonal fluctuation to materially affect its operations in the future.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
At January 29, 2000, there were no derivative financial instruments.
In addition, the Company does not believe it is materially at risk for changes
in market interest rates or foreign currency fluctuations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements listed in Item 14(a) 1 and 2 are included in
the Report beginning on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information included under the captions "Directors", "Executive
Officers" and "Compliance with Section 16(a) of the Exchange Act" in the
Company's proxy statement for the 2000 Annual Meeting of Shareholders to be
filed with the Commission (the "Proxy Statement") are incorporated herein by
reference.
Item 11. EXECUTIVE COMPENSATION
----------------------
The information included under the captions "Executive Compensation",
"Executive Employment Agreements", "Compensation of Directors", "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" in the
Company's Proxy Statement are incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information included under the caption "Security Ownership of
Directors and Officers" in the Company's Proxy Statement is incorporated herein
by reference.
Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
---------------------------------------------
The information included under the caption "Certain Transactions" in
the Company's Proxy Statement is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
-----------------------------------------------------------------
(a) The following Financial Statements of Jos. A. Bank Clothiers,
Inc., the notes thereto, and the related reports thereon of the independent
public accountants are filed under Item 8 of this report:
12
1. Financial Statements Page
Report of Independent Public Accountants........................................... F
Consolidated Balance Sheets as of January 30, 1999 and January 29, 2000............ F-1
Consolidated Statements of Income for the Years Ended
January 31, 1998, January 30, 1999 and January 29, 2000............................ F-2
Consolidated Statements of Shareholders' Equity for the Years Ended
January 31, 1998, January 30, 1999 and January 29, 2000............................ F-3
Consolidated Statements of Cash Flows for the Years Ended
January 31, 1998, January 30, 1999 and January 29, 2000............................ F-4
Notes to Consolidated Financial Statements.......................................... F-5
2. Financial Statement Schedules
All required information is included within the Consolidated Financial
Statements and the notes thereto.
(b) Forms 8-K
- Item 5 - Other events - Press release stating the Company's
intention to complete a long term supply agreement with MS Pietrafesa LP.
(c) Exhibits
3.1 --Restated Certificate of Incorporation of the Company.*1...........................
3.2 --By-laws of the Company, together with all amendments thereto.*1...................
4.1 --Form of Common Stock certificate.*1...............................................
4.2 --Amended and Restated Stockholders Agreement, dated as of January 29,
1994, among the parties named therein.*1..........................................
4.3 --Rights Agreement dated as of September 19, 1997*5.................................
4.4 --Certificate of Designation governing the Company's Series A
Preferred Stock*5.................................................................
10.1 --1994 Incentive Plan*1.............................................................
10.1(a) --Amendments to Incentive Plan dated as of October 6, 1997, *6 .....................
10.4(f) --Fourth Amended and Restated Credit Agreement, April 30, 1996,
by and among the Company, Wells Fargo Bank, N.A. *3...............................
10.5(c) --Amended and Restated Employment Agreement, dated as of September 19, 1997,
between Timothy F. Finley and Jos. A. Bank Clothiers, Inc., *6....................
10.7(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997,........
between Frank Tworecke and Jos. A. Bank Clothiers, Inc., *6.......................
10.7(b) --Amendment to the Employment Agreement dated February 9, 1999 between Frank
Tworecke and Jos. A. Bank Clothiers, Inc., *7.....................................
10.8(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997,
between David E. Ullman and Jos. A. Bank Clothiers, Inc., *6......................
10.9 --Jos. A. Bank Clothiers, Inc. Retirement and Savings Plan and Trust Agreement as
amended and restated effective April 1, 1994.*4...................................
10.10 --Collective Bargaining Agreement between Retail Employees Union Local 340,
Amalgamated Clothing and Textile Workers Union, AFL-CIO and Jos. A. Bank
Clothiers, Inc.*4.................................................................
10.11 --Union Agreement, dated May 1, 1995, by and between Joseph A. Bank Mfg. Co., Inc.
and Baltimore Regional Joint Board, Amalgamated Clothing and Textile Workers
Union (also known as U.N.I.T.E.).*4...............................................
10.12 --Employment Agreement, dated September 19, 1997, between Gary W. Cejka and
Jos. A. Bank Clothiers, Inc. *6...................................................
10.13 --Employment Agreement, dated September 19, 1997, between Charles D. Frazer and
Jos. A. Bank Clothiers, Inc. *6...................................................
10.13a --Amendment to the Employment Agreement dated February 14, 1999 between
Charles D. Frazer and Jos. A. Bank Clothiers, Inc. *7.............................
10.15 --Employment Agreement dated August 31, 1998 between J.F. Timothy Carroll and
Jos. A. Bank Clothiers, Inc.,*7...................................................
10.15(a) --Amendment to the Employment Agreement dated March 6, 2000, between Robert N.
Wildrick and Jos. A. Bank Clothiers, inc., filed herewith.........................
13
10.16 --Employment Agreement, dated November 1, 1999 between Robert N. Wildrick and Jos. A.
Bank Clothiers, Inc*8...................................................................
10.17 --Employment Agreement, dated November 30, 1999 between Robert Hensley and Jos. A.
Bank Clothiers, Inc*8...................................................................
10.18 --Employment Agreement, dated December 21, 1999 between R. Neal Black and Jos. A. Bank
Clothiers, Inc., filed herewith.........................................................
21.1a --Company subsidiaries, *6................................................................
27.0 --Financial data schedule, filed herewith.................................................
*1 Incorporated by reference to the Company's Registration Statement on Form S-1 filed May 3, 1994.
*2 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
January 28, 1995.
*3 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 3, 1996.
*4 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 1, 1997.
*5 Incorporated by reference to the Company's Form 8-K dated September 19, 1997.
*6 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 31, 1998.
*7 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 30, 1999.
*8 Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999.
Pursuant to the requirements Section 13 and 15(d) 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, in the City of
Hampstead, State of Maryland, on April 20, 2000.
14
JOS. A. BANK CLOTHIERS, INC.
(registrant)
By: /s/: Robert N. Wildrick
---------------------------
ROBERT N. WILDRICK
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.
NAME TITLE DATE
- ---- ----- ----
/s/: Robert N. Wildrick Chief Executive Officer (Principal Executive Officer) April 27, 2000
- ------------------------------
/s/: Robert B. Hensley Executive Vice President, Stores & Operations April 27, 2000
- ------------------------------
/s/: R. Neal Black Executive Vice President, Marketing & Merchandising April 27, 2000
- ------------------------------
/s/: David E. Ullman Executive Vice President, Chief Financial Officer April 27, 2000
- ------------------------------
/s/: Richard E. Pitts Vice President - Treasurer (Principal Accounting Officer) April 27, 2000
- ------------------------------
/s/: Andrew A. Giordano Director April 27, 2000
- ------------------------------
/s/: Gary S. Gladstein Director April 27, 2000
- ------------------------------
/s/: Peter V. Handal Director April 27, 2000
- ------------------------------
/s/: David A. Preiser Director April 27, 2000
- ------------------------------
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Jos. A. Bank Clothiers, Inc.:
We have audited the accompanying consolidated balance sheets of Jos. A. Bank
Clothiers, Inc. (a Delaware corporation) and subsidiaries as of January 30, 1999
and January 29, 2000, and the related consolidated statements of income,
shareholders' equity and cash flows for the years ended January 31, 1998,
January 30, 1999 and January 29, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jos. A. Bank Clothiers, Inc.
and subsidiaries as of January 30, 1999 and January 29, 2000, and the results of
their operations and their cash flows for the years ended January 31, 1998,
January 30, 1999 and January 29, 2000, are in conformity with accounting
principles generally accepted in the United States.
Arthur Andersen LLP
Baltimore, Maryland
March 7, 2000 (except with respect to the matter discussed in Note 13, as to
which the date is April 12, 2000)
F
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JANUARY 30, 1999 AND JANUARY 29, 2000
(In Thousands, Except Share Information)
ASSETS
Jan. 30, 1999 Jan. 29, 2000
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 748 $ 1,087
Accounts receivable 2,808 2,601
Inventories 44,828 46,387
Prepaid expenses and other current assets 4,189 3,178
Deferred income taxes 2,883 2,479
- --------------------------------------------------------------------------------
Total current assets 55,456 55,732
NONCURRENT ASSETS:
Property, plant and equipment, net 24,547 27,247
Other noncurrent assets, net 512 73
Deferred income taxes 2,000 1,699
- --------------------------------------------------------------------------------
Total assets $ 82,515 $ 84,751
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,012 $ 13,195
Accrued expenses 12,504 14,573
Current portion of long-term debt 1,111 1,218
Net current liabilities of discontinued operations 767 254
- --------------------------------------------------------------------------------
Total current liabilities 28,394 29,240
NONCURRENT LIABILITIES:
Long-term debt 8,066 8,148
Deferred rent 3,662 3,577
Pension liability 80 --
- --------------------------------------------------------------------------------
Total liabilities 40,202 40,965
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par, 20,000,000 shares authorized,
7,001,442 issued and 6,792,027 outstanding as of
January 30, 1999 and 7,039,442 issued and 6,830,027
outstanding as of January 29, 2000 70 70
Preferred stock, $1.00 par, 500,000 shares authorized,
none issued or outstanding -- --
Additional paid-in capital 56,393 56,500
Accumulated deficit (12,230) (10,864)
Less 209,415 shares of common stock held
in treasury, at cost (1,920) (1,920)
- --------------------------------------------------------------------------------
Total shareholders' equity 42,313 43,786
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 82,515 $ 84,751
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance
sheets.
F-1
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED JANUARY 31, 1998, JANUARY 30, 1999 AND JANUARY 29, 2000
(In Thousands, Except Share Information)
Years Ended
----------------------------------------------
Jan. 31, 1998 Jan. 30, 1999 Jan. 29, 2000
-------------- -------------- --------------
NET SALES $172,174 $187,163 $193,529
COST OF GOODS SOLD 92,001 96,281 100,030
- ----------------------------------------------------------------------------------------------
Gross Profit 80,173 90,882 93,499
- ----------------------------------------------------------------------------------------------
OPERATING EXPENSES:
General and administrative 17,695 18,806 18,965
Sales and marketing 55,609 62,249 67,694
Store opening costs 301 617 153
Executive payouts and other one-time charges -- -- 3,102
- ----------------------------------------------------------------------------------------------
Total operating expenses 73,605 81,672 89,914
- ----------------------------------------------------------------------------------------------
OPERATING INCOME 6,568 9,210 3,585
Interest expense, net (2,501) (1,762) (1,346)
- ----------------------------------------------------------------------------------------------
Income from continuing operations
before provision for income taxes 4,067 7,448 2,239
Provision for income taxes (1,590) (1,539) (873)
----------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 2,477 5,909 1,366
Discontinued operations, net of tax:
Loss on disposal of manufacturing operations (1,512) -- --
Loss from discontinued operations (266) (51) --
- ----------------------------------------------------------------------------------------------
Net income $ 699 $ 5,858 $ 1,366
----------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Income from continuing operations:
Basic $ 0.36 $ 0.87 $ 0.20
Diluted $ 0.36 $ 0.85 $ 0.20
Discontinued operations (net of tax):
Basic $ (0.26) $ (0.01) $ --
Diluted $ (0.26) $ (0.01) $ --
Net income:
Basic $ 0.10 $ 0.86 $ 0.20
Diluted $ 0.10 $ 0.84 $ 0.20
Weighted average shares outstanding:
Basic 6,791 6,791 6,801
Diluted 6,864 6,976 6,892
The accompanying notes are an integral part of these consolidated statements.
F-2
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED JANUARY 31, 1998, JANUARY 30, 1999 AND JANUARY 29, 2000
(In Thousands)
Additional Total
Common Paid-In Accumulated Treasury Shareholders'
Stock Capital Deficit Stock Equity
- --------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1997 $70 $56,336 $(18,787) $(1,920) $35,699
- --------------------------------------------------------------------------------------------
Net income -- -- 699 -- 699
- --------------------------------------------------------------------------------------------
BALANCE, January 31, 1998 70 56,336 (18,088) (1,920) 36,398
- --------------------------------------------------------------------------------------------
Net income -- -- 5,858 -- 5,858
Net proceeds from issuance of
common stock (875 shares)
pursuant to Incentive Option
Plan -- 5 -- -- 5
Stock based compensation -- 52 -- -- 52
- --------------------------------------------------------------------------------------------
BALANCE, January 30, 1999 70 56,393 (12,230) (1,920) 42,313
- --------------------------------------------------------------------------------------------
Net income -- -- 1,366 -- 1,366
Net proceeds from issuance of
common stock (38,000 shares)
pursuant to Incentive Option
Plan -- 62 -- -- 62
Stock based compensation -- 45 -- -- 45
- --------------------------------------------------------------------------------------------
BALANCE, January 29, 2000 $70 $56,500 $(10,864) $(1,920) $43,786
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
F-3
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
------------------------------------
FOR THE YEARS ENDED JANUARY 31, 1998, JANUARY 30, 1999 AND JANUARY 29, 2000
(In Thousands)
Years Ended
----------------------------------------------
Jan. 31, 1998 Jan. 30, 1999 Jan. 29, 2000
------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 699 $ 5,858 $ 1,366
Loss from discontinued operations 266 51 --
Loss on disposal of manufacturing operations 1,512 -- --
- --------------------------------------------------------------------------------------------------------
Income from continuing operations 2,477 5,909 1,366
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred tax expense 1,573 827 705
Depreciation and amortization 3,581 4,105 3,973
Loss on disposition of assets 2 -- 107
Stock based compensation -- 52 45
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 349 (71) 207
Increase in inventories (546) (4,714) (1,559)
Decrease in prepaid expenses and
other current assets 511 149 1,011
Decrease in other noncurrent assets 248 53 439
Increase (decrease) in accounts payable 1,192 693 (817)
Decrease in long-term pension liability (803) (437) (80)
Increase in accrued expenses 1,070 2,730 2,069
Increase (decrease) in deferred rent 256 188 (85)
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities
of continuing operations 9,910 9,484 7,381
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,056) (6,319) (6,780)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities of
continuing operations (4,056) (6,319) (6,780)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving loan agreement 36,505 36,549 60,161
Repayment of borrowings under revolving loan
agreement (42,419) (40,329) (61,311)
Borrowing of other long-term debt 833 277 1,686
Repayment of other long-term debt (335) (319) (347)
Principal payments under capital lease obligations (16) -- --
Net proceeds from issuance of common stock -- 5 62
- --------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities of
continuing operations (5,432) (3,817) 251
- --------------------------------------------------------------------------------------------------------
Net cash (used in) provided by discontinued
operations (577) 836 (513)
- --------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (155) 184 339
CASH AND CASH EQUIVALENTS, beginning of year 719 564 748
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 564 $ 748 $ 1,087
- --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
F-4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JANUARY 31, 1998, JANUARY 30, 1999 AND JANUARY 29, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Description of Business - Jos. A. Bank Clothiers, Inc. ("Clothiers") is a
nationwide retailer of classic men's clothing through conventional retail
stores, catalog and internet direct marketing and franchisees.
Fiscal Year - The Company maintains its accounts on a fifty-two/fifty-three week
fiscal year ending on the Saturday nearest to January 31. The fiscal years ended
January 31, 1998 (fiscal 1997), January 30, 1999 (fiscal 1998) and January 29,
2000 (fiscal 1999), each contained fifty-two weeks.
Basis of Presentation - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation - The consolidated financial statements include the
accounts of Clothiers and its wholly-owned subsidiaries, The Joseph A. Bank Mfg.
Co., Inc. and National Tailoring Services, Inc. (collectively referred to as the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include overnight
investments.
Supplemental Cash Flow Information - Interest and income taxes paid were as
follows (in thousands):
Years Ended
Jan. 31, Jan. 30, Jan. 29,
1998 1999 2000
------ ------ ------
Interest paid $2,181 $1,462 $1,162
Income taxes paid 101 252 163
Inventories - 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 merchandise to the point of sale.
Catalogs and Promotional Materials - 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. At January 30, 1999 and January 29, 2000, prepaid catalog and
promotional materials were approximately $1,400,000 and $1,625,000,
respectively, representing expenditures for the applicable subsequent spring
catalog.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. The Company depreciates and amortizes property, plant and equipment on a
straight-line basis over the following estimated useful lives:
Estimated
Asset Class Useful Lives
- -------------------------------------------
Buildings 25 years
Equipment 3-10 years
Furniture and fixtures 10 years
Leasehold improvements Initial term of lease,
not to exceed 10 years
Other Noncurrent Assets - Other noncurrent assets includes deferred financing
costs of $57,000 and $0 as of January 30, 1999 and January 29, 2000,
respectively. Deferred financing costs were incurred in connection with the
Company's bank credit agreement described in Note 5 and were amortized as
additional interest expense over the remaining term of the agreement using the
effective interest method. Other noncurrent assets also include $375,000 and
$73,000 of notes receivable as of January 30, 1999 and January 29, 2000,
respectively.
Fair Value of Financial Instruments - For cash and equivalents, the carrying
amount is a reasonable estimate of fair value. For long-term debt, rates
available for debt with similar terms and remaining maturities are used to
estimate the fair value of existing debt.
Franchise Revenue Recognition - Initial franchise fees for a store are generally
recognized as revenue when the Company has provided substantially all the
initial franchise services. Inventory sales (and cost of sales) to the
franchisees are recognized when the inventory is shipped. Monthly franchise fees
are recorded when earned under the franchise agreements.
Lease Expense - The Company records lease expense in accordance with Statement
of Financial Accounting Standards (SFAS) No. 13 -- Accounting for Leases. As
such, rent expense on leases is recorded on a straight-line basis over the term
of the lease and the excess of expense over cash amounts paid are reflected as
"deferred rent" in the accompanying Consolidated Balance Sheets.
Store Opening Costs - Costs incurred in connection with start-up and promotion
of new store openings are expensed as incurred.
Income Taxes - The Company accounts for income taxes in accordance with SFAS No.
109 -- Accounting for Income Taxes. Under SFAS 109, the liability method is used
in accounting for income taxes. Deferred tax liabilities are determined based on
differences between the financial
F-5
reporting and tax basis of assets and liabilities and are measured using tax
rates and laws that are expected to be in effect when the differences are
scheduled to reverse.
Earnings Per Share ("EPS") - During 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 128, "Earnings Per Share," which 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 are as follows (in thousands):
1997 1998 1999
----- ----- -----
Weighted average shares
outstanding for basic EPS 6,791 6,791 6,801
- -------------------------------------------------
Diluted EPS:
Dilutive effect of
common stock equivalents 73 185 91
- --------------------------------------------------
Weighted average shares
outstanding for diluted
EPS 6,864 6,976 6,892
- --------------------------------------------------
The Company uses the treasury method for calculating the dilutive effect of
stock options.
Reclassifications - Certain reclassifications have been made to the January 31,
1998 and January 30, 1999, financial statements in order to conform with the
January 29, 2000, presentation.
2. INVENTORIES:
------------
Inventories at January 30, 1999 and January 29, 2000, consist of the following
(in thousands):
Jan. 30, 1999 Jan. 29, 2000
------------- --------------
Finished goods $ 39,650 $ 43,036
Raw materials 5,178 3,351
- -------------------------------------------------------------------
Total $ 44,828 $ 46,387
- -------------------------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT:
-----------------------------
Property, plant and equipment at January 30, 1999 and January 29, 2000, consists
of the following (in thousands):
Jan. 30, 1999 Jan. 29, 2000
------------- -------------
Land $ 475 $ 475
Buildings and
improvements 32,059 33,688
Equipment,
furniture and
fixtures 19,245 21,977
- ----------------------------------------------------------------------
51,779 56,140
Less: Accumulated
depreciation and
amortization (27,232) (28,893)
- -----------------------------------------------------------------------
Property, plant and
equipment, net $ 24,547 $ 27,247
- -----------------------------------------------------------------------
4. ACCRUED EXPENSES:
----------------
Accrued expenses at January 30, 1999 and January 29, 2000, consists of the
following (in thousands):
Jan. 30, 1999 Jan. 29, 2000
------------- -------------
Accrued compensation
and benefits $ 5,007 $ 4,266
Accrued advertising 1,216 1,948
Gift certificate
payable 1,899 2,327
Other accrued expenses 4,382 6,032
- ----------------------------------------------------------
Total $12,504 $14,573
- ----------------------------------------------------------
Other accrued expenses consist primarily of liabilities related to interest,
sales taxes, property taxes, customer deposits, and percentage rent.
5. LONG-TERM DEBT:
--------------
Long-term debt at January 30, 1999 and January 29, 2000, consists of the
following (in thousands):
Jan. 30, Jan. 29,
1999 2000
------ ------
Bank credit agreement-
Borrowings under
long-term revolving
loan agreement, including
term portion $8,316 $7,166
Notes related to lease-
hold improvements,
interest at 2% plus prime,
9.4%, 9.9% and 11.0%, respect-
ively, payable in monthly install-
ments through February 1, 2003 828 547
Notes related to
building improvements,
interest at 12% and 9.1% pay-
able in monthly installments
through November 1, 2007 11 729
Notes related to POS equipment,
interest at 9.7% payable in
monthly installments
through November 1, 2004 -- 924
Mortgage payable,
interest at 3%, payable
in monthly installments
through September 1,
1999; secured by related
land and building 22 --
- --------------------------------------------------------------
Total debt 9,177 9,366
Less: Current maturities 1,111 1,218
- --------------------------------------------------------------
Long-term debt $8,066 $8,148
==============================================================
Bank Credit Agreement - The Company maintains a bank credit agreement (the
"Credit Agreement"), which
F-6
provides for a revolving loan whose limit is determined by a formula based on
the Company's inventories, accounts receivable and real estate and equipment
values. In September, 1997, the Company extended the Credit Agreement to April,
2001. The amended Credit Agreement changed the maximum borrowing under the
facility to approximately $43,000,000 including a new term loan facility of
$4,000,000 payable in monthly installments based on a five-year amortization
with any outstanding balance due in April 2001. The Credit Agreement also
includes a) financial covenants concerning net worth, EBITDA coverage and
working capital, among others, b) limitations on capital expenditures and
additional indebtedness and c) a restriction on the payment of dividends. The
Company is in compliance with all loan covenants. Interest rates under the
amended agreement range from prime to prime plus 2.0% or LIBOR plus 2.0% to
LIBOR plus 4.0%, depending upon financial performance. The amended agreement
also includes an early termination fee and provisions for a seasonal over-
advance.
As of January 30, 1999 and January 29, 2000, the Company's availability in
excess of outstanding borrowings under the formula was $28,732,000 and
$29,916,000, respectively. Substantially all assets of the Company are
collateralized under the Credit Agreement.
During the years ended January 30, 1999 and January 29, 2000, borrowings under
the Credit Agreement bore interest ranging from prime to prime plus .75% or
LIBOR plus 2.0% to LIBOR plus 2.75%. Amounts outstanding under the Credit
Agreement as of January 29, 2000, bear interest at rates ranging from 8.5% to
9.25% which may vary in the future depending upon prime and LIBOR rate
fluctuations.
The average daily outstanding balance under the Credit Agreement for the fiscal
years ended January 30, 1999 and January 29, 2000 were $12,474,000 and
$9,856,000, respectively. The highest month end outstanding balance under the
Credit Agreement for the fiscal years ended January 30, 1999 and January 29,
2000 were $18,657,000 and $17,957,000, respectively. In addition to borrowings
under the Credit Agreement, the Company has issued a letter of credit of
$400,000 at January 29, 2000, to secure the payment of rent and one for $48,000
for the purchase of merchandise.
The aggregate maturities of the Company's long-term debt as of January 29, 2000,
are as follows: year ending 2001 - $1,218,000; 2002 - $6,787,000; 2003 -
$452,000; 2004 - $298,000; 2005 and thereafter - $611,000.
6. EXECUTIVE PAYOUTS AND OTHER ONE-TIME CHARGES:
--------------------------------------------
During the second quarter of 1999, the Company's Chairman/CEO retired and the
Company recorded a one-time charge of $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. During the
fourth quarter, the Company recorded an additional one-time charge of $.9
million. This charge included a $.4 million charge related to the departure of
the Company's former President, a $.2 million charge related to discontinuing an
unprofitable business and approximately $.3 million of costs related to the
recruiting and relocation of new corporate officers that were incurred by the
end of fiscal 1999.
7. COMMITMENTS AND CONTINGENCIES:
-----------------------------
Litigation - Lawsuits and claims are filed from time to time against the Company
in its ordinary course of business. Management, after reviewing developments to
date with legal counsel, is of the opinion that the outcome of such matters will
not have a material adverse effect on the net assets of the Company or the
accompanying consolidated financial statements taken as a whole.
Employment Agreements - The Company has employment agreements with certain of
its executives expiring in 2001, aggregating base compensation of $3,061,000
(not including annual adjustments) over the term. These executives would also be
entitled to severance of approximately $4,028,000 (not including annual
adjustments) if terminated without cause or if the executive left the Company
for cause (as defined). The contracts also provide for additional incentive
payments subject to performance standards. In addition, other employees are
eligible for incentive payments based on performance. The Company expensed
approximately $1,393,000, $1,885,000 and $250,000 in incentive payments in
fiscal years 1997, 1998 and 1999, respectively.
Lease Obligations - The Company has numerous noncancelable operating leases for
retail stores, certain office space and equipment. Certain facility leases
provide for annual base minimum rentals plus contingent rentals based on sales.
Renewal options are available under the majority of the leases.
Future minimum lease payments under noncancelable operating leases at January
29, 2000, are as follows (in thousands):
Year Ending Amount
----------- -------
2001 $12,718
2002 12,225
2003 11,340
2004 10,842
2005 8,478
2006 and thereafter 22,247
--------------------------------
Total $77,850
================================
The minimum rentals above do not include additional payments for percentage
rent, insurance, property taxes and maintenance costs that may be due as
provided for in the leases. Many of the noncancelable operating leases include
scheduled rent increases.
F-7
Total rental expense for operating leases, including contingent rentals and net
of sublease payments received, was $11,364,000, $12,839,000 and $12,826,000 for
the years ended January 31, 1998, January 30, 1999 and January 29, 2000,
respectively. Minimum rentals were $11,049,000, $12,435,000 and $12,383,000,
respectively. Contingent rentals, which are based on a percentage of sales,
approximated $389,000, $423,000 and $462,000, respectively. Additionally,
sublease payments received approximated $74,000, $19,000 and $19,000,
respectively.
Inventories - The Company ordinarily commits to purchases of inventory at least
one to two seasons in advance. The Company has committed to a substantial
portion of its purchases for fiscal 2000 and has also committed to approximately
10% of its purchases for fiscal 2001. In 1999, the Company purchased 36% of its
finished product from one vendor through a contract, of which 52% was paid to
the vendor and the remainder was paid to several piece goods suppliers.
Other - During fiscal 1997, the Company signed a five-year agreement which
expires in January, 2002 with David Leadbetter, a golf professional, to produce
golf and other apparel under his name. Payments are based on sales volumes. The
minimum annual commitment under this agreement is $150,000.
8. BENEFIT PLANS:
-------------
Defined Benefit Pension & Post-Retirement Plans - In connection with the
termination of certain plans in 1994, the Company adopted a noncontributory
defined benefit pension plan and a post-retirement benefit plan to cover certain
union employees with equivalent benefits to the predecessor plans. The annual
contributions are not less than the minimum funding standards set forth in the
Employee Retirement Income Security Act of 1974, as amended. The plan provides
for eligible employees to receive benefits based principally on years of service
with the Company. The Company does not pre-fund the benefits from the post-
retirement benefit plan.
In accordance with SFAS No. 106, "Employers' Accounting for Post-Retirement
Benefits Other than Pensions", the Company records the expected cost of these
benefits as expense during the years that employees render service. The Company
has adopted the standards on a prospective basis as permitted. As such, the
Company amortizes the related transition liability of $187,000 over 20 years.
The following table sets forth the plan's funded status as of December 31, 1998
and 1999, the dates of the latest actuarial valuations (in thousands):
- --------------------------------------------------------------------------------
Other Post-retirement
Pension Benefits Benefits
---------------- --------
1998 1999 1998 1999
---- ---- ---- ----
Change in benefit
obligation:
Benefit obligation at
beginning of year $ 177 $ 156 $ 300 $ 351
Service cost 24 17 9 25
Interest cost 10 32 10 21
Actuarial (gain) loss (44) 50 32 (59)
Benefits paid (11) (49) -- --
- --------------------------------------------------------------------------------
Benefit obligation at end
of year $ 156 $ 206 $ 351 $ 338
- --------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets
at beginning of year $ 186 $ 206 $ -- $ --
Actual return on plan
assets 19 205 -- --
Employer contribution 12 109 -- --
Benefits paid (11) (49) -- --
- --------------------------------------------------------------------------------
Fair value of plan assets
at end of year $ 206 $ 471 $ -- $ --
- --------------------------------------------------------------------------------
Funded status $ 50 $ 265 $ (351) $(338)
Unrecognized net actuarial
(gain) (19) (42) (93) (137)
Unrecognized initial net
liability at transition 48 43 143 134
- --------------------------------------------------------------------------------
Prepaid (accrued) benefit
cost $ 79 $ 266 $ (301) $(341)
- --------------------------------------------------------------------------------
Discount rate 7.25% 7.25% 7.25% 7.25%
Expected return on plan
assets 8.00% 8.00% -- --
Components of net periodic
benefit cost:
Service cost $ 24 $ 17 $ 22 $ 25
Interest cost 10 32 21 21
Amortization of net
liability at transition 5 5 10 9
Expected return on plan
assets (11) (127) -- --
Recognized net actuarial
(gain) loss (1) 66 (10) (15)
- --------------------------------------------------------------------------------
Net periodic benefit cost $ 27 $ (7) $ 43 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-8
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have less than a $12,000 effect on total
service and interest costs and post-retirement benefit obligation.
Profit Sharing Plan - The Company maintains a defined contribution 401(k) profit
sharing plan for its employees. All non-union and certain union employees are
eligible to participate after one year of service. Employee contributions to the
plan are limited based on applicable sections of the Internal Revenue Code. The
Company is required to match a portion of employee contributions to the plan and
may make additional contributions at the discretion of the directors of the
Company. Contributions by the Company to the plan were approximately $238,000,
$321,000 and $384,000 for the years ended January 31, 1998, January 30, 1999 and
January 29, 2000, respectively. The Company also established a non-qualified,
unfunded deferred Compensation plan effective October 1, 1998. This plan is
designed to provide a select group of management and highly-compensated
employees with retirement benefits. All assets of the plan are fully subject to
the Company's creditors. The Company's matching contributions are equal to $.25
for each $1.00 the participant contributes. Contributions by the Company for the
years ended January 30, 1999 and January 29, 2000 were $10,000 and $41,000,
respectively.
9. INCOME TAXES:
------------
As of the beginning of fiscal year 1998, the Company had a deferred tax asset
related to tax net operating loss carry-forwards ("NOLs") and an offsetting
valuation allowance. 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 the NOLs prior to their expiration. Accordingly,
during the third quarter of 1998, the Company eliminated the valuation reserve.
At January 29, 2000, the Company had utilized substantially all of its NOLs.
The provision for income taxes for continuing operations was comprised of the
following (in thousands):
Years Ended
-------------------------------------
Jan. 31, Jan. 30, Jan. 29,
1998 1999 2000
---------- ----------- --------
Federal:
Current $ (110) $ (712) $ (53)
Deferred (1,289) (651) (641)
State:
Current -- -- (115)
Deferred (191) (176) (64)
- --------------------------------------------------------------
Provision for
income taxes $ (1,590) $ (1,539) $ (873)
- --------------------------------------------------------------
The differences between the recorded income tax provision and the "expected" tax
provision based on the statutory federal income tax rate is as follows (in
thousands):
Years Ended
--------------------------------
Jan. 31, Jan. 30, Jan. 29,
1998 1999 2000
--------------------------------
Computed federal tax
provision at
statutory rates $ (1,383) $ (2,532) $ (761)
State income taxes, net
of federal income
tax effect (203) (372) (112)
Valuation allowance -- 1,365 --
Other, net (4) -- --
- --------------------------------------------------------------
Provision for
income taxes $ (1,590) $ (1,539) $ (873)
- --------------------------------------------------------------
Temporary differences between the financial reporting carrying amounts and tax
basis of assets and liabilities give rise to deferred income taxes. Total
deferred tax assets and deferred tax liabilities stated by sources of the
differences between financial accounting and tax basis of the Company's assets
and liabilities which give rise to the deferred tax assets and deferred tax
liabilities are as follows (in thousands):
Jan. 30, Jan. 29,
1999 2000
-------- ----------
Deferred Tax Assets:
Inventories $ 717 $ 766
Property, plant and equipment 844 536
Accrued liabilities 2,514 3,388
Operating loss carryforwards
and carrybacks 1,525 188
- --------------------------------------------------------------
5,600 4,878
Deferred Tax Liabilities:
Prepaid expenses and other
current assets (717) (700)
- --------------------------------------------------------------
Net Deferred Tax Asset $ 4,883 $ 4,178
- --------------------------------------------------------------
10. INCENTIVE OPTION PLANS:
----------------------
Effective January 28, 1994, the Company adopted an Incentive Plan ("the 1994
Plan"). The 1994 Plan generally provides for the granting of stock, stock
options, stock appreciation rights, restricted shares or any combination of the
foregoing to the eligible participants, as defined. Approximately 915,000 shares
of Common Stock have been reserved for issuance under the 1994 Plan. The
exercise price of an option granted under the 1994 Plan may not be less than the
fair market value of the underlying shares of Common Stock on the date of grant
and employee options expire at the earlier of termination of employment or ten
years from the date of grant. All options covered under the 1994 Plan vest in
full upon a change of control of the Company.
On September 14, 1999, in order to attract a new Chief Executive Officer ("CEO")
to the Company, the Board of Directors authorized a pool of 600,000 shares of
Common Stock to be available to support a grant of options to said CEO ("the
1999 Plan"). An Option to purchase up to 600,000 shares
F-9
of Common Stock under the 1999 Plan was granted to the CEO pursuant to his
Employment Agreement, dated as of November 1, 1999. Unless sooner terminated
pursuant to those provisions of the Employment Agreement dealing with exercise
of the option after termination of employment or death, and subject to
acceleration of vesting as provided in the next sentence, the Option shall vest
and become exercisable in whole or in part from time to time as to (a) 200,000
of the Option Shares on or after November 1, 1999, (b) an additional 200,000 of
the Option Shares on or after November 1, 2000 and (c) as to an additional
200,000 Option Shares on and after the earlier of September 30, 2009 and the
first date after which the average closing price of the Common Shares for any
consecutive 90-day period equals or exceeds $8.00 per share, and shall not be
exercisable after November 1, 2009. Upon the occurrence of a change in control
of the Company (as defined in the Optionee's Employment Agreement), any
installments of the Option not then vested shall vest and become immediately
exercisable.
As of January 29, 2000, options outstanding for 611,325 shares had been granted
under the 1994 Plan at exercise prices ranging from $1.63 to $8.00 per share and
options for 433,142 shares were exercisable. As of January 29, 2000, options
outstanding for 600,000 shares had been granted under the 1999 Plan at an
exercise price of $3.41 per share, of which 200,000 shares were exercisable at
January 29, 2000. In addition, there are 95,959 options outstanding and
exercisable at $9.17 per share which were issued in fiscal 1993 under employment
agreements.
The Company has computed for pro forma disclosure purposes the value of all
compensatory options granted during fiscal years 1997, 1998 and 1999, using the
Black-Scholes option pricing model as prescribed by SFAS No. 123. Assumptions
used for the pricing model include 4.5% to 7.9% for the risk-free interest
rates, expected stock option lives of 2-10 years, expected dividend yield of 0%
each year and expected volatility of 61.3% to 69%. Options were assumed to be
exercised upon vesting for the purposes of this valuation. Adjustments are made
for options forfeited prior to vesting. Had compensation costs for compensatory
options been determined consistent with SFAS No. 123, the Company's pro forma
net income would have been net income of $542,000 in 1997, net income of
$5,680,455 in 1998 and net income of $432,160 in 1999. Pro forma basic earnings
per share would have been $.08 in 1997, $.84 in 1998 and $.06 in 1999. Pro forma
diluted earnings per share would have been $.08 in 1997, $.81 in 1998 and $.06
in 1999.
Transactions with respect to the plans were as follows (shares in thousands):
January 29, 2000 January 30, 1999 January 31, 1998
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at
beginning of year 1,093 $ 6.48 1,081 $ 6.45 1,036 $ 6.57
Granted 739 $ 3.51 36 $ 6.57 189 $ 6.10
Exercised (38) $ 1.63 (1) $ 4.00 -- $ --
Canceled (487) $ 6.49 (23) $ 6.65 (144) $ (6.88)
----- ----- -----
Outstanding at
end of year 1,307 $ 4.75 1,093 $ 6.48 1,081 $ 6.45
===== ===== =====
Exercisable at
end of year 729 $ 5.31 637 $ 7.14 475 $ 7.71
===== ===== =====
F-10
The following table summarizes information about stock options outstanding at January 29, 2000 (shares in thousands):
Options Outstanding Options Exercisable
- ----------------- --------------------------------------------------------- -----------------------------------
Number Weighted Average Weighted Number Weighted
Range of Exercise Outstanding Remaining Average Exercisable at Average
Prices Jan. 29, 2000 Contractual Life Exercise Price Jan. 29, 2000 Exercise Price
- ----------------- ------------- ------------------- -------------- -------------- --------------
$1.63 - $4.00 872 8.78 $ 3.43 387 $ 3.22
$4.01 - $7.38 338 5.52 6.88 245 7.09
$7.39 - $9.17 97 4.05 9.16 97 9.16
----- ----
1,307 7.58 4.75 729 5.31
===== ====
The weighted average fair value of options granted for the years ended January
31, 1998, January 30, 1999 and January 29, 2000 was $4.80, $5.06 and $3.42,
respectively.
11. RIGHTS OFFERING:
---------------
In September, 1997, the Company adopted a Stockholder Rights Plan in which
preferred stock purchase rights were distributed as a dividend at the rate of
one Right for each share of Jos. A. Bank's outstanding Common Stock held as of
the close of business on September 30, 1997. Each Right will entitle
stockholders to buy one one-hundredth of a share of the newly designated Series
A Preferred Stock of Jos. A. Bank at an exercise price of $40. The Rights will
be exercisable only if a person or group acquires beneficial ownership of 20
percent or more of the Company's outstanding Common Stock (without the approval
of the board of directors) or commences a tender or exchange offer upon
consummation of which a person or group would beneficially own 20 percent or
more of the Company's outstanding Common Stock.
If any person becomes the beneficial owner of 20 percent or more of the
Company's outstanding common stock (without the approval of the board of
directors), or if a holder of 20 percent or more of the Company's Common Stock
engaged in certain self-dealing transactions or a merger transaction in which
the Company is the surviving corporation and its Common Stock remains
outstanding, then each Right not owned by such person or certain related parties
will entitle its holder to purchase, at the Right's then-current exercise price,
units of the Company's Series A Preferred Stock (or, in certain circumstances,
Common Stock, cash, property or other securities of the Company) having a market
value equal to twice the then-current exercise price of the Rights. In addition,
if the Company is involved in a merger or other business combination transaction
with another person after which its Common Stock does not remain outstanding, or
sells 50 percent or more of its assets or earning power to another person, each
Right will entitle its holder to purchase, at the Right's ten-current exercise
price, shares of common stock of such other person having a market value equal
to twice the then-current exercise price of the Rights.
The Company will generally be entitled to redeem the Rights at $.01 per Right at
any time until the tenth business day following the public announcement that a
person or group has acquired 20 percent or more of the Company's Common Stock.
12. DISCONTINUED OPERATIONS:
-----------------------
In January, 1998 (fiscal 1997), the Company formalized a plan to dispose of its
manufacturing operations. Accordingly, the consolidated financial statements
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 $2,479,000 was reported net of an income tax
benefit of $967,000, for an after-tax loss of $1,512,000 for fiscal 1997. In
addition, losses from operations have been reflected for each year presented.
Summarized financial information for the discontinued operations is as follows
(in thousands):
Jan. 31, Jan. 30, Jan. 29,
1998 1999 2000
---- ---- ----
Loss before income taxes $ (374) $ (84) $ --
Net loss $ (266) $ (51) $ --
- -------------------------------------------------------------
Current assets $ 1,159 $ 580
Less current liabilities 1,926 834
- -------------------------------------------------------------
Net current liabilities $ (767) $ (254)
- -------------------------------------------------------------
Noncurrent assets $ 241 $ --
Noncurrent liabilities 241 --
- -------------------------------------------------------------
Net noncurrent assets $ -- $ --
- -------------------------------------------------------------
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 include receivables, inventories, plant and equipment, pension termination
and other transaction costs associated with the discontinued manufacturing
operations.
F-11
13. SUBSEQUENT EVENT:
----------------
On April 12, 2000, the Company announced a repurchase of approximately 13% of
its outstanding common stock. In a private transaction, the Company purchased
896,400 shares at $3.50 per share.
14. SEGMENT REPORTING (Unaudited):
-----------------------------
The Company has two reportable segments: full line stores and catalog and
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
summary of significant policies. 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.
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/direct
marketing customer receives a catalog in his or her home, office and/or visits
our web page via the internet and either calls, mails, faxes or places an order
on-line. The merchandise is then shipped to the customer.
The detail segment data is presented in the following table (in thousands):
Fiscal 1999 Full line Catalog & Internet direct
- -----------
(in thousands) stores marketing Other Total
------ --------- ----- -----
Net sales $161,285 $24,602 $ 7,642 (a) $193,529
Depreciation and
amortization 3,123 15 835 3,973
Operating income (b) 24,362 2,377 (23,154) (e) 3,585
Identifiable assets (c) 51,307 8,862 24,582 84,751
Capital expenditures (d) 4,777 97 1,906 6,780
Fiscal 1998 Full line Catalog & Internet direct
- -----------
(in thousands) stores marketing Other Total
------ --------- ----- -----
Net sales $156,187 $23,783 $ 7,193 (a) $187,163
Depreciation and
amortization 2,817 15 1,273 4,105
Operating income (b) 25,622 3,210 (19,622) 9,210
Identifiable assets (c) 47,562 9,192 25,761 82,515
Capital expenditures (d) 4,811 14 1,494 6,319
Fiscal 1997 Full line Catalog & Internet direct
- -----------
(in thousands) stores marketing Other Total
------ --------- ----- -----
Net sales $140,349 $23,391 $ 8,434 (a) $172,174
Depreciation and
amortization 2,499 26 1,056 3,581
Operating income (b) 21,221 3,920 (18,573) 6,568
Identifiable assets (c) 39,477 8,537 29,130 77,144
Capital expenditures (d) 3,939 2 115 4,056
a) Revenue from segments below the quantitative thresholds are attributable
primarily to four operating segments of the Company. Those segments include
factory stores, 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 represents profit before allocations of overhead from
corporate office and the distribution center, interest and income taxes.
c) Identifiable assets include cash, accounts receivable, inventories, prepaid
expenses and fixed assets residing in or related to the reportable segment.
Assets included in Other are primarily fixed assets associated with the
corporate office and distribution center, deferred tax assets, and inventory
which has not been assigned to one of the reportable segments.
d) Capital Expenditures include purchases of property, plant and equipment made
for the reportable segment.
e) Includes one time charges of $3,102,000.
F-12
15. QUARTERLY FINANCIAL INFORMATION (Unaudited):
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
(In Thousands, Except Per Share Amounts)
FISCAL 1999
- -----------
Net sales $ 43,607 $ 44,203 $ 43,739 $ 61,980 $ 193,529
Gross profit 22,108 21,276 21,562 28,553 93,499
Operating income (loss) 1,102 (1,067) 23 3,527 3,585
Income (loss) from continuing operations 472 (801) (236) 1,931 1,366
Net Income (loss) 472 (801) (236) 1,931 1,366
Income (loss) from continuing operations
per share (diluted) $ 0.07 $ (0.12) $ (0.03) $ 0.28 $ 0.20
Net income (loss) per share (diluted) $ 0.07 $ (0.12) $ (0.03) $ 0.28 $ 0.20
FISCAL 1998
- -----------
Net sales $ 43,383 $ 41,947 $ 44,584 $ 57,249 $ 187,163
Gross profit 21,232 20,190 22,316 27,144 90,882
Operating income 1,794 1,415 1,966 4,035 9,210
Income from continuing operations 828 597 2,238 2,246 5,909
Net Income $ 777 $ 597 $ 2,238 $ 2,246 $ 5,858
Income from continuing operations
per share (diluted) $ 0.12 $ 0.09 $ 0.32 $ 0.32 $ 0.85
Net income per share (diluted) $ 0.11 $ 0.09 $ 0.32 $ 0.32 $ 0.84
F-13