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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q

Commission File Numbers    0-23874

Jos. A. Bank Clothiers, Inc.

410-239-2700
(Registrant's telephone number including area code)

None
(Former name or former address, if
changed since last report)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or if 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    ý        No    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

Yes    ý        No    o

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

JOS. A. BANK CLOTHIERS, INC.
Index

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PART I. FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands except per share data)
(Unaudited)

See accompanying notes

3

JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)

See accompanying notes

4

JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands) (Unaudited)

See accompanying notes

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in Thousands Except Per Share Amounts and the Number of Stores)

1.     BASIS OF PRESENTATION

        Jos. A. Bank Clothiers, Inc. (the "Company") is a nationwide retailer of classic men's clothing through conventional retail stores and catalog and internet direct marketing. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

        The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year 2003. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. These adjustments are of a normal recurring nature.

        Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's February 1, 2003 Annual Report on Form 10-K.

2.     SIGNIFICANT ACCOUNTING POLICIES

        Inventories—Inventories are stated at the lower of first-in, first-out cost or market. The Company capitalizes into inventory certain warehousing and delivery costs associated with shipping its merchandise to the point of sale.

        Catalog—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.

        Supplemental Cash Flow Information—Interest and income taxes paid were as follows:

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        Stock Option Plan—The Company applies the intrinsic-value-based method of accounting for stock issued to employees and directors to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying common stock exceeds the exercise price. There was no stock-based compensation expense recognized in the statements of income for the periods ended November 2, 2002. The Company recognized $132 and $247 for the three and nine months ended November 1, 2003 related to variable plan stock options. The Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123, as amended. The following table illustrates the effect on net income if the fair-value-based method had been applied to all awards in the three month and nine month periods ended November 2, 2002 and November 1, 2003:

(1)

Amounts for 2003 are net of compensation expense recognized for variable plan stock options.

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        The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumption used for grants in:

        Reclassifications—Certain reclassifications have been made to the November 2, 2002 financial statements in order to conform with the November 1, 2003 presentation.

3.     WORKING CAPITAL

        The net change in operating working capital is composed of the following:

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4.     EARNINGS PER SHARE

        Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the periods. Diluted net income per share is calculated by dividing net income by the diluted weighted average common shares, which reflects the potential dilution of stock options. The weighted average shares used to calculate basic and diluted earnings per share are as follows:

        The Company uses the treasury method for calculating the dilutive effect of stock options. The effects on weighted average shares outstanding of options to purchase common stock of the Company that were not included in the computation of diluted net income per share for the third quarters ended November 1, 2003 was 100 because the options were anti-dilutive.

5.     SEGMENT REPORTING

        The Company has two reportable segments: stores and direct marketing. While each segment offers a similar mix of men's clothing to the retail customer, the stores also provide alterations for all products.

        The accounting policies of the segments are the same as those described in the Company's February 1, 2003 Annual Report on Form 10-K. The Company evaluates performance of the segments based on "four wall" contribution, which excludes any allocation of "management company" costs, distribution center costs (except order fulfillment costs which are allocated to direct marketing), 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 stores the typical customer travels to the store and purchases men's clothing and/or alterations and takes their purchases with them. The direct marketing customer receives a catalog in his or her home, office and/or visits the Company's internet website and either calls, mails, faxes or places an order on-line. The merchandise is then shipped to the customer. Segment data is presented in the following table:

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Three months ended November 1, 2002

Three months ended November 1, 2003

Nine Months ended November 2, 2002

Nine Months ended November 1, 2003

(a)

Direct marketing net sales represent catalog and internet sales including catalog orders placed in new stores. Net sales from segments below the quantitative thresholds are attributable primarily to three operating segments of the Company. Those segments are factory, franchise stores and regional tailor shops. None of these segments have ever met any of the quantitative thresholds for determining reportable segments and are included in "Other".

(b)

Operating income for Stores and Direct Marketing segments represents profit before allocations of overhead from the corporate office and the distribution center (which are included in the "Other" segment), interest and income taxes. Total Operating Income, per the accompanying Condensed Consolidated Statements of Income, represents profit before interest and income taxes.

(c)

Identifiable assets include cash and cash equivalents, accounts receivable, inventories, prepaid expenses and property, plant and equipment residing in or related to the reportable segment. Assets included in Other are primarily cash and cash equivalents, property, plant and equipment associated with the corporate office and distribution center, deferred tax assets, and inventories, which have not been assigned to one of the reportable segments.

(d)

Capital expenditures include purchases of property, plant and equipment made for the reportable segment.

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6.     LEGAL MATTERS

        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.

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Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition

        The Company's statements 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 outside of the Company's control that can affect the Company's operating results, liquidity and financial condition such as risks associated with economic, weather, public health and other factors affecting consumer spending, the ability of the Company to finance its expansion plans, the mix and pricing of goods sold, the market price of key raw materials such as wool and cotton, availability of lease sites for new stores, the ability to source product from its global supplier base and other competitive factors. These cautionary statements qualify all of the forward-looking statements the Company makes herein. The Company cannot assure you that the results or developments anticipated by the Company will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for the Company or affect the Company, its business or its operations in the way the Company expects. The Company cautions you not to place undue reliance on these forward-looking statements, which speak only as of their respective dates, and assumes no obligation to update any of the forward-looking statements. These risks should be carefully reviewed before making any investment decision.

        The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto and with the Company's audited financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended February 1, 2003.

        Overview—For the third quarter of the Company's fiscal year ending January 31, 2004 ("fiscal 2003"), the Company's net income increased 53.6% to approximately $2.9 million compared with net income of approximately $1.9 million for the third quarter of the Company's fiscal year ended February 1, 2003 ("fiscal 2002"). The Company earned $0.38 per diluted share in the third quarter of fiscal 2003 compared with $0.26 per diluted share in the third quarter of fiscal 2002. As such, diluted earnings per share increased 46.2% compared with the prior year period.

        The Company generated increased profits in both the stores and direct marketing segments in the third quarter of fiscal 2003 compared to the third quarter of 2002 driven by a 24.4% increase in net sales over the third quarter of fiscal 2002 and higher gross profit margins. Gross profit margin increased 160 basis points in the third quarter of fiscal 2003 to 57.7% as compared with 56.1% in the third quarter of 2002 because the Company continued to improve its sourcing of merchandise and management of retail prices and related markdowns.

        The Company opened 25 stores in the third quarter of fiscal 2003 and has opened 46 stores in the first nine months of fiscal 2003. Management believes the chain can grow to approximately 500 stores from the fiscal 2002 year-end base of 160 stores. The Company plans to open an additional 4 or 5 stores in fiscal 2003, between 50 to 75 stores in fiscal 2004 and between 75 to 100 stores each year thereafter to grow the chain to the 500 store level. However, the Company cannot make any assurances that it will open such number of stores. The store growth is part of a strategic plan the Company initiated in fiscal 2000. In the past four years, the Company has continued to increase the amount of store openings as its infrastructure and performance improved. Accordingly, the Company opened ten new stores in fiscal 2000 (including two factory stores), 21 new stores in fiscal 2001, 25 new stores in fiscal 2002 and expect to open 50 to 51 new stores in fiscal 2003 (including 46 opened through November 1, 2003).

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Results of Operations

        The following table is derived from the Company's Condensed Consolidated Statements of Income and sets forth, for the periods indicated, the items included in the Condensed Consolidated Statements of Income expressed as a percentage of net sales.

        Net Sales—Net sales for the third quarter of fiscal 2003 increased 24.4%, to $72.0 million, compared with $57.9 million in the third quarter of fiscal 2002. Comparable store sales increased 8.7% in the third quarter of fiscal 2003 as compared with the third quarter of fiscal 2002. Net sales for the first nine months of fiscal 2003 increased 20.1%, to $198.7 million, compared with $165.5 million in the first nine months of fiscal 2002. Comparable store sales increased 7.2% in the first nine months of fiscal 2003 as compared with the same period of fiscal 2002. The increases in net sales were driven primarily by increases in sales of suits, shirts and ties in the third quarter and first nine months of fiscal 2003, as well as increases in sportswear and furnishings in the third quarter of fiscal 2003. For the first nine months of fiscal 2003, suits represented approximately 31% of total merchandise sales. Net sales also increased as a result of the opening of new stores as follows:

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*

Square feet is presented in thousands and excludes franchise stores

        Comparable store sales include merchandise sales generated in full-line and factory stores, excluding stores that had new stores opened in their immediate market area (within zero to ten miles) in the past 12 months. New stores are added to the comparable store base at the beginning of the second fiscal year after they open. As such, a new store may be excluded from comparable store sales for the first 13 to 23 months of operation. Franchise stores are not included in comparable store sales. Comparable store sales include catalog purchases made by customers while shopping in stores which are included in the comparable store base.

        Gross Profit—Gross profit (net sales less cost of goods sold) as a percent of net sales increased 160 basis points in the third quarter of fiscal 2003 to 57.7% from 56.1% for the third quarter of fiscal 2002 and increased 260 basis points to 56.5% in the first nine months of fiscal 2003 from 53.9% in the comparable periods of the prior year. The increased gross profit percent is primarily due to the continued improvement in sourcing of merchandise and management of retail prices and related markdowns.

        General and Administrative Expenses—General and administrative expenses, which consist primarily of corporate payroll and overhead and distribution center costs, increased $1.4 million in the third quarter of fiscal 2003 and increased $4.0 million in the first nine months of fiscal 2003 compared with the comparable periods in fiscal 2002. The increases were due primarily to higher payroll, travel-related costs and other expenses related to business expansion and higher distribution center costs.

        Sales and Marketing Expenses—Sales and marketing expenses, which consist primarily of a) store, factory store and direct marketing occupancy, b) selling and other variable costs and c) total Company advertising and marketing expenses, increased $5.3 million in the third quarter of fiscal 2003 and increased $13.3 million in the first nine months of fiscal 2003 as compared with the same periods of fiscal 2002. The increase in sales and marketing expenses in the 47 stores which opened since the end of the third quarter of fiscal 2002 plus the incremental increase in expense in the 24 stores opened throughout the first nine months of fiscal 2002 were $4.5 million and $11.3 million in the third quarter and nine months ended November 1, 2003, respectively. Sales and marketing expenses in the 118 stores which were open prior to fiscal 2002 were $0.6 million and $1.8 million higher in the third quarter and

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nine months ended November 1, 2003, respectively, than in the same periods in fiscal 2002 primarily as a result of higher sales commissions and increased occupancy costs.

        Store Opening Costs—Store opening costs increased $0.4 million and $0.8 million, respectively, during the third quarter and first nine months of fiscal 2003, principally because the Company opened more new stores in these periods compared with the same periods of the prior year.

        Interest Expense, net—Interest expense, net increased $0.2 million in the third quarter of fiscal 2003 compared with the same quarter of the prior year primarily due to a $23.2 million higher average outstanding debt balance in the current quarter. Interest expense, net increased $0.3 million for the first nine months of fiscal 2003 compared with the same period last year as the average outstanding debt balance increased $13.8 million and the average interest rate decreased.

        Income Taxes—The Company's effective tax rate, which consists of Federal and state income taxes, was 43.1% and 42.0% in the fiscal third quarters of 2003 and 2002, respectively and 42.5% and 40.7% in the first nine months of fiscal 2003 and 2002. The increased tax rates in 2003 are primarily a result of higher state taxes due to increased tax rates and disallowance of certain deductions and higher marginal Federal income tax rates as income extends into higher tax brackets.

        Liquidity and Capital Resources—The Company maintains a $75 million bank line of credit (the "Credit Agreement"), that extends until April 2006 which provides for a revolving loan whose limit is determined by a formula based on the Company's inventories and accounts receivable. The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under the Credit Agreement, was $35.0 million at November 1, 2003 compared with $43.1 million at the same time in fiscal 2002. The decrease in availability was primarily a result of increased borrowings to support the increase in inventory levels necessitated by the Company's expansion and to build the basic inventory levels. Total bank debt outstanding under the Credit Agreement, excluding mortgages and long-term notes, was $24.0 million at November 1, 2003 compared with $6.5 million at the same time in fiscal 2002.

        The Credit Agreement includes a) financial covenants concerning (i) minimum earnings before interest, income taxes, depreciation and amortization (EBITDA) and (ii) limitations on capital expenditures and additional indebtedness and b) a restriction on the payment of dividends. The financial covenants are in effect only if the Company's availability in excess of outstanding borrowings is less than $10 million. The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under its Credit Agreement, was $35.0 million at November 1, 2003, and thus the covenants were not in effect. The Company cannot make any assurances that these covenants will not go into effect in the future. Interest rates under the Credit Agreement are either at the prime rate or at LIBOR plus 1.5% at the Company's option. The Credit Agreement also includes provisions for a seasonal increase in the advance rate used to determine the borrowing base amount.

        The Company has outstanding several notes that are payable in monthly installments, including a mortgage in connection with its corporate offices and distribution center, and secured notes in connection with certain equipment. The aggregate amount outstanding under these notes at November 1, 2003 was $9.5 million as compared with $10.7 million as November 2, 2002.

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        The following table summarizes the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows:

        In the first nine months of fiscal 2003, cash used in operating activities was $37.6 million due primarily to an increase in inventories of $51.3 million. This increase was partially offset by an increase in net income exclusive of depreciation and amortization. Finished goods inventories increased $48.3 million during the first nine months of fiscal 2003, primarily to support new stores. Raw material inventories (wool) increased $3.0 million in the first nine months of fiscal 2003 as a result of the Company's continuing effort to contract directly with clothing manufacturers and cut out the middleman.

        Inventories at the end of the third quarter of fiscal 2003 were $129.6 million compared with $77.2 million at the end of the third quarter of fiscal 2002. The $52.4 million increase in inventories since the end of the third quarter of fiscal 2002 was due primarily to the following:

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        Cash used in investing activities in the first nine months of fiscal 2003 was $12.7 million, which was $5.6 million higher than in the first nine months of fiscal 2002. The increase was due primarily to the opening of 46 new stores in the first nine months of fiscal 2003, renovating four major stores and expanding the capacity of the distribution center to handle at least 400 stores.

        In the first nine months of fiscal 2003, $42.5 million of cash was provided by financing activities primarily to support the increase in inventories necessitated by the Company's expansion and to build the basic inventory levels. The source of these funds was $39.8 million from the Company's revolving loan under the Credit Agreement and $3.7 million from proceeds of the exercise of stock options. Also, the Company used $0.9 million for the repayment of long-term debt.

        For fiscal 2003, the Company expects to spend between $16 to $17 million on capital expenditures, primarily to fund the opening of approximately 50 new stores (of which 46 have been opened as of November 1, 2003), the renovation of four stores, an expansion of the distribution center capacity and the implementation of various systems initiatives. Capital expenditures were $12.7 million for the first nine months of fiscal 2003.

        The estimated capital expenditures are net of negotiated landlord contributions to help fund the construction of leasehold improvements for new stores. These amounts are typically paid by the landlords after the completion of construction by the Company and the receipt of appropriate lien waivers and other documents from contractors. For the stores opened in fiscal 2002, the Company negotiated approximately $5.3 million of landlord contributions all of which have been collected, including $2.4 million which was collected in fiscal 2003. For the stores opened in the first nine months of 2003, the Company negotiated $8.2 million of landlord contributions of which approximately $1.8 million were collected in the first nine months of 2003.

        Management believes the Company's cash from operations and availability under its Credit Agreement will be sufficient to fund its planned capital expenditures and operating expenses for fiscal 2003. The Company expects to increase the current credit line to support growth beyond 2003.

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        Critical accounting policies and estimates—In preparing the consolidated financial statements, a number of assumptions and estimates are made that, in the judgement of management, are proper in light of existing general economic and company-specific circumstances. For a detailed discussion on the application of this and other accounting policies, see Note 1 in the Consolidated Financial Statements in the Company's February 1, 2003 Annual Report on Form 10-K.

        Inventory.    The Company records inventory at the lower of cost or market. Cost is determined using the first-in, first-out method. The estimated market value is based on assumptions for future demand and related pricing. The Company reduces the carrying value of inventory to net realizable value where cost exceeds estimated selling price less costs of disposal. Management's sales assumptions are based on the Company's experience that historically most of the Company's inventory is sold through the Company's primary sales channels with virtually no inventory being liquidated through bulk sales to third parties. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

        Asset Valuation.    Long-lived assets, such as property, plant, and equipment, subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The valuation of these assets is dependent on the Company's ability to continue to generate profits at both the Company and store levels.

        While the Company has taken reasonable care in preparing these estimates and making these judgements, actual results could and probably will differ from the estimates. Management believes any difference in the actual results from the estimates will not have a material effect upon the Company's financial position or results of operations.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        At November 1, 2003, the Company had 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. The Company's interest on borrowings under its Credit Agreement is at a variable rate based on the prime rate or a spread over the LIBOR.

Item 4.    Internal Controls and Procedures

        CEO and CFO Certifications.    Attached as exhibits to this quarterly report are the certifications of the CEO and the CFO required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the "Certifications"). This section of the quarterly report contains the information concerning the evaluation of Disclosure Controls and changes to Internal Controls over Financial Reporting referred to in the Certifications and this information should be read in conjunction with the Certifications for a more complete understanding of the topics presented.

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        Disclosure Controls.    Disclosure Controls are procedures that are designed for the purpose of ensuring that information required to be disclosed in the Company's reports filed under the Securities Exchange Act of 1934 (such as this quarterly report), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

        Internal Controls over Financial Reporting.    Internal Controls over Financial Reporting means a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and includes those policies and procedures that:

        —pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

        —provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

        —provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's consolidated financial statements.

        Limitations on the Effectiveness of Controls.    The Company's management, including the CEO and CFO, does not expect that the Company's Disclosure Controls or Internal Controls over Financial Reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Further, the design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

        Conclusions Regarding Disclosure Controls.    Based upon the required evaluation of Disclosure Controls as of November 1, 2003, the CEO and CFO have concluded that, subject to the limitations noted above, the Company's Disclosure Controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to management, including the CEO and CFO.

        Changes in Internal Controls over Financial Reporting.    In accordance with the SEC's requirements, the CEO and the CFO note that, during the quarter ended November 1, 2003, there have been no significant changes in Internal Controls over Financial Reporting or in other factors that have materially affected or are reasonably likely to materially affect Internal Controls over Financial Reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

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        There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.

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PART II. OTHER INFORMATION

        Item 1.    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.

        Item 6.    Exhibits and Reports on Form 8-K

(a)

Exhibits

(b)

Reports on Form 8-K

Form 8-K furnished August 20, 2003, providing News Release relating to second quarter of fiscal 2003 financial results (and not incorporated herein by reference).

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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