United States Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
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þ
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended November 1, 2008.
or
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o
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Commission File Number 0-23874
Jos. A. Bank Clothiers, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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36-3189198
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer
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Identification
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Number)
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500 Hanover Pike, Hampstead, MD
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21074-2095
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(Address of Principal Executive Offices)
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(Zip Code)
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410-239-2700
(Registrants 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 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
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company (See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange
Act)(check one):
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act):
Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:
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Class
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Outstanding as of November 25, 2008
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Common Stock, $.01 par value
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18,250,617
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JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Index
2
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands except per share data)
(Unaudited)
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Three Months Ended
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Nine Months Ended
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November 3,
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November 1,
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November 3,
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November 1,
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2007
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2008
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2007
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2008
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Net sales
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$
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131,304
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$
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149,274
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$
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395,115
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$
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447,412
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Cost of goods sold
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47,679
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54,980
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146,663
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166,900
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Gross Profit
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83,625
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94,294
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248,452
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280,512
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Operating expenses:
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Sales and
marketing, including occupancy
costs
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59,017
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66,209
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170,570
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193,773
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General and administrative
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13,111
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14,231
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39,067
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41,269
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Total operating expenses
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72,128
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80,440
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209,637
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235,042
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Operating income
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11,497
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13,854
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38,815
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45,470
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Other income (expense):
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Interest income
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396
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169
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1,374
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793
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Interest expense
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(92
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(103
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(285
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)
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(289
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Total other income
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304
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66
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1,089
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504
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Income before provision for income taxes
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11,801
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13,920
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39,904
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45,974
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Provision for income taxes
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4,705
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4,621
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16,244
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17,975
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Net income
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$
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7,096
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$
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9,299
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$
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23,660
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$
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27,999
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Earnings per share:
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Net income per share:
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Basic
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$
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0.39
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$
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0.51
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$
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1.31
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$
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1.54
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Diluted
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$
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0.38
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$
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0.50
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$
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1.28
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$
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1.52
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Weighted average shares outstanding:
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Basic
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18,165
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18,215
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18,111
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18,194
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Diluted
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18,439
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18,461
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18,419
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18,433
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See accompanying notes.
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
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February 2, 2008
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November 1, 2008
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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82,082
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$
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44,452
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Accounts receivable, net
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5,855
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16,127
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Inventories:
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Finished goods
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196,547
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230,491
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Raw materials
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10,278
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11,109
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Total inventories
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206,825
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241,600
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Prepaid expenses and other current assets
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18,593
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21,019
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Total current assets
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313,355
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323,198
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NONCURRENT ASSETS:
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Property, plant and equipment, net
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126,235
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138,523
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Other noncurrent assets
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508
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478
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Total assets
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$
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440,098
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$
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462,199
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LIABILITIES AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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47,383
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$
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43,965
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Accrued expenses
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72,150
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61,658
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Deferred tax liability current
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6,688
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6,652
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Total current liabilities
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126,221
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112,275
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NONCURRENT LIABILITIES:
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Deferred rent
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50,185
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55,267
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Deferred tax liability noncurrent
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1,210
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2,456
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Other noncurrent liabilities
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1,317
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1,372
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Total liabilities
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178,933
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171,370
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS EQUITY:
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Common stock
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181
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181
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Additional paid-in capital
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80,791
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82,456
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Retained earnings
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180,260
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208,259
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Accumulated other comprehensive losses
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(67
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(67
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Total stockholders equity
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261,165
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290,829
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Total liabilities and stockholders equity
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$
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440,098
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$
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462,199
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See accompanying notes.
4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
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Nine Months Ended
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November 3, 2007
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November 1, 2008
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Cash flows from operating activities:
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Net income
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$
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23,660
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$
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27,999
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization
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13,753
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15,394
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Loss on disposals of property, plant and equipment
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121
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227
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(Decrease) increase in deferred taxes
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(996
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1,210
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Net increase in operating working capital and other components
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(36,465
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(57,434
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Net cash provided by (used in) operating activities
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73
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(12,604
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Cash flows from investing activities:
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Capital expenditures
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(19,511
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(26,888
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Proceeds from disposal of fixed assets
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290
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197
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Net cash used in investing activities
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(19,221
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(26,691
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Cash flows from financing activities:
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Income tax benefit from exercise of stock options
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807
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528
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Net proceeds from exercise of stock options
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1,869
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1,137
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Net cash provided by financing activities
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2,676
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1,665
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Net decrease in cash and cash equivalents
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(16,472
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(37,630
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)
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Cash and cash equivalents beginning of period
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43,080
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82,082
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Cash and cash equivalents end of period
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$
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26,608
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$
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44,452
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See accompanying notes.
5
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in Thousands Except Per Share Amounts and the Number of Stores, or as Otherwise Noted)
1. BASIS OF PRESENTATION
Jos. A. Bank Clothiers, Inc. (the Company) is a nationwide retailer of classic mens
apparel through conventional retail stores and catalog and Internet direct marketing. The
condensed consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
The results of operations for the interim periods shown in this report are not
necessarily indicative of results to be expected for the fiscal year. In the opinion of
management, the information contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of the operating results for
these periods. These adjustments are of a normal recurring nature.
The Company operates on a 52-53 week fiscal year ending on the Saturday closest to
January 31. The following fiscal years ended or will end on the dates indicated and will be
referred to herein by their fiscal year designations:
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Fiscal year 2002
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February 1, 2003
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Fiscal year 2003
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January 31, 2004
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Fiscal year 2004
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January 29, 2005
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Fiscal year 2005
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January 28, 2006
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Fiscal year 2006
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February 3, 2007
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Fiscal year 2007
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February 2, 2008
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Fiscal year 2008
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January 31, 2009
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Fiscal year 2009
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January 30, 2010
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The accompanying unaudited Condensed Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and therefore do not
include all of the information and footnotes required by accounting principles accepted in the
United States for comparable annual financial statements. 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 Companys Annual Report on Form 10-K for fiscal year 2007.
Reclassifications
Certain amounts for the three and nine months ended November
3, 2007 have been reclassified to conform to the presentation in the three and nine months
ended November 1, 2008. The Company reclassified $(0.1) million and $0.6 million for the three
and nine months ended November 3, 2007, respectively, for certain costs (income) related to
its healthcare plan from general and administrative expense to sales and marketing expense in
the accompanying unaudited Condensed Consolidated Statements of
Income. Additionally, the
Company reclassified certain amounts in the Segment Reporting Note (Note 6) to conform to the
current year presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventories
The Company records inventory at the lower of cost or market
(LCM). Cost is determined using the first-in, first-out method. The Company capitalizes into
inventory certain warehousing and freight delivery costs associated with shipping its
merchandise to the point of sale. The Company periodically reviews quantities of inventories
on hand and compares these amounts to the expected sales of each product. The Company records
a charge to cost of goods sold for the amount required to reduce the carrying value of
inventory to net realizable value.
6
Vendor Rebates
The Company receives credits from vendors in connection with
inventory purchases. The credits are separately negotiated with each vendor. Substantially all
of these credits are earned in one of two ways: a) as a fixed percentage of the purchase price
when an invoice is paid or b) as an agreed-upon amount in the month a new store is opened.
There are no contingent minimum purchase amounts, milestones or other contingencies that are
required to be met to earn the credits. The credits described in a) above are recorded as a
reduction to inventories in the Consolidated Balance Sheets as the inventories are purchased
and the credits described in b) above are recorded as a reduction to inventories as new stores
are opened. In both cases, the credits are recognized as reductions to cost of goods sold as
the product is sold.
Landlord Contributions
Landlord contributions are accounted for as an increase
to deferred rent and as an increase to prepaid expenses and other current assets when the
related store is opened. When collected, the Company records cash and reduces the prepaid
expenses and other current assets account. The landlord contributions are presented in the
Consolidated Statements of Cash Flows as an operating activity. The deferred rent is amortized
over the life of the lease in a manner that is consistent with the Companys policy to
straight-line rent expense over the term of the lease. The amortization is recorded as a
reduction to sales and marketing expense which is consistent with the classification of lease
expense.
Recently Issued Accounting Standards
In September 2006, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value under generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS 157 does not require
any new fair value measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy used to classify the source of the information. This
statement was effective beginning in fiscal year 2008, except as it relates to nonfinancial
assets and liabilities, for which the statement is effective for fiscal year 2009. With
respect to its financial assets and liabilities, this statement has not had a material impact
on the Companys consolidated financial statements. With respect to its nonfinancial assets
and liabilities, the Company is currently evaluating the impact SFAS 157 will have on its
consolidated financial statements.
In October 2008, the FASB issued Staff Position 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (FSP 157-3), which clarifies
the application of SFAS 157 and provides an example of determining fair value when the market
for a financial asset is not active. FSP 157-3 was effective for the Company upon issuance
and has not had a material impact on the Companys consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities including an amendment of FASB Statement No. 115, (SFAS
159). SFAS 159 permits entities to choose to measure many financial instruments and certain
other assets and liabilities at fair value on an instrument-by-instrument basis (the fair
value option). SFAS 159 became effective beginning in fiscal year 2008. The Company adopted
SFAS 159 on February 3, 2008 and elected not to apply fair value accounting on its existing
financial assets and liabilities. Therefore, this statement has not had an impact on the
Companys consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS No. 133, (SFAS 161). SFAS 161 is intended to
improve financial standards for derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on an entitys
financial position, financial performance and cash flows. Entities are required to provide
enhanced disclosures about: how and why an entity uses derivative instruments; how derivative
instruments and related hedged items are accounted for under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and its related interpretations; and how
derivative instruments and related hedged items affect an entitys financial position,
financial performance and cash flows. SFAS 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008. The Company is
currently evaluating the impact SFAS 161 will have on its consolidated financial statements.
7
3. SUPPLEMENTAL CASH FLOW DISCLOSURE
The net changes in operating working capital and other components consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
November 3, 2007
|
|
|
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
$
|
(5,210
|
)
|
|
$
|
(10,272
|
)
|
Increase in inventories
|
|
|
(41,576
|
)
|
|
|
(34,775
|
)
|
Increase in prepaids and other assets
|
|
|
(2,181
|
)
|
|
|
(2,396
|
)
|
Increase (decrease) in accounts payable
|
|
|
14,545
|
|
|
|
(3,418
|
)
|
Decrease in accrued expenses and other liabilities
|
|
|
(7,272
|
)
|
|
|
(11,710
|
)
|
Increase in deferred rent and other noncurrent liabilities
|
|
|
5,229
|
|
|
|
5,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in operating working capital and other components
|
|
$
|
(36,465
|
)
|
|
$
|
(57,434
|
)
|
|
|
|
|
|
|
|
Interest and income taxes paid were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
November 3, 2007
|
|
|
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
200
|
|
|
$
|
203
|
|
Income taxes paid
|
|
$
|
30,505
|
|
|
$
|
32,269
|
|
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 period. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding for basic EPS
|
|
|
18,165
|
|
|
|
18,215
|
|
|
|
18,111
|
|
|
|
18,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of common stock
equivalents
|
|
|
274
|
|
|
|
246
|
|
|
|
308
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding for diluted EPS
|
|
|
18,439
|
|
|
|
18,461
|
|
|
|
18,419
|
|
|
|
18,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses the treasury stock method for calculating the dilutive effect of stock
options. There were 12,500 options that were anti-dilutive for the nine months ended November
1, 2008, which were excluded from the calculation of diluted shares. For the quarter ended
November 1, 2008 and the quarter and nine months ended November 3, 2007, there were no
anti-dilutive options.
8
5. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in the
Consolidated Statements of Income in the period that includes the enactment date.
Effective February 4, 2007, the Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 is an interpretation
of SFAS Statement No. 109, Accounting for Income Taxes, that prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. In addition, FIN 48 requires
expanded disclosure with respect to the uncertainty in income taxes.
Also effective February 4, 2007, the Company adopted FASB Staff Position (FSP) No. FIN
48-1, Definition of Settlement in FASB Interpretation No. 48, (FSP FIN 48-1), which was
issued on May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide guidance on how an entity should
determine whether a tax position is effectively settled for the purpose of recognizing
previously unrecognized tax benefits. The term effectively settled replaces the term
ultimately settled when used to describe recognition, and the terms settlement or
settled replace the terms ultimate settlement or ultimately settled when used to
describe measurement of a tax position under FIN 48. FSP FIN 48-1 clarifies that a tax
position can be effectively settled upon the completion of an examination by a taxing
authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is
not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open.
The effective income tax rate for the first nine months of fiscal year 2008 was 39.1% as
compared with 40.7% in the first nine months of fiscal year 2007. The effective rate for
fiscal year 2008 was favorably impacted by a management transition plan, approved by the
Company during the third quarter, which will enable the Company to fully deduct all employee
compensation which was previously limited under Internal Revenue Code Section 162(m) (IRC
162(m)). The benefit of this change was approximately $0.6 million which was recorded in the
third quarter of fiscal year 2008. In addition, the effective rate for the third quarter of
fiscal year 2008 was impacted by a decrease in the liability for unrecognized tax benefits and
related penalties and interest of $0.3 million. For the first nine months of fiscal year 2008,
this decrease was offset by a comparable amount that was required to be recorded in the first
quarter of fiscal year 2008.
The Company files a federal income tax return and state and local income tax returns in
various jurisdictions. The Internal Revenue Service (IRS) has audited tax returns through
fiscal year 2005, including its examination of the tax return for fiscal year 2005 in the
third quarter of fiscal year 2008. No significant adjustments were required to the fiscal
year 2005 tax return as a result of the examination by the IRS. The majority of the Companys
state and local tax returns are no longer subject to examinations by taxing authorities for the
years before fiscal year 2004.
6. SEGMENT REPORTING
The Company has two reportable segments: Stores and Direct Marketing. The Stores segment
includes all Company-owned stores excluding outlet stores. The Direct Marketing segment
includes catalog and Internet. While each segment offers a similar mix of mens clothing to
the retail customer, the Stores segment also provides complete alterations, while the Direct
Marketing segment provides certain limited 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, which consists
primarily of general and administration costs (except order fulfillment costs which are
allocated to Direct Marketing), interest and income taxes.
The Companys segments are strategic business units that offer similar products to the
retail customer by two distinctively different methods. In the Stores segment, typical
customers travel to the store and purchase mens clothing and/or alterations and take their
purchases with them. The Direct Marketing customer receives a catalog in his
or her home and/or office and/or visits our Internet web site and places an order by
phone, mail, fax or online. The merchandise is then shipped to the customer.
9
Segment data is presented in the following tables:
Three months ended November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
136,084
|
|
|
$
|
10,408
|
|
|
$
|
2,782
|
|
|
$
|
149,274
|
|
Depreciation and amortization
|
|
|
4,723
|
|
|
|
17
|
|
|
|
605
|
|
|
|
5,345
|
|
Operating income (loss)
(b)
|
|
|
24,183
|
|
|
|
3,989
|
|
|
|
(14,318
|
)
|
|
|
13,854
|
|
Capital expenditures
(d)
|
|
|
8,419
|
|
|
|
|
|
|
|
333
|
|
|
|
8,752
|
|
Three months ended November 3, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
116,586
|
|
|
$
|
11,751
|
|
|
$
|
2,967
|
|
|
$
|
131,304
|
|
Depreciation and amortization
|
|
|
4,069
|
|
|
|
22
|
|
|
|
619
|
|
|
|
4,710
|
|
Operating income (loss)
(b)
|
|
|
19,486
|
|
|
|
4,687
|
|
|
|
(12,676
|
)
|
|
|
11,497
|
|
Capital expenditures
(d)
|
|
|
7,748
|
|
|
|
3
|
|
|
|
234
|
|
|
|
7,985
|
|
Nine months ended November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
400,288
|
|
|
$
|
39,084
|
|
|
$
|
8,040
|
|
|
$
|
447,412
|
|
Depreciation and amortization
|
|
|
13,517
|
|
|
|
57
|
|
|
|
1,820
|
|
|
|
15,394
|
|
Operating income (loss)
(b)
|
|
|
71,997
|
|
|
|
15,640
|
|
|
|
(42,167
|
)
|
|
|
45,470
|
|
Identifiable assets
(c)
|
|
|
413,165
|
|
|
|
35,126
|
|
|
|
13,908
|
|
|
|
462,199
|
|
Capital expenditures
(d)
|
|
|
26,075
|
|
|
|
5
|
|
|
|
808
|
|
|
|
26,888
|
|
Nine months ended November 3, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
347,582
|
|
|
$
|
39,240
|
|
|
$
|
8,293
|
|
|
$
|
395,115
|
|
Depreciation and amortization
|
|
|
11,846
|
|
|
|
60
|
|
|
|
1,847
|
|
|
|
13,753
|
|
Operating income (loss)
(b)
|
|
|
63,376
|
|
|
|
15,334
|
|
|
|
(39,895
|
)
|
|
|
38,815
|
|
Identifiable assets
(c)
|
|
|
349,015
|
|
|
|
44,923
|
|
|
|
14,889
|
|
|
|
408,827
|
|
Capital expenditures
(d)
|
|
|
18,805
|
|
|
|
24
|
|
|
|
682
|
|
|
|
19,511
|
|
|
|
|
(a)
|
|
Direct Marketing net sales represent catalog and Internet sales. Net sales from segments
below the quantitative thresholds are attributable primarily to three operating segments of
the Company. Those segments are outlet stores, 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.
|
10
|
|
|
(b)
|
|
Operating income (loss) for the Stores and Direct Marketing segments represents profit
before allocations of overhead from the corporate office and the distribution centers,
interest and income taxes. Operating income (loss) for Other consists primarily of costs
included in general and administrative costs. Total operating income represents profit
before interest and income taxes.
|
|
(c)
|
|
Identifiable assets include cash and cash equivalents, accounts receivable, inventories,
prepaid expenses and other current assets and property, plant and equipment 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 centers, other noncurrent 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.
|
7. LEGAL MATTERS
On July 24, 2006, a lawsuit was filed against the Company and Robert N. Wildrick, the
Companys Chief Executive Officer, in the United States District Court for the District of
Maryland by Roy T. Lefkoe, Civil Action Number 1:06-cv-01892-WMN (the Class Action). On
August 3, 2006, a lawsuit substantially similar to the Class Action was filed in the United
States District Court for the District of Maryland by Tewas Trust UAD 9/23/86, Civil Action
Number 1:06-cv-02011-WMN (the Tewas Trust Action). The Tewas Trust Action was filed against
the same defendants as those in the Class Action and purported to assert the same claims and
seek the same relief. On November 20, 2006, the Class Action and the Tewas Trust Action were
consolidated under the Class Action case number (1:06-cv-01892-WMN) and the Tewas Trust Action
was administratively closed.
Massachusetts Labor Annuity Fund has been appointed the lead plaintiff in the Class
Action and has filed a Consolidated Class Action Complaint. R. Neal Black, the Companys
President, and David E. Ullman, the Companys Executive Vice President and Chief Financial
Officer, have been added as defendants. On behalf of purchasers of the Companys stock between
December 5, 2005 and June 7, 2006 (the Class Period), the Class Action purports to make
claims under Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934,
based on the Companys disclosures during the Class Period. The Class Action seeks unspecified
damages, costs, and attorneys fees. The Companys Motion to Dismiss the Class Action was not
granted. The Company intends to defend vigorously the Class Action.
On August 11, 2006, a lawsuit was filed against the Companys directors and, as nominal
defendant, the Company in the United States District Court for the District of Maryland by
Glenn Hutton (Hutton), Civil Action Number 1:06-cv-02095-BEL (the Hutton Action). The
lawsuit purported to be a shareholder derivative action. The lawsuit purported to make claims
for various violations of state law that allegedly occurred from January 5, 2006 through
August 11, 2006 (the Relevant Period). It sought on behalf of the Company against the
directors unspecified damages, equitable relief, costs and attorneys fees.
On August 28, 2006, a lawsuit substantially similar to the Hutton Action was filed in the
United States District Court for the District of Maryland by Robert Kemp, Civil Action Number
1:06-cv-02232-BEL (the Kemp Action). The Kemp Action was filed against the same defendants
as those in the Hutton Action and purported to assert substantially the same claims and sought
substantially the same relief.
11
On October 17, 2006, the Hutton Action and the Kemp Action were consolidated under the
Hutton Action case number (1:06-cv-02095-BEL) and are now known as In re Jos. A. Bank
Clothiers, Inc. Derivative Litigation (the Derivative Action). The Amended Shareholder
Derivative Complaint in the Derivative Action was filed against the same defendants as those
in the Hutton Action, extended the Relevant Period to October 20, 2006 and purported to assert
substantially the same claims and seek substantially the same relief.
The Companys Motion to Dismiss the Derivative Action was granted on September 13, 2007.
Among the reasons for dismissal was the failure of the plaintiff to demand that the Board of
Directors pursue on behalf of the Company the claims alleged in the Derivative Action. By
letter dated September 17, 2007 (the Demand Letter), Hutton, by and through his attorneys,
made such demand. The Board appointed a Special Litigation Committee (the SLC) to
investigate, and determine the position of the Company with respect to, all matters relating
to the Demand Letter. The SLC, with the assistance of independent counsel, conducted an
investigation into the claims presented in the Demand Letter. The SLC issued its findings in a
Report of the Special Litigation Committee of Jos. A. Bank Clothiers, Inc., dated February
7, 2008 (the Report). In the Report, the SLC concludes that, for a variety of reasons, the
institution of a lawsuit [as proposed in the Demand Letter] is neither appropriate nor in the
best interest of the Company.... First, and most important [among those reasons, the SLC found
that] the proposed lawsuit is entirely without merit. The Report has been delivered to
Huttons attorneys.
By letter dated November 27, 2007, the Company received from the Norfolk County
Retirement System (NCRS) a demand pursuant to Section 220 of the Delaware General
Corporation Law for inspection of certain of the Companys books and records for the purpose
of investigating, among other matters, claims that appear substantially similar to those
raised in the Derivative Action. The Company asked that the demand be withdrawn or held in
abeyance until the SLC reported on its investigation. On January 3, 2008, NCRS filed in the
Court of Chancery of the State of Delaware (Case Number 3443-VCP) a Verified Complaint against
the Company seeking to compel an inspection of the Companys books and records. The Company
has answered the Complaint and intends to defend vigorously the action.
The resolution of the foregoing matters cannot be accurately predicted and there is no
estimate of costs or potential losses, if any. Accordingly, the Company cannot determine
whether its insurance coverage would be sufficient to cover such costs or potential losses, if
any, and has not recorded any provision for cost or loss associated with these actions. It is
possible that the Companys consolidated financial statements could be materially impacted in
a particular fiscal quarter or year by an unfavorable outcome or settlement of these actions.
From time to time, other legal matters in which the Company may be named as a defendant
arise in the normal course of the Companys business activities. The resolution of these legal
matters against the Company cannot be accurately predicted. The Company does not anticipate
that the outcome of such matters will have a material adverse effect on the business, net
assets or financial position of the Company.
12
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and notes thereto included in this Quarterly Report on Form
10-Q and with the Companys audited financial statements and notes thereto included in its
Annual Report on Form 10-K for fiscal year 2007.
Overview
For the third quarter of fiscal year 2008, the Companys net income
was $9.3 million, as compared with net income of $7.1 million for the third quarter of fiscal
year 2007. The Company earned $0.50 per diluted share in the third quarter of fiscal year
2008, as compared with $0.38 per diluted share in the third quarter of fiscal year 2007. As
such, diluted earnings per share increased 32% as compared with the prior year period. The
results of the third quarter of fiscal year 2008, as compared to the third quarter of fiscal
year 2007, were primarily driven by:
|
|
|
13.7% increase in net sales, generated primarily by the 16.7% increase in the
Stores segment, partially offset by the 11.4% decrease in the Direct Marketing segment,
with gross profit margins decreasing by 50 basis points;
|
|
|
|
|
7.0% increase in comparable store sales;
|
|
|
|
|
a 50 basis point decrease in sales and marketing costs as a percentage of sales
driven primarily by the leveraging of advertising and marketing costs, partially offset by higher other variable selling costs (largely shipping costs
to customers) and higher store payroll costs;
|
|
|
|
|
a 50 basis point decrease in general and administrative costs as a percentage
of sales as the Company was able to leverage its costs during the
quarter; and
|
|
|
|
|
tax benefits realized during the quarter of approximately $0.9 million or $0.05 per diluted
share due to the Companys ability to fully deduct employee compensation which was
previously limited under IRC 162(m) and a decrease in the liability for unrecognized
tax benefits and related penalties and interest.
|
As of the end of the third quarter of fiscal year 2008, the Company had 460 stores, which
included 441 Company-owned full-line stores, seven Company-owned outlet stores and 12 stores
operated by franchisees. Management believes that the chain can grow to approximately 600
stores, depending on the performance of the Company over the next several years and the
availability of suitable lease sites, among other factors. The Company plans to open
approximately 40 stores in fiscal year 2008, including the 38 stores opened in the first nine
months of fiscal year 2008. In the past six years, the Company has continued to increase its
number of stores as infrastructure and performance have improved. As such, there were 25 new
stores opened in fiscal year 2002, 50 new stores opened in fiscal year 2003, 60 new stores
opened in fiscal year 2004, 56 new stores opened in fiscal year 2005, 52 new stores opened in
fiscal year 2006 and 48 new stores opened in fiscal year 2007.
The Company expects to open approximately 15 to 20 stores in fiscal year 2009, as we
believe there will be less suitable new sites. The Company previously believed that it
could attain the 600 store level by the end of Fiscal Year 2012. However, due to the recent
changes in economic conditions and the resulting lack of real estate projects by developers, the
Company has reduced its new store expansion plan for fiscal year 2009 and needs to reevaluate the
timing of its expansion program beyond fiscal year 2009.
Capital expenditures in fiscal year 2008 are expected to be approximately $31 to $33
million, primarily to fund the opening of approximately 40 new stores, the renovation and/or
relocation of several stores, the purchase and renovation of a retail location and the
implementation of various systems projects. The capital expenditures include the cost of the
construction of leasehold improvements for new stores and several stores to be renovated or
relocated, of which approximately $10 to $11 million is expected to be reimbursed through
landlord contributions. The Company also expects inventories to increase in 2008 to support
new store openings and sales growth in both the Companys Stores and Direct Marketing
segments.
Critical Accounting Policies and Estimates
In preparing the condensed
consolidated financial statements, a number of assumptions and estimates are made that, in the
judgment of management, are proper in light of existing general economic and company-specific
circumstances. For a detailed discussion on the application of these and other accounting
policies, see Note 1 to the Consolidated Financial Statements in the Companys Annual Report
on Form 10-K for fiscal year 2007.
13
Inventory.
The Company records inventory at the lower of cost or market (LCM). 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.
Managements sales assumptions regarding sales below cost are based on the Companys
experience that most of the Companys inventory is sold through the Companys primary sales
channels with virtually no inventory being liquidated through bulk sales to third parties.
The Companys LCM reserve estimates for inventory that have been made in the past have been
very reliable as a significant portion of its sales (over two-thirds in fiscal year 2007) are
of classic traditional products that are on-going programs and that bear low risk of
write-down. These products include items such as navy and gray suits, navy blazers, and white
and blue dress shirts, etc. The portions of products that have fashion elements are reviewed
closely to monitor that aging goals are achieved to limit the need to sell significant amounts
of product below cost. In addition, the Companys strong gross profit margins enable the
Company to sell substantially all of its products at levels above cost.
To calculate the estimated market value of its inventory, the Company periodically
performs a detailed review of all of its major inventory classes and stock-keeping units and
performs an analytical evaluation of aged inventory on a quarterly basis. Semi-annually, the
Company compares the on-hand units and season-to-date unit sales (including actual selling
prices) to the sales trend and estimated prices required to sell the units in the future,
which enables the Company to estimate the amount which may have to be sold below cost. The
units sold below cost are sold in the Companys outlet stores, through the Internet website or
on clearance at the retail stores, typically within twenty-four months of the Companys
purchase. The Companys costs in excess of selling price for units sold below cost totaled
$1.3 million and $1.9 million in fiscal year 2006 and fiscal year 2007, respectively. The
Company reduces the carrying amount of its current inventory value for product in its
inventory that may be sold below its cost in future periods as of the end of the respective
reporting periods. If the amount of inventory which is sold below its cost differs from the
estimate, the Companys inventory valuation adjustment could change.
Asset Valuation.
Long-lived assets, such as property, plant and equipment subject to
depreciation, are reviewed for impairment to determine whether 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 in the amount by which the carrying amount of the asset
exceeds the fair value of the asset. The asset valuation estimate is principally dependent on
the Companys ability to generate profits at both the Company and store levels. These levels
are principally driven by the sales and gross profit trends that are closely monitored by the
Company. While the Company performs a quarterly review of its long-lived assets to determine
if an impairment exists, the fourth quarter is typically the most significant quarter to make
such a determination since it provides the best indication of performance trends in the
individual stores. There were no asset valuation charges in either the first nine months of
fiscal year 2008 or the first nine months of fiscal year 2007. During the fourth quarter of
fiscal year 2007, the Company recognized an impairment charge of $0.8 million relating to
several stores within its Stores segment.
Lease Accounting.
The Company uses a consistent lease period (generally, the initial
non-cancelable lease term plus renewal option periods provided for in the lease that can be
reasonably assured) when calculating depreciation of leasehold improvements and in determining
straight-line rent expense and classification of its leases as either an operating lease or a
capital lease. The lease term and straight-line rent expense commence on the date when the
Company takes possession and has the right to control the use of the leased premises. Funds
received from the lessor intended to reimburse the Company for the costs of leasehold
improvements are recorded as a deferred credit resulting from a lease incentive and amortized
over the lease term as a reduction to rent expense.
While the Company has taken reasonable care in preparing these estimates and making these
judgments, 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 Companys financial position or results of operations. These estimates were
discussed by Management with the Companys Audit Committee.
Recently
Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework
for measuring fair value under generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. This statement was effective
beginning in fiscal year 2008, except as it relates to nonfinancial assets and liabilities,
for which the statement is effective for fiscal year 2009. With respect to its financial
assets and liabilities, this statement has not had a material impact on the Companys
consolidated financial statements. With respect to its nonfinancial assets and liabilities,
the Company is currently evaluating the impact SFAS 157 will have on its consolidated
financial statements.
14
In October 2008, the FASB issued Staff Position 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (FSP 157-3), which clarifies
the application of SFAS 157 and provides an example of determining fair value when the market
for a financial asset is not active. FSP 157-3 was effective for the Company upon issuance
and has not had a material impact on the Companys consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities including an amendment of FASB Statement No. 115, (SFAS
159). SFAS 159 permits entities to choose to measure many financial instruments and certain
other assets and liabilities at fair value on an instrument-by-instrument basis (the fair
value option). SFAS 159 became effective beginning in fiscal year 2008. The Company adopted
SFAS 159 on February 3, 2008 and elected not to apply fair value accounting on its existing
financial assets and liabilities. Therefore, this statement has not had an impact on the
Companys consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS No. 133, (SFAS 161). SFAS 161 is intended to
improve financial standards for derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on an entitys
financial position, financial performance and cash flows. Entities are required to provide
enhanced disclosures about: how and why an entity uses derivative instruments; how derivative
instruments and related hedged items are accounted for under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and its related interpretations; and how
derivative instruments and related hedged items affect an entitys financial position,
financial performance and cash flows. SFAS 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008. The Company is
currently evaluating the impact SFAS 161 will have on its consolidated financial statements.
Results of Operations
The following table is derived from the Companys 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net Sales
|
|
|
Percentage of Net Sales
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
36.3
|
|
|
|
36.8
|
|
|
|
37.1
|
|
|
|
37.3
|
|
Gross profit
|
|
|
63.7
|
|
|
|
63.2
|
|
|
|
62.9
|
|
|
|
62.7
|
|
Sales and marketing expenses
|
|
|
44.9
|
|
|
|
44.4
|
|
|
|
43.2
|
|
|
|
43.3
|
|
General and administrative
expenses
|
|
|
10.0
|
|
|
|
9.5
|
|
|
|
9.9
|
|
|
|
9.2
|
|
Total operating expenses
|
|
|
54.9
|
|
|
|
53.9
|
|
|
|
53.1
|
|
|
|
52.5
|
|
Operating income
|
|
|
8.8
|
|
|
|
9.3
|
|
|
|
9.8
|
|
|
|
10.2
|
|
Total other income
|
|
|
0.2
|
|
|
|
|
|
|
|
0.3
|
|
|
|
0.1
|
|
Income before provision for
income taxes
|
|
|
9.0
|
|
|
|
9.3
|
|
|
|
10.1
|
|
|
|
10.3
|
|
Provision for income taxes
|
|
|
3.6
|
|
|
|
3.1
|
|
|
|
4.1
|
|
|
|
4.0
|
|
Net income
|
|
|
5.4
|
|
|
|
6.2
|
|
|
|
6.0
|
|
|
|
6.3
|
|
Net Sales
Net sales increased 13.7% to $149.3 million in the third quarter of
fiscal year 2008, as compared with $131.3 million in the third quarter of fiscal year 2007.
Net sales for the first nine months of fiscal year 2008 increased 13.2% to $447.4 million, as
compared with $395.1 million in the first nine months of fiscal year 2007. The sales increases
were largely related to increases in Store sales of 16.7% and 15.2% for the third quarter and
first nine months of fiscal year 2008, respectively, including comparable store sales
increases of 7.0% and 6.8% for the third quarter and first nine months of fiscal year 2008,
respectively. Comparable store sales include merchandise sales generated in all stores that
have been open for at least thirteen full months. Direct Marketing sales decreased 11.4% and
0.4% for the third quarter and first nine months of fiscal year 2008, respectively, with
Internet sales decreasing for the quarter and increasing for the first nine months and catalog
sales decreasing for both the quarter and the first nine months. The decreases in Direct
Marketing sales were largely related to more of the Companys promotional focus being directed
to the much larger Stores segment during the third quarter of fiscal year 2008. Substantially all major product
categories generated sales increases during the third quarter and the first nine months of
fiscal year 2008, led by sales of suits and dress shirts during the quarter and suits,
sportswear and dress shirts during the first nine months.
15
The increase in comparable store sales for the third quarter of fiscal year 2008 was
primarily driven by an increase in traffic (as measured by number of transactions), an
increase in items per transaction and an increase in average dollars per transaction, while
the increase for the first nine months of fiscal year 2008 was primarily driven by an increase
in traffic and an increase in items per transaction, partially offset by a decrease in average
dollars per transaction.
The following table summarizes store opening and closing activity during the respective
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
November 3, 2007
|
|
|
November 1, 2008
|
|
|
November 3, 2007
|
|
|
November 1, 2008
|
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open at the
beginning of the period
|
|
|
391
|
|
|
|
1,804
|
|
|
|
444
|
|
|
|
2,024
|
|
|
|
376
|
|
|
|
1,745
|
|
|
|
422
|
|
|
|
1,935
|
|
Stores opened
|
|
|
16
|
|
|
|
68
|
|
|
|
16
|
|
|
|
68
|
|
|
|
32
|
|
|
|
135
|
|
|
|
38
|
|
|
|
157
|
|
Stores closed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open at the
end of the period
|
|
|
407
|
|
|
|
1,872
|
|
|
|
460
|
|
|
|
2,092
|
|
|
|
407
|
|
|
|
1,872
|
|
|
|
460
|
|
|
|
2,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Square feet is presented in thousands and excludes the square footage of the Companys
franchise stores. Square feet amounts reflect reductions to square footage due to renovations
or relocations.
|
Gross profit
Gross profit (net sales less cost of goods sold) totaled $94.3
million or 63.2% of net sales in the third quarter of fiscal year 2008, as compared with $83.6
million or 63.7% of net sales in the third quarter of fiscal year 2007. Gross profit totaled
$280.5 million or 62.7% of net sales for the first nine months of fiscal year 2008, as
compared with $248.5 million or 62.9% of net sales for the first nine months of fiscal year
2007. As stated in the Companys Annual Report on Form 10-K for
fiscal year 2007 and in this Quarterly Report on Form 10-Q, the Company
is subject to certain risks that may affect its gross profit, including risks of doing
business on an international basis, increased costs of raw materials and other resources and
changes in economic conditions. The Company experienced certain of these risks during the
third quarter of fiscal year 2008, particularly a weaker economic environment, which resulted
in lower merchandise gross margins due primarily to increased promotional activity. For the
first nine months of fiscal year 2008, the Companys merchandise gross profit margins
decreased slightly due to increased promotional activity, partially offset by higher initial
mark-ups. In addition, during the earlier part of fiscal year 2008 the Companys gross profit
margin was negatively impacted by increased freight costs, but through certain operational
changes, the Company was able to stabilize these costs and for the first nine months of fiscal
year 2008, freight costs as a
percentage of sales were relatively comparable to the prior year period. The Company
expects to continue to be subject to similar gross profit risks in the fourth quarter and in
the future.
The Companys gross profit classification may not be comparable to the classification
used by certain other entities. Some entities include distribution costs (including
depreciation), store occupancy, buying and other costs in cost of goods sold. Other entities
(including the Company) exclude such costs from gross profit, including them instead in
general and administrative and/or sales and marketing expenses.
Sales
and Marketing Expenses
Sales and marketing expenses increased to $66.2
million or 44.4% of sales in the third quarter of fiscal year 2008 from $59.0 million or 44.9%
of sales in the third quarter of fiscal year 2007. Sales and marketing expenses increased to
$193.8 million or 43.3% of sales in the first nine months of fiscal year 2008 from $170.6
million or 43.2% of sales in the first nine months of fiscal year 2007. Sales and marketing
expenses consist primarily of a) Stores, outlet store and Direct Marketing occupancy, payroll,
selling and other variable costs and b) total Company advertising and marketing expenses.
16
The increase in sales and marketing expenses relates primarily to the opening of 53 new
stores, net of closing one store, since the end of the third quarter of fiscal year 2007 and
consists of a) $3.3 million and $9.0 million for the third quarter and the first nine months,
respectively, related to additional occupancy costs, b) $2.2 million and $7.4 million for the
third quarter and the first nine months, respectively, related to additional store employee
compensation costs, c) $0.5 million and $2.9 million for the third quarter and the first nine
months, respectively, related to additional advertising and marketing expenses, and d) $1.2
million and $3.9 million for the third quarter and the first nine months, respectively,
related to additional other variable selling costs including such costs as shipping costs to
customers and credit card processing fees. The Company expects sales and marketing expenses
to increase for the remainder of fiscal year 2008 as compared to fiscal year 2007 primarily as
a result of opening new stores in fiscal year 2008, the full year operation of stores that
were opened during fiscal year 2007, an increase in advertising expenditures and anticipated
increases in postage used in the mailing of catalogs and direct mail advertising pieces.
General and Administrative Expenses
General and administrative expenses
(G&A), which consist primarily of corporate and distribution center costs, were $14.2
million and $13.1 million for the third quarter of fiscal year 2008 and the third quarter of
fiscal year 2007, respectively. G&A expenses were $41.3 million and $39.1 million for the
first nine months of fiscal year 2008 and the first nine months of fiscal year 2007,
respectively. The increased expenses for the third quarter of fiscal year 2008 were due
primarily to higher corporate compensation costs (which includes all company incentive
compensation) of $1.4 million and higher distribution center costs of $0.2 million, partially
offset by lower professional fees of $0.3 million and lower other corporate costs of $0.2
million. The increased expenses for the first nine months of fiscal year 2008 were due
primarily to higher corporate compensation costs of $2.2 million, higher travel costs of $0.4
million, higher other corporate costs of $0.2 million and higher distribution center costs of
$0.3 million, partially offset by lower professional fees of $0.5 million and lower benefits
costs related to group healthcare of $0.4 million. Continued growth in the Stores and Direct
Marketing segments may result in increases in G&A expenses in the future.
Other Income (Expense)
Other income (expense) decreased to $0.1 million and
$0.5 million in the third quarter and first nine months of fiscal year 2008, respectively, as
compared with $0.3 million and $1.1 million in the third quarter and first nine months of
fiscal year 2007. The decreases for both periods were due primarily to lower interest income
which resulted from lower average market interest rates as compared to fiscal year 2007,
partially offset by higher average cash and cash equivalents balances during the third quarter
and first nine months of fiscal year 2008.
Income
Taxes
The effective income tax rate for the first nine months of fiscal
year 2008 was 39.1% as compared with 40.7% in the first nine months of fiscal year 2007. The
effective rate for fiscal year 2008 was favorably impacted by a management transition plan,
approved by the Company during the third quarter, which will enable the Company to fully
deduct all employee compensation which was previously limited under IRC 162(m). The benefit of
this change was approximately $0.6 million which was recorded in the third quarter of fiscal
year 2008. In addition, the effective rate for the third quarter of fiscal year 2008 was
impacted by a decrease in the liability for unrecognized tax benefits and related penalties
and interest of $0.3 million. For the first nine months of fiscal year 2008, this decrease was
offset by a comparable amount that was required to be recorded in the first quarter of fiscal
year 2008.
Seasonality
The Companys net sales, net income and inventory levels fluctuate
on a seasonal basis and therefore, the results for one quarter are not necessarily indicative
of the results that may be achieved for a full fiscal year. Historically, the increased
traffic during the holiday season and the Companys increased marketing efforts during this
peak selling time have resulted in profits generated during the fourth quarter becoming a
larger portion of annual profits. Seasonality is also impacted by growth as more new stores
are opened in the second half of the fiscal year. During the fourth quarters of fiscal years
2005, 2006 and 2007, the Company generated approximately 53%, 58% and 53%, respectively, of
its annual net income.
Liquidity and Capital Resources
Pursuant to an Amended and Restated Credit
Agreement (the Credit Agreement), the Company maintains a credit facility with a maturity
date of April 30, 2010. The current maximum revolving amount available under the Credit
Agreement is $100 million. Borrowings are limited by a formula which considers inventories and
accounts receivable. Interest rates under the Credit Agreement vary with the prime rate or
LIBOR and may include a spread over or under the applicable rate. The spreads, if any, are
based upon the amount which the Company is entitled to borrow, from time to time, under the
Credit Agreement, after giving effect to all then outstanding obligations and other
limitations (Excess Availability). Aggregate borrowings are secured by substantially all
assets of the Company with the exception of its distribution center and certain equipment.
17
Under the provisions of the Credit Agreement, the Company must comply with certain
covenants if the Excess Availability is less than $7.5 million. The covenants include a
minimum earnings before interest, taxes, depreciation and amortization, limitations on capital
expenditures and additional indebtedness, and restrictions on cash dividend payments. At
November 1, 2008, February 2, 2008 and November 3, 2007, under the Credit Agreement, there
were no revolving borrowings outstanding, there was one standby letter of credit issued in the
amount of $0.4 million (to secure the payment of rent at one leased location) and the Excess
Availability was $99.6 million. Additionally, the Company had no term debt at November 1, 2008
and February 2, 2008 and $0.4 million of term debt at November 3, 2007.
The following table summarizes the Companys sources and uses of funds as reflected in
the Condensed Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
November 3, 2007
|
|
|
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
73
|
|
|
$
|
(12,604
|
)
|
Investing activities
|
|
|
(19,221
|
)
|
|
|
(26,691
|
)
|
Financing activities
|
|
|
2,676
|
|
|
|
1,665
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(16,472
|
)
|
|
$
|
(37,630
|
)
|
|
|
|
|
|
|
|
The Companys cash balance was $44.5 million at November 1, 2008, as compared with $26.6
million at November 3, 2007.
Cash was $82.1 million at the beginning of fiscal year 2008 and the significant changes
through November 1, 2008 are discussed below.
Cash used in the Companys operating activities of $12.6 million in the first nine months
of fiscal year 2008 was primarily impacted by an increase in operating working capital and
other operating items of $57.4 million, partially offset by net income of $28.0 million and
depreciation and amortization of $15.4 million. The increase in operating working capital and
other operating items included an increase of $34.8 million in inventories primarily related
to new store growth and sales growth during fiscal year 2008 and an increase in accounts
receivable of $10.3 million due to higher credit card
receivables from transactions through American Express, MasterCard and Visa as a result of increased sales near the end of
the third quarter of fiscal year 2008 as compared with the end of the fourth quarter of fiscal
year 2007. In addition, the increase in operating working capital and other operating items
included a reduction in accrued expenses and accounts payable
totaling $15.1 million related
primarily to the payment of income taxes and incentive compensation that had been accrued at
the end of fiscal year 2007 in addition to the timing of payments to vendors. Accounts
payable represent all short-term liabilities for which the Company has received a vendor
invoice prior to the end of the reporting period. Accrued expenses represent all other
short-term liabilities related to, among other things, vendors from whom invoices have not
been received, employee compensation, federal and state income taxes and unearned gift cards
and gift certificates.
Cash used in investing activities in the first nine months of fiscal year 2008 relates to
payments for capital expenditures, as described below. Cash provided by financing activities
for the first nine months of fiscal year 2008 relates to net proceeds from the exercise of
stock options.
For fiscal year 2008, the Company expects to spend approximately $31 to $33 million on
capital expenditures, primarily to fund the opening of approximately 40 new stores, the
renovation and/or relocation of several stores, the purchase and renovation of a retail
location and the implementation of various systems initiatives. The capital expenditures
include the cost of the construction of leasehold improvements for new stores and several
stores to be renovated or relocated, of which approximately $10 to $11 million is expected to
be reimbursed through landlord contributions. These amounts are typically paid by the
landlords after the completion of construction by the Company and the receipt of appropriate
lien waivers from contractors. The Company spent $26.9 million on capital expenditures in the
first nine months of fiscal year 2008 largely related to the 38 stores opened during the first
nine months of the year in addition to the purchase of a retail location and payments for
system initiatives primarily related to the stores. In addition, capital expenditures for the
period include payments of property, plant and equipment additions accrued at year-end fiscal
year 2007 related to stores opened in fiscal year 2007.
18
For the stores opened and renovated in the first nine months of fiscal year 2008, the
Company negotiated approximately $9.7 million of landlord contributions, of which the majority
is expected to be received by the end of the first nine months of fiscal year 2009. For the
stores opened and renovated in fiscal year 2007, the Company negotiated approximately $12.6
million of landlord contributions, of which approximately $12.0 million have been collected
through November 1, 2008, including approximately $6.0 million which was collected in the
first nine months of fiscal year 2008. The majority of the remaining
$0.6 million related to the
fiscal year 2007 stores is expected to be received in the fourth quarter of fiscal year 2008.
Management believes that the Companys cash from operations, existing cash and cash
equivalents and availability under its Credit Agreement will be sufficient to fund its planned
capital expenditures and operating expenses through at least the next twelve months.
Off-Balance
Sheet Arrangements
The Company has no off-balance sheet
arrangements other than its operating lease agreements and one letter of credit outstanding
under the Credit Agreement.
Disclosures about Contractual Obligations and Commercial Commitments
The Companys principal commitments are non-cancelable operating leases in connection
with its retail stores, certain tailoring facilities and equipment. Under the terms of
certain leases, the Company is required to pay a base annual rent, plus a contingent amount
based on sales (contingent rent). In addition, many of these leases include scheduled rent
increases. Base annual rent and scheduled rent increases are included in the contractual
obligations table below for operating leases, as these are only rent-related commitments that
are determinable at this time.
The following table reflects a summary of the Companys contractual cash obligations and
other commercial commitments for the periods indicated, including amounts paid in the first
nine months of fiscal year 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Fiscal Year
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond
|
|
|
|
|
|
|
2008
|
|
|
2009-2011
|
|
|
2012-2013
|
|
|
2013
|
|
|
Total
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
(a) (b)
|
|
$
|
50,680
|
|
|
$
|
154,647
|
|
|
$
|
90,490
|
|
|
$
|
98,967
|
|
|
$
|
394,784
|
|
Stand-by letter-of-credit
(c)
|
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
License agreement
|
|
|
165
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
495
|
|
|
|
|
(a)
|
|
Includes various lease agreements for stores to be opened and equipment placed in
service subsequent to November 1, 2008. See Note 9 to the Consolidated Financial Statements in the Companys
Annual Report on Form 10-K for fiscal year 2007.
|
|
(b)
|
|
Excludes contingent rent and other lease costs.
|
|
(c)
|
|
To secure the payment of rent at one leased location included in Operating Leases
above and is renewable each year through the end of the lease term (2009).
|
|
(d)
|
|
Obligations related to unrecognized tax benefits and related
penalties and interest of $0.7 million have been excluded
from the above table as the amount to be settled in cash and the specific payment dates
are not known.
|
Cautionary Statement
This Quarterly Report on Form 10-Q includes and incorporates by reference certain
statements that may be deemed to be forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for certain forward-looking statements so long as such
information is identified as forward-looking and is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to differ materially
from those projected in the information. When used in this Quarterly Report on Form 10-Q, the
words estimate, project, plan, will, anticipate, expect, intend, outlook,
may, believe, and other similar expressions are intended to identify forward-looking
statements and information.
19
Actual results may differ materially from those forecast due to a variety of factors
outside of the Companys control that can affect the Companys operating results, liquidity
and financial condition. Such factors include risks associated with economic, weather, public
health and other factors affecting consumer spending, including
negative changes to consumer confidence and other recessionary
pressures, higher energy and security costs, the
successful implementation of the Companys growth strategy, including the ability of the
Company to finance its expansion plans, the mix and pricing of goods sold, the effectiveness
and profitability of new concepts, the market price of key raw materials such as wool and
cotton, seasonality, merchandise trends and changing consumer preferences, the effectiveness
of the Companys marketing programs, the availability of suitable lease sites for new stores,
doing business on an international basis, the ability to source product from its global
supplier base, litigations and other competitive factors as described under the caption Item
1A. Risk Factors in the Companys Annual Report on Form 10-K for fiscal year 2007 and under
Item 1A. Risk Factors in Part II of this report. 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. The Company does
not undertake an obligation to update or revise any forward-looking statements to reflect
actual results or changes in the Companys assumptions, estimates or projections. The
identified risk factors and others are more fully described under the caption Item 1A. Risk
Factors in Part I of the Companys Annual Report on
Form 10-K for fiscal year 2007 and Item 1A. Risk
Factors in Part II of this Current Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
At November 1, 2008, the Company was not a party to any 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 Companys interest on borrowings under
its Credit Agreement is at a variable rate based on the prime rate or LIBOR, and may include a
spread over or under the applicable rate. In addition, the Company invests its excess cash in
short-term investments, primarily treasury bills and overnight federally-sponsored agency
notes, where returns effectively reflect current interest rates. As a result, market interest
rate changes may impact the Companys net interest income or expense. The impact will depend
on variables such as the magnitude of rate changes and the level of borrowings or excess cash
balances. A 100 basis point change in interest rate would have changed net interest income by
approximately $0.4 million in fiscal year 2007.
As discussed above, at present, the Company invests its excess cash in lower risk
short-term investments, primarily treasury bills and overnight federally-sponsored agency
notes. If the Company were to invest in other types of securities such as municipal or
corporate debt instruments or other types of potentially higher yielding securities, their
value could be negatively impacted by changing liquidity conditions, credit rating downgrades,
changes in market interest rates or a deterioration of the underlying entities financial
condition, among other factors. As a result, the value or liquidity of the Companys excess
cash/investments could decline and result in a material impairment, which could have a
material adverse effect on the Companys financial condition and operating results.
Item 4. Controls and Procedures
Limitations on Control Systems.
Because of their inherent limitations, disclosure
controls and procedures and internal control over financial reporting (collectively, Control
Systems) may not prevent or detect all failures or misstatements of the type sought to be
avoided by Control Systems. Also, projections of any evaluation of the effectiveness of the
Companys Control Systems to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Management, including the Companys Chief Executive
Officer (the CEO) and Chief Financial Officer (the CFO), does not expect that the
Companys Control Systems will prevent all errors or 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. Further, the design of a Control System must reflect
the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all Control Systems, no
evaluation can provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. Reports by management, including the CEO and CFO,
on the effectiveness of the Companys Control Systems express only reasonable assurance of the
conclusions reached.
Disclosure Controls and Procedures.
The Company maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed in the
Companys reports under the Securities Exchange Act of 1934, as amended (the Exchange Act),
is recorded, processed, summarized and reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and communicated to management,
including the CEO and CFO, as appropriate, to allow timely decisions regarding required
disclosure.
20
Management, with the participation of the CEO and CFO, has evaluated the effectiveness,
as of November 1, 2008, of the Companys disclosure controls and procedures (as defined in
Rules 13a15(e) and 15d15(e) under the Exchange Act). Based on that evaluation, the CEO and
CFO have concluded that the Companys disclosure controls and procedures were effective as of
November 1, 2008.
Changes in Internal Control over Financial Reporting
. There were no changes in the
Companys internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Rule13a-15 of the Exchange Act that occurred during
the Companys last fiscal quarter (the Companys fourth quarter in the case of an annual
report) that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 24, 2006, a lawsuit was filed against the Company and Robert N. Wildrick, the
Companys Chief Executive Officer, in the United States District Court for the District of
Maryland by Roy T. Lefkoe, Civil Action Number 1:06-cv-01892-WMN (the Class Action). On
August 3, 2006, a lawsuit substantially similar to the Class Action was filed in the United
States District Court for the District of Maryland by Tewas Trust UAD 9/23/86, Civil Action
Number 1:06-cv-02011-WMN (the Tewas Trust Action). The Tewas Trust Action was filed against
the same defendants as those in the Class Action and purported to assert the same claims and
seek the same relief. On November 20, 2006, the Class Action and the Tewas Trust Action were
consolidated under the Class Action case number (1:06-cv-01892-WMN) and the Tewas Trust Action
was administratively closed.
Massachusetts Labor Annuity Fund has been appointed the lead plaintiff in the Class
Action and has filed a Consolidated Class Action Complaint. R. Neal Black, the Companys
President, and David E. Ullman, the Companys Executive Vice President and Chief Financial
Officer, have been added as defendants. On behalf of purchasers of the Companys stock between
December 5, 2005 and June 7, 2006 (the Class Period), the Class Action purports to make
claims under Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934,
based on the Companys disclosures during the Class Period. The Class Action seeks unspecified
damages, costs, and attorneys fees. The Companys Motion to Dismiss the Class Action was not
granted. The Company intends to defend vigorously the Class Action.
On August 11, 2006, a lawsuit was filed against the Companys directors and, as nominal
defendant, the Company in the United States District Court for the District of Maryland by
Glenn Hutton (Hutton), Civil Action Number 1:06-cv-02095-BEL (the Hutton Action). The
lawsuit purported to be a shareholder derivative action. The lawsuit purported to make claims
for various violations of state law that allegedly occurred from January 5, 2006 through
August 11, 2006 (the Relevant Period). It sought on behalf of the Company against the
directors unspecified damages, equitable relief, costs and attorneys fees.
On August 28, 2006, a lawsuit substantially similar to the Hutton Action was filed in the
United States District Court for the District of Maryland by Robert Kemp, Civil Action Number
1:06-cv-02232-BEL (the Kemp Action). The Kemp Action was filed against the same defendants
as those in the Hutton Action and purported to assert substantially the same claims and sought
substantially the same relief.
On October 17, 2006, the Hutton Action and the Kemp Action were consolidated under the
Hutton Action case number (1:06-cv-02095-BEL) and are now known as In re Jos. A. Bank
Clothiers, Inc. Derivative Litigation (the Derivative Action). The Amended Shareholder
Derivative Complaint in the Derivative Action was filed against the same defendants as those
in the Hutton Action, extended the Relevant Period to October 20, 2006 and purported to assert
substantially the same claims and seek substantially the same relief.
The Companys Motion to Dismiss the Derivative Action was granted on September 13, 2007.
Among the reasons for dismissal was the failure of the plaintiff to demand that the Board of
Directors pursue on behalf of the Company the claims alleged in the Derivative Action. By
letter dated September 17, 2007 (the Demand Letter), Hutton, by and through his attorneys,
made such demand. The Board appointed a Special Litigation Committee (the SLC) to
investigate, and determine the position of the Company with respect to, all matters relating
to the Demand Letter. The SLC, with the assistance of independent counsel, conducted an
investigation into the claims presented in the Demand Letter. The SLC issued its findings in a
Report of the Special Litigation Committee of Jos. A. Bank Clothiers, Inc., dated February
7, 2008 (the Report). In the Report, the SLC concludes that, for a variety of reasons, the
institution of a lawsuit [as proposed in the Demand Letter] is neither appropriate nor in the
best interest of the Company.... First, and most important [among those reasons, the SLC found
that] the proposed lawsuit is entirely without merit. The Report has been delivered to
Huttons attorneys.
21
By letter dated November 27, 2007, the Company received from the Norfolk County
Retirement System (NCRS) a demand pursuant to Section 220 of the Delaware General
Corporation Law for inspection of certain of the Companys books and records for the purpose
of investigating, among other matters, claims that appear substantially similar to those
raised in the Derivative Action. The Company asked that the demand be withdrawn or held in
abeyance until the SLC reported on its investigation. On January 3, 2008, NCRS filed in the
Court of Chancery of the State of Delaware (Case Number 3443-VCP) a Verified Complaint against
the Company seeking to compel an inspection of the Companys books and records. The Company
has answered the Complaint and intends to defend vigorously the action.
The resolution of the foregoing matters cannot be accurately predicted and there is no
estimate of costs or potential losses, if any. Accordingly, the Company cannot determine
whether its insurance coverage would be sufficient to cover such costs or potential losses, if
any, and has not recorded any provision for cost or loss associated with these actions. It is
possible that the Companys consolidated financial statements could be materially impacted in
a particular fiscal quarter or year by an unfavorable outcome or settlement of these actions.
From time to time, other legal matters in which the Company may be named as a defendant
arise in the normal course of the Companys business activities. The resolution of these legal
matters against the Company cannot be accurately predicted. The Company does not anticipate
that the outcome of such matters will have a material adverse effect on the business, net
assets or financial position of the Company.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully
consider the factors discussed below and under the caption Item 1A. Risk Factors in the
Companys Annual Report on Form 10-K for fiscal year 2007, which could materially affect the
Companys business, financial condition and results of operations. These risks are not the only
risks facing the Company. Additional risks and uncertainties, including those not currently
known to the Company or that the Company currently deems to be immaterial also could materially
adversely affect the Companys business, financial condition and results of operations. In
light of current economic conditions, we have updated certain risk factors from our Annual
Report on Form 10-K for fiscal year 2007 as set forth below. There have been no material
changes in our risk factors from those disclosed in our Annual Report on Form 10-K for fiscal
year 2007 except for the following:
If we are not able to continue profitably opening new stores, our growth may be adversely
affected.
A significant portion of our growth has resulted and is expected to continue to result
from the opening of new stores. The continued deterioration in the
U.S. economic environment, the disruption and significant tightening in the U.S. credit and lending markets and reduced
consumer spending has, among other things, slowed the development of new shopping malls and
retail centers which may restrict the Companys ability to find suitable locations for new
stores. Accordingly, we have reduced our new store expansion plans for fiscal year 2009.
Further, a prolonged economic downturn could lead to further adjustments to our expansion
program. While we believe that we will continue to be able to obtain suitable locations for
the reduced number of new stores, negotiate acceptable lease terms, hire qualified personnel
and open and operate these new stores on a timely and profitable basis, we cannot make any such
assurances. As we continue our expansion program, the proposed expansion may place increased
demands on our operational, managerial and administrative resources. These increased demands
could cause us to operate our business less effectively, which in turn could cause
deterioration in our financial performance. The opening of new stores may adversely affect
catalog and Internet sales and profits. In addition, the opening of new stores in existing
markets may adversely affect sales and profits of established stores in those markets. We
expect to fund our expansion through use of existing cash, cash flows from operations and, if
needed, by borrowings under our line of credit. However, if we experience limitations on our
ability to utilize these sources of liquidity, our performance declines or other factors so
dictate, we may slow or discontinue store openings. If we fail to successfully implement our
expansion program, our business, financial condition and results of operations could be
materially adversely affected.
22
Our business is tied to consumer spending for discretionary items and the negative changes to
consumer confidence and other recessionary pressures could have an adverse affect on our
business.
Our business is sensitive to a number of factors that influence the levels of consumer
spending, including political and economic conditions, consumer confidence and the levels of
disposable consumer income which is impacted by consumer debt, interest rates, unemployment
levels, reductions in net worth based on market declines, residential real estate values, the
tightening credit markets, taxation and gasoline and energy costs, among other factors.
Consumer confidence may be adversely affected by national and international security concerns
such as war, terrorism or the threat of war or terrorism. In addition, because apparel and
accessories generally are discretionary purchases, declines in consumer spending patterns may
impact us more negatively as a specialty retailer and could have a material adverse effect on
our business, financial condition and results of operations.
Recently, economic conditions have deteriorated significantly in the United States. This
downturn has resulted in lower consumer confidence, recessionary pressures and overall slowing
in growth in the retail sector which may continue to be negatively affected for the foreseeable
future. Consumer spending for discretionary items generally declines during recessionary
periods and other periods where disposable income is adversely affected. If the current
unfavorable economic conditions continue, consumer purchases of our merchandise could be
adversely affected, which could have a material adverse effect on our business, financial
condition and results of operations.
We rely heavily on a limited number of key suppliers, the loss of any of which could cause a
significant disruption to our business and negatively affect our business.
Historically, we have purchased a substantial portion of our products from a limited
number of suppliers throughout the world. The loss of any one of these suppliers or any
significant interruption in our product supply, such as manufacturing problems or shipping
delays, could have an adverse effect on our business due to lost sales, cancellation charges,
excessive markdowns or delays in finding alternative sources, and could result in increased
costs. In addition, the current deterioration in economic conditions, including decreased
access to credit, may result in financial difficulties leading to restructurings, liquidations
and other unfavorable events for industry suppliers. These suppliers may not be able to
overcome any such difficulties which could lead to interruptions in our product supply and
could also lead to increases in the costs that we pay for our products as any surviving
suppliers could be in better positions to increase their prices. Although we have not
experienced any material disruptions in our sourcing in the past several years any significant
disruption of supply from any of these sources or supplier failures could have a material
adverse effect on our business, financial condition and results of operations.
Our success depends, in part, on the volume of retail traffic in our geographic locations and
the availability of suitable lease space.
Many of our stores are located in shopping malls or retail centers. Sales at these stores
are affected, in part, by the volume of traffic in those malls and retail centers. Our sales
volume and mall or retail center traffic may be adversely affected by the current economic
downturn, which could, among other things, result in reduced sales and the closing of nearby
stores. In addition, a decline in the desirability of the shopping environment in a particular
mall or retail center, or a decline in the popularity of mall shopping or retail center among
our target consumers, could adversely affect our business, financial condition and results of
operations.
Part of our future growth is significantly dependent on our ability to operate stores in
desirable locations with capital investment and lease costs that allow us to maintain our
profitability. We cannot be sure as to when or whether desirable locations will become
available at reasonable costs. In addition, we must be able to renew our existing store leases
on terms that meet our financial targets. Our failure to secure favorable locations and lease
terms generally, and upon renewal, could result in our loss of market share and could have an
adverse effect on our business, financial condition and results of operations.
23
Our business has become increasingly dependent on a strong holiday season.
Our net sales, net income and inventory levels fluctuate on a seasonal basis and therefore
the results for one quarter are not necessarily indicative of the results that may be achieved
for a full fiscal year. During the fourth quarters of fiscal years 2005, 2006 and 2007, we
generated approximately 53%, 58% and 53%, respectively, of our annual net income, which
resulted, in part, from increased traffic during the holiday season and our increased marketing
efforts during this peak selling time. The current economic climate, including recessionary
pressures, may have a negative impact on the effectiveness of our increased promotional
marketing efforts during the peak selling time, which could adversely affect our sales. Any
reduction in retail traffic in and around our store locations could also adversely affect our
sales. Any decrease in sales or margins during this period could have a disproportionate
effect on our business, financial condition and results of operations. In addition, major
winter storms could negatively impact our sales and result in a material adverse effect on our
business, financial condition and results of operations.
Item 6. Exhibits
Exhibits
|
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 or 15d-14(a).
|
|
|
|
|
|
|
31.2
|
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 or 15d-14(a).
|
|
|
|
|
|
|
32.1
|
|
|
Certification by Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
32.2
|
|
|
Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
Dated: December 3, 2008
|
Jos. A. Bank Clothiers, Inc.
(Registrant)
|
|
|
/s/ D
avid
E. U
llman
|
|
|
David E. Ullman
|
|
|
Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer and
Duly Authorized Officer)
|
|
24
Exhibit Index
Exhibits
|
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 or 15d-14(a).
|
|
|
|
|
|
|
31.2
|
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 or 15d-14(a).
|
|
|
|
|
|
|
32.1
|
|
|
Certification by Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
32.2
|
|
|
Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
25
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