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 October 31, 2009.
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 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 has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes
o
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
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(Do not check if smaller reporting company)
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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, 2009
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Common Stock, $.01 par value
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18,294,883
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JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Index
2
PART I. FINANCIAL INFORMATION
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Item 1.
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Unaudited Condensed Consolidated Financial Statements
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JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands except per share data)
(Unaudited)
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Three Months Ended
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Nine Months Ended
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November 1,
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October 31,
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November 1,
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October 31,
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2008
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2009
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2008
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2009
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Net sales
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$
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149,274
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$
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161,309
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$
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447,412
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$
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490,969
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Cost of goods sold
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54,980
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60,502
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166,900
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188,531
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Gross profit
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94,294
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100,807
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280,512
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302,438
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Operating expenses:
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Sales and marketing,
including occupancy costs
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66,209
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67,450
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193,773
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200,079
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General and administrative
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14,231
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14,043
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41,269
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43,514
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Total operating expenses
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80,440
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81,493
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235,042
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243,593
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Operating income
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13,854
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19,314
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45,470
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58,845
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Other income (expense):
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Interest income
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169
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101
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793
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262
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Interest expense
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(103
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)
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(93
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)
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(289
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)
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(301
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Total other income (expense)
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66
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8
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504
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(39
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)
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Income before provision for income taxes
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13,920
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19,322
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45,974
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58,806
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Provision for income taxes
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4,621
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7,594
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17,975
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23,111
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Net income
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$
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9,299
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$
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11,728
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$
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27,999
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$
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35,695
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Per share information:
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Earnings per share:
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Basic
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$
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0.51
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$
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0.64
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$
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1.54
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$
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1.95
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Diluted
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$
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0.50
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$
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0.63
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$
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1.52
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$
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1.93
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Weighted average shares outstanding:
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Basic
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18,215
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18,292
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18,194
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18,291
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Diluted
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18,461
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18,532
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18,433
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18,518
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See accompanying notes.
3
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
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January 31,
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October 31,
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2009
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2009
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(Audited)
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(Unaudited)
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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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122,875
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$
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41,914
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Short-term investments
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64,879
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Accounts receivable, net
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7,404
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13,253
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Inventories:
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Finished goods
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199,886
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241,705
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Raw materials
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9,356
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10,149
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Total inventories
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209,242
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251,854
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Prepaid expenses and other current assets
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17,776
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17,557
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Total current assets
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357,297
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389,457
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NONCURRENT ASSETS:
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Property, plant and equipment, net
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133,588
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128,439
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Other noncurrent assets
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481
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746
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Total assets
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$
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491,366
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$
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518,642
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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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29,774
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$
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33,695
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Accrued expenses
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74,792
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63,901
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Deferred tax liability current
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6,604
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6,760
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Total current liabilities
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111,170
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104,356
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NONCURRENT LIABILITIES:
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Deferred rent
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54,743
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53,259
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Deferred tax liability noncurrent
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2,605
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2,249
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Other noncurrent liabilities
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1,035
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1,175
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Total liabilities
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169,553
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161,039
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS EQUITY:
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Common stock
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182
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182
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Additional paid-in capital
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82,951
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83,046
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Retained earnings
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238,668
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274,363
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Accumulated other comprehensive income
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12
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12
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Total stockholders equity
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321,813
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357,603
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Total liabilities and stockholders equity
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$
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491,366
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$
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518,642
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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 1,
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October 31,
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2008
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2009
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Cash flows from operating activities:
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Net income
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$
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27,999
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$
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35,695
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Adjustments to reconcile net income to net cash used in
operating activities:
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Depreciation and amortization
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15,394
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16,533
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Loss on disposals of property, plant and equipment
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227
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120
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Increase
(decrease) in deferred taxes
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1,210
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(200
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Net increase in operating working capital and other components
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(57,434
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(57,730
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Net cash used in operating activities
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(12,604
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(5,582
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Cash flows from investing activities:
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Capital expenditures
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(26,888
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(10,595
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Proceeds from disposal of fixed assets
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197
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Purchases of short-term investments
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(64,879
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)
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Net cash used in investing activities
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(26,691
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)
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(75,474
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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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528
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57
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Net proceeds from exercise of stock options
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1,137
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38
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Net cash provided by financing activities
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1,665
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95
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Net decrease in cash and cash equivalents
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(37,630
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(80,961
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Cash and cash equivalents beginning of period
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82,082
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122,875
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Cash and cash equivalents end of period
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$
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44,452
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$
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41,914
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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)
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 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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Fiscal year 2010
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January 29, 2011
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Each fiscal year noted above consists of 52 weeks except fiscal year 2006, which
consisted of 53 weeks.
The accompanying unaudited condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United States of America
(GAAP) 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 GAAP 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 2008.
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2.
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SIGNIFICANT ACCOUNTING POLICIES
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Cash and Cash Equivalents
Cash and cash equivalents include bank deposit
accounts, money market accounts and other highly liquid investments with original maturities
of 90 days or less. At October 31, 2009, substantially all of the cash and cash equivalents
were invested in money market accounts and overnight federally-sponsored agency notes. These
investments are classified as held-to-maturity and, due to the short-term maturities of the
instruments, their market values approximate their carrying values.
Short-term Investments
Short-term investments consist of investments in
securities with original maturities of more than 90 days but less than one year. At October
31, 2009, short-term investments consisted solely of U.S. Treasury bills with original
maturities ranging from six to nine months. These investments are classified as
held-to-maturity and their market values approximate their carrying values.
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 products are sold.
Landlord Contributions
The Company typically receives reimbursement from
landlords for a portion of the cost of leasehold improvements for new stores and at times for
renovations. These landlord contributions are initially 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 collection of landlord contributions is presented in the
Condensed Consolidated Statements of Cash Flows as an operating activity. The deferred rent is
amortized over the lease term 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 June, 2009, the Financial Accounting
Standards Board (FASB) issued FASB Accounting Standards Codification (ASC) effective for
financial statements issued for interim and annual periods ending after September 15, 2009.
The ASC is an aggregation of previously issued authoritative GAAP in one comprehensive set of
guidance organized by subject area. In accordance with the ASC, references to previously
issued accounting standards have been replaced by ASC references. Subsequent revisions to GAAP
will be incorporated into the ASC through Accounting Standards Updates (ASU).
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements, now ASC 820, Fair Value Measurements and Disclosures
(ASC 820). ACS 820 defines fair value, establishes a framework for measuring fair value
under GAAP, and expands disclosures about fair value
measurements. ACS 820 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 for the Company beginning in fiscal year
2008, except as it related to nonfinancial assets and liabilities, for which the statement
became effective beginning in fiscal year 2009. This statement has not had a material 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, now ASC 815, Derivatives and Hedging
(ASC 815). ASC 815 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 ASC 815 and its related
interpretations; and how derivative instruments and related hedged items affect an entitys
financial position, financial performance and cash flows. ASC 815 was effective for the
Company beginning in fiscal year 2009 and has not had an impact on the Companys consolidated
financial statements.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements
(ASU 2009-13). ASU 2009-13 addresses revenue recognition of multiple-element sales
arrangements. It establishes a selling price hierarchy for determining the selling price of
each product or service, with vendor-specific objective evidence (VSOE) at the highest
level, third-party evidence of VSOE at the intermediate level, and a best estimate at the
lowest level. It replaces fair value with selling price in revenue allocation guidance.
It also significantly expands the disclosure requirements for such arrangements. ASU 2009-13
will be effective prospectively for sales entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact ASU 2009-13 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 1,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
$
|
(10,272
|
)
|
|
$
|
(5,849
|
)
|
Increase in inventories
|
|
|
(34,775
|
)
|
|
|
(42,612
|
)
|
Increase in prepaids and other assets
|
|
|
(2,396
|
)
|
|
|
(46
|
)
|
Increase (decrease) in accounts payable
|
|
|
(3,418
|
)
|
|
|
3,921
|
|
Decrease in accrued expenses
|
|
|
(11,710
|
)
|
|
|
(11,800
|
)
|
Increase (decrease) in deferred rent and other noncurrent liabilities
|
|
|
5,137
|
|
|
|
(1,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in operating working capital and other components
|
|
$
|
(57,434
|
)
|
|
$
|
(57,730
|
)
|
|
|
|
|
|
|
|
Interest and income taxes paid were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
November 1,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
203
|
|
|
$
|
226
|
|
Income taxes paid
|
|
$
|
32,269
|
|
|
$
|
36,263
|
|
Basic earnings per share is calculated by dividing net income by the weighted average
number of common shares outstanding for the period. Diluted earnings 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 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding for basic EPS
|
|
|
18,215
|
|
|
|
18,292
|
|
|
|
18,194
|
|
|
|
18,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of common stock
equivalents
|
|
|
246
|
|
|
|
240
|
|
|
|
239
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding for diluted EPS
|
|
|
18,461
|
|
|
|
18,532
|
|
|
|
18,433
|
|
|
|
18,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and nine months ended October 31, 2009 and
for the quarter ended November 1, 2008, there were no anti-dilutive options.
8
Income taxes are accounted for under the asset and liability method in accordance with
FASB ASC 740, Income Taxes, (ASC 740), formerly SFAS No. 109, Accounting for Income
Taxes. 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 carry
forwards, if any. 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 Condensed Consolidated Statements of Income in the
period that includes the enactment date.
The Company accounts for uncertainties in income taxes pursuant to ASC 740, formerly FASB
Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation
of SFAS No. 109, which clarifies the accounting for uncertainty in income taxes recognized in
the financial statements. The Company recognizes tax liabilities for uncertain income tax
positions (unrecognized tax benefits) pursuant to ASC 740 where an evaluation has indicated
that it is more likely than not that the tax positions will not be sustained on an audit. The
Company estimates the unrecognized tax benefits as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. The Company reevaluates these uncertain tax
positions on a quarterly basis or when new information becomes available to management. The
reevaluations are based on many factors, including but not limited to, changes in facts or
circumstances, changes in tax law, successfully settled issues under audit, expirations due to
statutes of limitations, and new federal or state audit activity. The Company also recognizes
accrued interest and penalties related to these unrecognized tax benefits which are included
in the provision for income taxes in the Condensed Consolidated Statement of Income.
The effective income tax rate for the first nine months of fiscal year 2009 was 39.3% as
compared with 39.1% for the first nine months of fiscal year 2008. The effective tax rate for
the third quarter of fiscal year 2009 was 39.3% as compared with 33.2% for the third quarter
of fiscal year 2008. During the third quarter of fiscal year 2008, the Company realized tax
benefits of approximately $0.9 million due primarily to cumulative adjustments related to the
Companys ability to fully deduct employee compensation which for the first half of fiscal
year 2008 and for periods prior to fiscal year 2008 was limited under Internal Revenue Code
Section 162(m) (IRC 162(m)). In addition the benefit was partially due to a decrease in the
liability for unrecognized tax benefits and related penalties and interest.
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 IRS is currently
performing an examination of the Companys tax returns for fiscal years 2007 and 2008 which
began in November 2009. For the years before fiscal year 2005, the majority of the Companys
state and local tax returns are no longer subject to examinations by taxing authorities.
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 call center 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. This basis excludes any allocation of management company costs, consisting
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, a typical
customer travels to the store and purchases mens clothing and/or alterations and take their
purchases with them. In the Direct Marketing segment, a typical 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 October 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
145,759
|
|
|
$
|
12,618
|
|
|
$
|
2,932
|
|
|
$
|
161,309
|
|
Depreciation and amortization
|
|
|
4,928
|
|
|
|
76
|
|
|
|
633
|
|
|
|
5,637
|
|
Operating income (loss)
(b)
|
|
|
29,075
|
|
|
|
5,262
|
|
|
|
(15,023
|
)
|
|
|
19,314
|
|
Capital expenditures
(c)
|
|
|
2,504
|
|
|
|
449
|
|
|
|
229
|
|
|
|
3,182
|
|
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
(c)
|
|
|
8,419
|
|
|
|
|
|
|
|
333
|
|
|
|
8,752
|
|
Nine months ended October 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
|
|
|
Direct Marketing
|
|
|
Other
|
|
|
Total
|
|
|
Net sales
(a)
|
|
$
|
440,570
|
|
|
$
|
41,961
|
|
|
$
|
8,438
|
|
|
$
|
490,969
|
|
Depreciation and amortization
|
|
|
14,532
|
|
|
|
96
|
|
|
|
1,905
|
|
|
|
16,533
|
|
Operating income (loss)
(b)
|
|
|
87,431
|
|
|
|
17,284
|
|
|
|
(45,870
|
)
|
|
|
58,845
|
|
Capital expenditures
(c)
|
|
|
8,404
|
|
|
|
1,295
|
|
|
|
896
|
|
|
|
10,595
|
|
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
|
|
Capital expenditures
(c)
|
|
|
26,075
|
|
|
|
5
|
|
|
|
808
|
|
|
|
26,888
|
|
|
|
|
(a)
|
|
Direct Marketing net sales represent catalog call center and Internet sales. Net sales
from segments below the GAAP 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.
|
|
(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. Total Company shipping costs to customers of approximately $1.4
million and $1.5 million for the third quarter of fiscal years 2008 and 2009, respectively,
and approximately $5.1 million and $5.6 million for the first nine months of fiscal years
2008 and 2009, respectively, which primarily related to the Direct Marketing segment, were
recorded to Sales and marketing, including occupancy costs in the Condensed Consolidated
Statements of Income. 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)
|
|
Capital expenditures include payments for property, plant and equipment made for the
reportable segment.
|
10
On July 24, 2006, a lawsuit was filed against the Company and Robert N. Wildrick (then
the Companys Chief Executive Officer and now its Chairman of the Board) in the United States
District Court for the District of Maryland (the U.S. District Court for 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 U.S. District Court for
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 Laborers Annuity Fund (MLAF) was appointed the lead plaintiff in the
Class Action and filed a Consolidated Class Action Complaint. R. Neal Black (then the
Companys Executive Vice President for Merchandising and Marketing and now its President and
Chief Executive Officer) and David E. Ullman (the Companys Executive Vice President and Chief
Financial Officer) were 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.
In late October 2009, the Company and MLAF agreed to settle the Class Action for an
amount that is within the limits of the Companys insurance coverage. The settlement is
therefore not expected to have any impact on the Companys financial statements. The Company
and MLAF have also agreed that the definitive settlement documents will reflect that, at the
time of the settlement, the substantial discovery completed did not substantiate any of the
claims against the individual defendants. The settlement is to be finalized in definitive
settlement documents which will be subject to a number of conditions, including approval by
the U.S. District Court for Maryland. Although we expect to enter into definitive settlement
documents and that the U.S. District Court for Maryland will approve the terms of the
settlement, we cannot provide any assurance that such documents will be executed or that the
U.S. District Court for Maryland will approve the settlement as finalized by the parties.
On October 20, 2006, Glenn Hutton, derivatively and on behalf of the Company, filed an
Amended Shareholder Derivative Complaint against the Companys directors and, as nominal
defendant, the Company in the U.S. District Court for Maryland, Civil Action Number
1:06-cv-02095-BEL (the 2006 Derivative Action). The 2006 Derivative Action was based on
factual allegations similar to those made in the Class Action. The Amended Shareholder
Derivative Complaint alleged that the defendants violated various state laws from January 5,
2006 through October 20, 2006. It sought on behalf of the Company unspecified damages,
equitable relief, costs and attorneys fees. The Companys Motion to Dismiss the 2006
Derivative Action was granted on September 13, 2007.
On October 16, 2009, Norfolk County Retirement System (NCRS), derivatively and on
behalf of the Company, filed a Verified Shareholder Derivative Complaint against the Companys
directors, one of its former directors, its chief financial officer and, as nominal defendant,
the Company in the U.S. District Court for Maryland, Civil Action Number 1:09-cv-0269-BEL (the
2009 Derivative Action). The 2009 Derivative Action is based on factual allegations similar
to those made in the Class Action and in the 2006 Derivative Action. The Verified
Shareholder Derivative Complaint alleges that the defendants breached various fiduciary
duties and misappropriated corporate information from December 5, 2005 through June 7, 2006.
It seeks on behalf of the Company unspecified damages, equitable relief, restitution and costs
and attorneys fees. The Company intends to defend vigorously the 2009 Derivative Action.
To the best of the Companys knowledge NCRS is not affiliated with Glenn Hutton. NCRS
previously was the plaintiff in an action in the Court of Chancery of the State of Delaware
(Case Number 3443-VCP) seeking to compel an inspection of the Companys books and records. The
Court of Chancery granted the Companys motion for summary
judgment in the books and records action and its
decision was affirmed by the Supreme Court of Delaware. That case is now closed.
11
On November 12, 2009, Casey J. Stewart, a former employee of the Company, on behalf of
himself and all others similarly situated, filed a Complaint against the Company in the United
States District Court for the Northern District of California (Case number CV 09 5348 JL)
alleging racial discrimination by the Company with respect to hiring and terms and conditions
of employment. The Complaint seeks, among other things, certification of the case as a class
action, declaratory and injunctive relief, an order mandating corrective action,
reinstatement, back pay, front pay, general damages, exemplary and punitive damages, costs and
attorneys fees. The Company intends to defend this lawsuit vigorously.
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.
Management evaluated all activity of the Company through December 2, 2009, the issue date
of the Companys condensed consolidated financial statements (up to the time of filing), and
concluded that no subsequent events have occurred that would require recognition in the
condensed consolidated financial statements.
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 2008.
Overview
For the third quarter of fiscal year 2009, the Companys net income
was $11.7 million, an increase of 26.1% as compared with the third quarter of fiscal year
2008. The Company earned $0.63 per diluted share in the third quarter of fiscal year 2009, as
compared with $0.50 per diluted share in the third quarter of fiscal year 2008. As such,
diluted earnings per share increased 26.0% as compared with the prior year period. The
results of the third quarter of fiscal year 2009, as compared to the third quarter of fiscal
year 2008, were primarily driven by:
|
|
|
8.1% increase in net sales, driven by a 7.1% increase in the Stores segment and
a 21.2% increase in the Direct Marketing segment, with gross profit margins decreasing
by 70 basis points;
|
|
|
|
|
3.3% increase in comparable store sales;
|
|
|
|
|
260 basis point decrease in sales and marketing costs as a percentage of sales
driven primarily by the leveraging of occupancy costs, other variable selling costs and
advertising and marketing costs;
|
|
|
|
|
80 basis point decrease in general and administrative costs as a percentage of
sales as the Company was able to better leverage its corporate costs during the
quarter; and
|
|
|
|
|
tax benefits realized during the third quarter of fiscal year 2008 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) in
addition to 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 2009, the Company had 470 stores,
consisting of 451 Company-owned full-line stores, seven Company-owned outlet stores and 12
stores operated by franchisees. The Company opened ten stores in the first nine months of
fiscal year 2009. In the past five years, the Company has opened over 250 stores.
Specifically, there were 60 new stores opened in fiscal year 2004, 56 new stores opened in
fiscal year 2005, 52 new stores opened in fiscal year 2006, 48 new stores opened in fiscal
year 2007 and 40 new stores opened in fiscal year 2008.
The Company expects to open approximately 15 stores in fiscal year 2009, including
the ten stores opened in the first nine months of fiscal year 2009. The lower number of store
openings in the first nine months of fiscal year 2009 compared to previous years has been due
primarily to the impact of the national economic crisis that occurred during late 2008 and
early 2009, including but not limited to a resulting lack of quality real estate
opportunities. The Company expects to open approximately 30 to 40 stores in fiscal year 2010
as quality real estate opportunities are beginning to open in the marketplace and the Company
wants to expand its store base at a more rapid pace. The Company previously believed that it
could grow the chain to 600 stores by the end of fiscal year 2012. However, primarily as a
result of the slowdown in store openings in fiscal year 2009, the Company may reach the 600
store level subsequent to 2012.
Capital expenditures in fiscal year 2009 are expected to be approximately $17 to $19
million, primarily to fund the opening of approximately 15 new stores, the renovation
and/or relocation of several stores and the implementation of various systems projects,
including the replacement of the Companys existing Internet infrastructure. The capital
expenditures include the cost of the construction of leasehold improvements for new stores and
the renovation or relocation of several stores, of which approximately $3 to $4 million is
expected to be reimbursed through landlord contributions.
For fiscal year 2009, the Company expects inventories to increase over fiscal year 2008
as a result of new store openings and the replenishment of certain core items that had higher
than expected sales volumes in fiscal year 2008.
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 2008.
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 2008) are
of classic traditional products that are part of on-going programs and that bear low risk of
declines in value below cost. These products include items such as navy and gray suits, navy
blazers, white and blue dress shirts, etc. All product categories are monitored closely to
ensure 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 web site
or on clearance at the retail stores, typically within 24 months of the Companys purchase.
The Companys costs in excess of selling price for units sold below cost totaled $1.9 million
and $1.4 million in fiscal year 2007 and fiscal year 2008, respectively. The Company reduces
the carrying amount of its current inventory value for product in its inventory that may be
sold below its cost. 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 estimated fair value of the asset, which is based on the discounted cash flows.
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 2009 or the first nine
months of fiscal year 2008.
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 amortization 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 rent 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 making its best estimates and judgments,
actual results could differ from these estimates. These estimates, among other things, were
discussed by management with the Companys Audit Committee.
14
Recently Issued Accounting Standards
In June, 2009, the Financial Accounting Standards
Board (FASB) issued FASB Accounting Standards Codification (ASC) effective for financial
statements issued for interim and annual periods ending after September 15, 2009. The ASC is
an aggregation of previously issued authoritative GAAP in one comprehensive set of guidance
organized by subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions to GAAP will
be incorporated into the ASC through Accounting Standards Updates (ASU).
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements, now ASC 820, Fair Value Measurements and Disclosures
(ASC 820). ACS 820 defines fair value, establishes a framework for measuring fair value
under GAAP, and expands disclosures about fair value
measurements. ACS 820 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 for the Company beginning in fiscal year
2008, except as it related to nonfinancial assets and liabilities, for which the statement
became effective beginning in fiscal year 2009. This statement has not had a material 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, now ASC 815, Derivatives and Hedging
(ASC 815). ASC 815 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 ASC 815 and its related
interpretations; and how derivative instruments and related hedged items affect an entitys
financial position, financial performance and cash flows. ASC 815 was effective for the
Company beginning in fiscal year 2009 and has not had an impact on the Companys consolidated
financial statements.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements
(ASU 2009-13). ASU 2009-13 addresses revenue recognition of multiple-element sales
arrangements. It establishes a selling price hierarchy for determining the selling price of
each product or service, with vendor-specific objective evidence (VSOE) at the highest
level, third-party evidence of VSOE at the intermediate level, and a best estimate at the
lowest level. It replaces fair value with selling price in revenue allocation guidance.
It also significantly expands the disclosure requirements for such arrangements. ASU 2009-13
will be effective prospectively for sales entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact ASU 2009-13 will have on its consolidated financial statements.
15
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 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
36.8
|
|
|
|
37.5
|
|
|
|
37.3
|
|
|
|
38.4
|
|
Gross profit
|
|
|
63.2
|
|
|
|
62.5
|
|
|
|
62.7
|
|
|
|
61.6
|
|
Sales and marketing expenses
|
|
|
44.4
|
|
|
|
41.8
|
|
|
|
43.3
|
|
|
|
40.8
|
|
General and administrative expenses
|
|
|
9.5
|
|
|
|
8.7
|
|
|
|
9.2
|
|
|
|
8.9
|
|
Total operating expenses
|
|
|
53.9
|
|
|
|
50.5
|
|
|
|
52.5
|
|
|
|
49.6
|
|
Operating income
|
|
|
9.3
|
|
|
|
12.0
|
|
|
|
10.2
|
|
|
|
12.0
|
|
Total other income
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
Income before provision for income
taxes
|
|
|
9.3
|
|
|
|
12.0
|
|
|
|
10.3
|
|
|
|
12.0
|
|
Provision for income taxes
|
|
|
3.1
|
|
|
|
4.7
|
|
|
|
4.0
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
6.2
|
%
|
|
|
7.3
|
%
|
|
|
6.3
|
%
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
Net sales increased 8.1% to $161.3 million in the third quarter of
fiscal year 2009, as compared with $149.3 million in the third quarter of fiscal year 2008.
Net sales for the first nine months of fiscal year 2009 increased 9.7% to $491.0 million, as
compared with $447.4 million in the first nine months of fiscal year 2008. The sales
increases were primarily related to increases in Stores sales of 7.1% and 10.1% for the third
quarter and first nine months of fiscal year 2009, respectively, including comparable store
sales increases of 3.3% and 4.6% for the third quarter and first nine months of fiscal year
2009, respectively. Comparable store sales include merchandise sales generated in all stores
that have been open for at least thirteen full months. The increase in comparable store sales
for the third quarter of fiscal year 2009 was primarily driven by increases in traffic (as
measured by number of transactions) and items per transaction, partially offset by a decrease
in average dollars per transaction. The increase in comparable store sales for the first nine
months of fiscal year 2009 was primarily driven by increases in items per transaction, traffic
and average dollars per transaction.
Direct Marketing sales increased 21.2% and 7.4% for the third quarter and first nine
months of fiscal year 2009, respectively, driven by increases in sales in the Internet
channel, which represents the major portion of this reportable segment, partially offset by
the continued decline of sales through the catalog call center. Of the major product
categories, suits generated strong unit sales growth during the third quarter and first nine
months of fiscal year 2009 while other tailored clothing, sportswear and dress shirts grew
modestly.
16
The following table summarizes store opening and closing activity during the respective
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
November 1, 2008
|
|
|
October 31, 2009
|
|
|
November 1, 2008
|
|
|
October 31, 2009
|
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
|
|
|
Square
|
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores
|
|
|
Feet*
|
|
|
Stores open at the
beginning of the
period
|
|
|
444
|
|
|
|
2,024
|
|
|
|
467
|
|
|
|
2,121
|
|
|
|
422
|
|
|
|
1,935
|
|
|
|
460
|
|
|
|
2,091
|
|
Stores opened
|
|
|
16
|
|
|
|
68
|
|
|
|
3
|
|
|
|
10
|
|
|
|
38
|
|
|
|
157
|
|
|
|
10
|
|
|
|
40
|
|
Stores closed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open at the
end of the period
|
|
|
460
|
|
|
|
2,092
|
|
|
|
470
|
|
|
|
2,131
|
|
|
|
460
|
|
|
|
2,092
|
|
|
|
470
|
|
|
|
2,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Square feet is presented in thousands and excludes the square footage of the Companys
franchise stores.
|
Gross
profit
Gross profit (net sales less cost of goods sold) totaled $100.8
million or 62.5% of net sales in the third quarter of fiscal year 2009, as compared with $94.3
million or 63.2% of net sales in the third quarter of fiscal year 2008. Gross profit totaled
$302.4 million or 61.6% of net sales for the first nine months of fiscal year 2009, as
compared with $280.5 million or 62.7% of net sales for the first nine months of fiscal year
2008. As stated in the Companys Annual Report on Form 10-K for fiscal year 2008, 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 continued to experience certain of these risks
during the third quarter and the first nine months of fiscal year 2009, particularly a weaker
economic environment, which resulted in lower merchandise gross margins due primarily to
increased promotional activity, partially offset by higher initial mark-ups. The lower
merchandise gross margins were partially offset by lower freight costs in the third quarter
and first nine months of fiscal year 2009 compared to the same periods in fiscal year 2008.
The Company expects to continue to be subject to gross profit risks in the future.
The Companys gross profit represents net sales less cost of goods sold which primarily
includes the cost of merchandise, the cost of tailoring and freight from vendors to the
distribution center and from the distribution center to the stores. This gross profit
classification may not be comparable to the classification used by certain other entities.
Some entities include distribution (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 $67.5
million or 41.8% of sales in the third quarter of fiscal year 2009 from $66.2 million or 44.4%
of sales in the third quarter of fiscal year 2008. Sales and marketing expenses increased to
$200.1 million or 40.8% of sales in the first nine months of fiscal year 2009 from $193.8
million or 43.3% of sales in the first nine months of fiscal year 2008. The decreases as a
percentage of sales for the third quarter and the first nine months were driven primarily by the
leveraging of occupancy costs, other variable selling costs and advertising and marketing
costs. Additionally, the decreases as a percentage of sales for the first nine months and to a lesser extent for the
third quarter were the result of the leveraging of the Companys store employee compensation
costs. The improved leverage for these cost categories was achieved primarily through cost
control initiatives, rent and vendor negotiations and process improvements. Sales and
marketing expenses consist primarily of a) full-line store, outlet store and Direct Marketing
occupancy, payroll, selling and other variable selling costs (which include such costs as
shipping costs to customers and credit card processing fees) and b) total Company advertising
and marketing expenses.
The increase in sales and marketing expenses relates primarily to the opening of 10 new
stores, net of 2 stores closed, since the end of the third quarter of fiscal year 2008. For
the third quarter of fiscal year 2009, the increase consists of a) $1.4 million related to
additional store employee compensation costs, and b) $0.1 million related to additional
advertising and marketing expenses, partially offset by lower occupancy costs of $0.1 million
and lower other variable selling costs of $0.1 million. For the first nine months of fiscal
year 2009 the increase consists of a) $3.7 million related to additional store employee
compensation costs, b) $2.5 million related to additional occupancy
costs, and c) $0.1 million related to additional advertising and marketing expenses. The
Company expects sales and marketing expenses to increase for the remainder of fiscal year 2009
as compared to fiscal year 2008, although possibly by a lower amount than recent years,
primarily as a result of opening new stores (approximately 15 stores) in fiscal year 2009, the full
year operation of the 40 stores that were opened during fiscal year 2008, an increase in
advertising expenditures and anticipated increases in postage used in the mailing of catalogs
and direct mail advertising pieces.
17
General and Administrative Expenses
General and administrative expenses
(G&A), which consist primarily of corporate and distribution center costs, were $14.0
million and $14.2 million for the third quarter of fiscal year 2009 and the third quarter of
fiscal year 2008, respectively. G&A expenses were $43.5 million for the first nine months of
fiscal year 2009 compared to $41.3 million for the first nine months of fiscal year 2008. As
a percent of net sales, G&A expenses were 8.7% and 9.5% for the third quarters of fiscal years
2009 and 2008, respectively, and 8.9% and 9.2% for the first nine months of fiscal years 2009
and 2008, respectively. The decreases as a percentage of sales for
the third quarter and the first
nine months were driven primarily by the leveraging of the Companys corporate costs primarily
through cost control initiatives.
The lower dollar amount of expenses for the third quarter of fiscal year 2009 was due
primarily to a) $0.5 million of lower corporate compensation costs (which includes all company
incentive compensation) and group medical costs and b) $0.2 million of lower distribution
center costs, partially offset by higher other corporate costs of $0.5 million. For the first
nine months of fiscal year 2009, the increased dollar amount of expenses was due to a) $1.1
million of higher corporate compensation costs and group medical costs, b) $0.7 million of
higher other corporate costs, and c) $0.4 million of higher distribution center costs.
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) for the third quarter and first
nine months of fiscal year 2009 was less than $0.1 million of income and less than $0.1
million of expense for the third quarter and first nine months of fiscal year 2009,
respectively, as compared to $0.1 million and $0.5 million of income for the third quarter and
first nine months of fiscal year 2008, respectively. The decreases were due primarily to lower
interest income which resulted from lower average market interest rates as compared to fiscal
year 2008, partially offset by higher average cash and cash equivalents and short-term
investment balances during the fiscal year 2009 periods.
Income Taxes
The effective income tax rate for the first nine months of fiscal
year 2009 was 39.3% as compared with 39.1% for the first nine months of fiscal year 2008. The
effective tax rate for the third quarter of fiscal year 2009 was 39.3% as compared with 33.2%
for the third quarter of fiscal year 2008. During the third quarter of fiscal year 2008, the
Company realized tax benefits of approximately $0.9 million due primarily to cumulative
adjustments related to the Companys ability to fully deduct employee compensation which for
the first half of fiscal year 2008 and for periods prior to fiscal year 2008 was limited under
IRC 162(m). In addition the benefit was partially due to a decrease in the liability for
unrecognized tax benefits and related penalties and interest.
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. The increased customer traffic
during the holiday season and the Companys increased marketing efforts during this peak
selling time have resulted in sales and profits generated during the fourth quarter becoming a
larger portion of annual sales and profits as compared to the other three quarters.
Seasonality is also impacted by growth as more new stores have historically been opened in the
second half of the year. During the fourth quarters of fiscal years 2006, 2007 and 2008, the
Company generated approximately 36%, 35% and 36%, respectively, of its annual net sales and
approximately 58%, 53% and 52%, 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 Company-owned real estate.
18
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
October 31, 2009, January 31, 2009 and November 1, 2008, 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 October 31,
2009, January 31, 2009 and November 1, 2008. The Company may negotiate an amendment to
the Credit Agreement or a new credit agreement prior to the expiration of the existing
facility. The Company may choose to reduce the maximum borrowing
amount of this facility or eliminate this facility entirely, based
on its current and projected cash needs and market conditions. The Company can make
no assurance that a facility will be in place beyond April 30, 2010.
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 1,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(12,604
|
)
|
|
$
|
(5,582
|
)
|
Investing activities
|
|
|
(26,691
|
)
|
|
|
(75,474
|
)
|
Financing activities
|
|
|
1,665
|
|
|
|
95
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
$
|
(37,630
|
)
|
|
$
|
(80,961
|
)
|
|
|
|
|
|
|
|
The Companys cash and cash equivalents consist primarily of money market accounts and
overnight federally-sponsored agency notes and the Companys short-term investments consist of
U.S. Treasury bills with original maturities of more than 90 days but less than one year. At
October 31, 2009, the Companys cash balance was $41.9 million and the Companys short-term
investments were $64.9 million, for a total of $106.8 million, as compared with a cash balance
of $44.5 million at November 1, 2008. The Company had no short-term investments at November 1,
2008. Cash was $122.9 million at the beginning of fiscal year 2009. The significant changes in
sources and uses of funds through November 1, 2009 are discussed below.
Cash used in the Companys operating activities of $5.6 million in the first nine months
of fiscal year 2009 was primarily impacted by an increase in operating working capital and
other operating items of $57.7 million, partially offset by net income of $35.7 million and
depreciation and amortization of $16.5 million. The increase in operating working capital and
other operating items included an increase in inventory of $42.6 million primarily related to
new store openings and the replenishment of certain core items that had higher than expected
sales volumes in fiscal year 2008. In addition, the increase in operating working capital and
other operating items included a reduction in accrued expenses and accounts payable totaling
$7.9 million (excluding accrued property, plant and equipment) related primarily to the
payment of income taxes and incentive compensation that had been accrued at the end of fiscal
year 2008, 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. The increase in
operating working capital and other operating items also included an increase in accounts
receivable of $5.8 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 2009 as compared with the end of the fourth quarter of fiscal year
2008.
Cash used in investing activities in the first nine months of fiscal year 2009 relates to
$10.6 million of payments for capital expenditures, as described below, and $64.9 million of
purchases of short-term investments.
19
For fiscal year 2009, the Company expects to spend approximately $17 to $19 million on
capital expenditures, primarily to fund the opening of approximately 15 new stores, the
renovation and/or relocation of several stores and the implementation of various systems
projects, including the replacement of its existing Internet infrastructure. The capital
expenditures for fiscal year 2009 are planned to be lower than prior years due primarily to
the reduced number of new stores planned. The capital expenditures include the cost of the
construction of leasehold improvements for new stores and the renovation or relocation of
several stores, of which approximately $3 to $4 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 $10.6 million on capital expenditures in the first nine months
of fiscal year 2009 largely related to partial payments for the ten stores opened during the
first nine months of the fiscal year, plus expenditures related to the replacement of its
existing Internet infrastructure and payments for various system initiatives. In addition,
capital expenditures for the period include payments of property, plant and equipment
additions accrued at year-end fiscal year 2008 related to stores opened in fiscal year 2008.
For the stores opened and renovated in the first nine months of fiscal year 2009, the Company
negotiated approximately $2.5 million of landlord contributions. The table below summarizes
the landlord contributions that were negotiated and collected related to the stores opened in
fiscal years 2009 and 2008.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
Collected
|
|
|
Amounts
|
|
|
|
|
|
|
|
Collected in
|
|
|
YTD in
|
|
|
Outstanding
|
|
|
|
Negotiated
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
October 31,
|
|
|
|
Amounts
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
|
(in thousands)
|
|
Full Fiscal Year 2008 Store
Openings (40 Stores)
|
|
$
|
10,513
|
|
|
$
|
(6,373
|
)
|
|
$
|
(3,613
|
)
|
|
$
|
527
|
|
First Nine Months of
Fiscal Year 2009
Store Openings (10 Stores)
|
|
|
2,451
|
|
|
|
|
|
|
|
(1,898
|
)
|
|
|
553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,964
|
|
|
$
|
(6,373
|
)
|
|
$
|
(5,511
|
)
|
|
$
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The outstanding amounts of the landlord contributions for the stores opened and renovated
in fiscal year 2008 and fiscal year 2009 are primarily expected to be received by the end of the third quarter of
fiscal year 2010.
For fiscal year 2009, the Company expects inventories to increase over fiscal year 2008
as a result of new store openings and the replenishment of certain core items that had higher
than expected sales volumes in fiscal year 2008.
Management believes that the Companys cash from operations, existing cash and cash
equivalents, short-term investments and availability under its Credit Agreement will be
sufficient to fund its planned capital expenditures and operating expenses through at least
the next 12 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-cancellable operating leases in connection
with its retail stores, certain tailoring facilities and equipment. Under the terms of
certain of the retail store 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 the only
rent-related commitments that are determinable at this time.
20
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 2009.
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|
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|
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Payments Due by Fiscal Year
|
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|
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(in thousands)
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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Beyond
|
|
|
|
|
|
|
2009
|
|
|
2010-2012
|
|
|
2013-2014
|
|
|
2014
|
|
|
Total
(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
(a) (b)
|
|
$
|
53,403
|
|
|
$
|
160,760
|
|
|
$
|
83,678
|
|
|
$
|
71,527
|
|
|
$
|
369,368
|
|
Standby letter of credit
(c)
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
Related Party Agreement
(d)
|
|
|
825
|
|
|
|
1,650
|
|
|
|
|
|
|
|
|
|
|
|
2,475
|
|
License agreement
|
|
|
165
|
|
|
|
495
|
|
|
|
330
|
|
|
|
330
|
|
|
|
1,320
|
|
|
|
|
(a)
|
|
Includes various lease agreements for stores to be opened and equipment placed in
service subsequent to
October 31, 2009.
|
|
(b)
|
|
Excludes contingent rent and other lease costs.
|
|
(c)
|
|
To secure the payment of rent through November 30, 2009
at one leased location included in Operating Leases.
|
|
(d)
|
|
Relates to consulting agreement with the Companys current Chairman of the Board to
consult on matters of strategic planning and initiatives.
|
|
(e)
|
|
Obligations related to unrecognized tax benefits and related penalties and interest
of $0.8 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.
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, legal matters and other competitive factors. The identified risk factors and other
factors and risks that may affect the Companys business or future financial results are
detailed in the Companys filings with the Securities and Exchange Commission, including, but
not limited to, those described under Risk Factors in the Companys Annual Report on Form
10-K for fiscal year 2008 and Managements Discussion and Analysis of Financial Condition and
Results of Operations in this Quarterly Report on Form 10-Q. 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.
21
|
|
|
Item 3.
|
|
Quantitative and Qualitative Disclosures About Market Risk
|
At October 31, 2009, the Company was not a party to any derivative financial instruments.
The Company does business with all of its product vendors in U.S. currency. As a result, the
Company may be affected by the value of the U.S. dollar against the currencies of its
suppliers countries. A devaluation of the U.S. dollar against these foreign currencies could
have a material adverse effect on our product costs and resulting gross profit. 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. Further, the
Company currently invests substantially all of its excess cash in short-term investments,
primarily in U.S. Treasury bills with original maturities of less than one year, overnight
federally-sponsored agency notes and money market accounts, 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 $0.7 million in fiscal
year 2008.
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|
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.
Management, with the participation of the CEO and CFO, has evaluated the effectiveness,
as of October 31, 2009, 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
October 31, 2009.
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 Rule 13a-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.
22
PART II. OTHER INFORMATION
|
|
|
Item 1.
|
|
Legal Proceedings
|
On July 24, 2006, a lawsuit was filed against the Company and Robert N. Wildrick (then
the Companys Chief Executive Officer and now its Chairman of the Board) in the United States
District Court for the District of Maryland (the U.S. District Court for 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 U.S. District Court for
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 Laborers Annuity Fund (MLAF) was appointed the lead plaintiff in the
Class Action and filed a Consolidated Class Action Complaint. R. Neal Black (then the
Companys Executive Vice President for Merchandising and Marketing and now its President and
Chief Executive Officer) and David E. Ullman (the Companys Executive Vice President and Chief
Financial Officer) were 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.
In late October 2009, the Company and MLAF agreed to settle the Class Action for an
amount that is within the limits of the Companys insurance coverage. The settlement is
therefore not expected to have any impact on the Companys financial statements. The Company
and MLAF have also agreed that the definitive settlement documents will reflect that, at the
time of the settlement, the substantial discovery completed did not substantiate any of the
claims against the individual defendants. The settlement is to be finalized in definitive
settlement documents which will be subject to a number of conditions, including approval by
the U.S. District Court for Maryland. Although we expect to enter into definitive settlement
documents and that the U.S. District Court for Maryland will approve the terms of the
settlement, we cannot provide any assurance that such documents will be executed or that the
U.S. District Court for Maryland will approve the settlement as finalized by the parties.
On October 20, 2006, Glenn Hutton, derivatively and on behalf of the Company, filed an
Amended Shareholder Derivative Complaint against the Companys directors and, as nominal
defendant, the Company in the U.S. District Court for Maryland, Civil Action Number
1:06-cv-02095-BEL (the 2006 Derivative Action). The 2006 Derivative Action was based on
factual allegations similar to those made in the Class Action. The Amended Shareholder
Derivative Complaint alleged that the defendants violated various state laws from January 5,
2006 through October 20, 2006. It sought on behalf of the Company unspecified damages,
equitable relief, costs and attorneys fees. The Companys Motion to Dismiss the 2006
Derivative Action was granted on September 13, 2007.
On October 16, 2009, Norfolk County Retirement System (NCRS), derivatively and on
behalf of the Company, filed a Verified Shareholder Derivative Complaint against the Companys
directors, one of its former directors, its chief financial officer and, as nominal defendant,
the Company in the U.S. District Court for Maryland, Civil Action Number 1:09-cv-0269-BEL (the
2009 Derivative Action). The 2009 Derivative Action is based on factual allegations similar
to those made in the Class Action and in the 2006 Derivative Action. The Verified Shareholder
Derivative Complaint alleges that the defendants breached various fiduciary duties and
misappropriated corporate information from December 5, 2005 through June 7, 2006. It seeks on
behalf of the Company unspecified damages, equitable relief, restitution and costs and
attorneys fees. The Company intends to defend vigorously the 2009 Derivative Action.
To the best of the Companys knowledge NCRS is not affiliated with Glenn Hutton. NCRS
previously was the plaintiff in an action in the Court of Chancery of the State of Delaware
(Case Number 3443-VCP) seeking to compel an inspection of the Companys books and records. The
Court of Chancery granted the Companys motion for summary
judgment in the books and records action and its
decision was affirmed by the Supreme Court of Delaware. That case is now closed.
23
On November 12, 2009, Casey J. Stewart, a former employee of the Company, on behalf of
himself and all others similarly situated, filed a Complaint against the Company in the United
States District Court for the Northern District of California (Case number CV 09 5348 JL)
alleging racial discrimination by the Company with respect to hiring and terms and conditions
of employment. The Complaint seeks, among other things, certification of the case as a class
action, declaratory and injunctive relief, an order mandating corrective action,
reinstatement, back pay, front pay, general damages, exemplary and punitive damages, costs and
attorneys fees. The Company intends to defend this lawsuit vigorously.
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.
In addition to the other information set forth in this report, you should carefully
consider the factors discussed under the caption Item 1A. Risk Factors in the Companys
Annual Report on Form 10-K for fiscal year 2008, which could materially affect the Companys
business, financial condition or future results. The risks described in the Companys Annual
Report on Form 10-K 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/or operating results. There have been no material changes in
our risk factors from those disclosed in our Annual Report on Form 10-K for fiscal year 2008.
|
|
|
|
Exhibits
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
|
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
|
Certification of Principal Financial Officer 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 2, 2009
|
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 Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
|
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
|
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
25
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