**United StatesSecurities and Exchange Commission**

**Washington,DC 20549**

**FORM 10-Q**

**x**                              Quarterlyreport pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934

**Forthe quarterly period ended October 29, 2005.**

**or**

**o**                                 Transitionreport pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934

**CommissionFile Number 0-23874**

**Jos. A. Bank Clothiers, Inc.**

(Exact name of registrantas specified in its charter)

| **Delaware**                                                   | ** ** | **36-3189198**                           |
|----------------------------------------------------------------|------------|------------------------------------------|
| (State  incorporation)                                         |       | (I.R.S. Employer  Identification Number) |
| **500 Hanover Pike, Hampstead, MD**                            | ** ** | **21074-2095**                           |
| (Address of  Principal Executive Offices)                      |       | (Zip Code)                               |
| **410-239-2700**                                               |
| (Registrant’s  telephone number including area code)      |
| **None**                                                       |
| (Former name or  former address, if changed since last report) |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

Yes  x   No  o

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

Yes  x   No  o

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

Yes  o   No  x

Indicate the numberof shares outstanding of each of the issuer’s classes of common stock, as ofthe latest practicable date:

| Class                         | ** ** | **Outstanding as of December 1, 2005** |
|-------------------------------|------------|---------------------------------------------|
| Common Stock,  $.01 par value |       | 13,716,546                                  |

 

 

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**Jos. A. BankClothiers, Inc.**

**Index**
|                    | ** **            | ** **                                                                                                                                   | ** ** | ** **                                                                                                                      | ** ** | **Page No.** |
|--------------------|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| Part I.       | Financial Information |                                                                                                                                         |       |                                                                                                                            |       |
|               |                  | Item 1.                                                                                                                                      |       | Condensed  Consolidated (unaudited) Financial Statements                                                                        |       |              | 3 |   |
|               |                  | Condensed  Consolidated Statements of Income—Three and Nine Months ended  October 30, 2004 (as restated) and October 29, 2005 |       |                                                                                                                            | 3          |              |
|               |                  | Condensed  Consolidated Balance Sheets—as of January 29, 2005 and October 29, 2005                                       |       |                                                                                                                            | 4          |              |
|               |                  | Condensed  Consolidated Statements of Cash Flows—Nine Months ended October 30, 2004  (as restated) and October 29, 2005       |       |                                                                                                                            | 5          |              |
|               |                  | Notes  to Condensed Consolidated Financial Statements                                                                                        |       |                                                                                                                            | 6          |              |
|               |                  | Item 2.                                                                                                                                      |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations       |       |              | 16 |   |
|               |                  | Item 3.                                                                                                                                      |       | Quantitative  and Qualitative Disclosures about Market Risk                                                                     |       |              | 23 |   |
|               |                  | Item 4.                                                                                                                                      |       | Controls  and Procedures                                                                                                        |       |              | 23 |   |
| Part II.      | Other  Information    |                                                                                                                                         |       | 24                                                                                                                              |       |
|               |                  | Item 1.                                                                                                                                      |       | Legal  Proceedings                                                                                                              |       |              | 24 |   |
|               |                  | Item 6.                                                                                                                                      |       | Exhibits                                                                                                                        |       |              | 24 |   |
| Signature          |                  |                                                                                                                                         | 24         |                                                                                                                            |
| Exhibit Index |                  |                                                                                                                                         | 25         |                                                                                                                            |
|                    |                       |                                                                                                                                              |            |                                                                                                                                 |            |                   |  |  |  |  |  |

 

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**PART I.**   FINANCIALINFORMATION

**Item 1.**                        CondensedConsolidated Financial Statements

**JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIESCondensed ConsolidatedStatements of Income(In thousands except per share data)(Unaudited)**

| ** **                               | ** ** | **Three Months Ended**              | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **October 30, 2004**                | ** ** | **October 29, 2005**  | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| ** **                               | ** ** | **(As Restated,  See Note 3)** | ** ** | ** **                      | ** ** | **(As Restated,  See Note 3)** | ** ** | ** ** | ** ** |
| Net sales                                | ** ** |                                          | $          | 82,634                          | ** ** |   |   | **$** | **105,639** | ** ** |   |   | $ | 244,557 | ** ** |   |   | **$** | **300,802** | ** ** |   |
| Cost of goods  sold                      |       |                                          | 34,094     | ** **                      |       |   | **42,167** | ** ** |   |   | 97,871 | ** ** |   |   | **115,539** | ** ** |   |
| Gross Profit                             |       |                                          | 48,540     | ** **                      |       |   | **63,472** | ** ** |   |   | 146,686 | ** ** |   |   | **185,263** | ** ** |   |
| Operating  expenses:                     | ** ** |                                          | ** ** | ** **                      |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Sales and marketing                      |       |                                          | 34,616     | ** **                      |       |   | **43,269** | ** ** |   |   | 97,544 | ** ** |   |   | **123,643** | ** ** |   |
| General and administrative               |       |                                          | 8,436      | ** **                      |       |   | **11,468** | ** ** |   |   | 27,273 | ** ** |   |   | **31,487** | ** ** |   |
| Store opening costs                      |       |                                          | 346        | ** **                      |       |   | **189** | ** ** |   |   | 846 | ** ** |   |   | **408** | ** ** |   |
| Total operating  expenses                |       |                                          | 43,398     | ** **                      |       |   | **54,926** | ** ** |   |   | 125,663 | ** ** |   |   | **155,538** | ** ** |   |
| Operating income                         |       |                                          | 5,142      | ** **                      |       |   | **8,546** | ** ** |   |   | 21,023 | ** ** |   |   | **29,725** | ** ** |   |
| Interest expense, net                    |       |                                          | 449        | ** **                      |       |   | **637** | ** ** |   |   | 1,363 | ** ** |   |   | **1,302** | ** ** |   |
| Income before provision for income taxes |       |                                          | 4,693      | ** **                      |       |   | **7,909** | ** ** |   |   | 19,660 | ** ** |   |   | **28,423** | ** ** |   |
| Provision for  income taxes              |       |                                          | 1,491      | ** **                      |       |   | **3,257** | ** ** |   |   | 7,755 | ** ** |   |   | **11,695** | ** ** |   |
| Net income                               | ** ** |                                          | $          | 3,202                           | ** ** |   |   | **$** | **4,652** | ** ** |   |   | $ | 11,905 | ** ** |   |   | **$** | **16,728** | ** ** |   |
| Earnings per  share:                     | ** ** |                                          |       | ** **                      |       |   | ** ** | ** ** |   |   |   | ** ** |   |   | ** ** | ** ** |   |
| Net income per share:                    | ** ** |                                          |       | ** **                      |       |   | ** ** | ** ** |   |   |   | ** ** |   |   | ** ** | ** ** |   |
| Basic                                    | ** ** |                                          | $          | 0.24                            | ** ** |   |   | **$** | **0.34** | ** ** |   |   | $ | 0.89 | ** ** |   |   | **$** | **1.23** | ** ** |   |
| Diluted                                  | ** ** |                                          | $          | 0.22                            | ** ** |   |   | **$** | **0.32** | ** ** |   |   | $ | 0.84 | ** ** |   |   | **$** | **1.16** | ** ** |   |
| Weighted average shares  outstanding:    | ** ** |                                          | ** ** | ** **                      |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Basic                                    |       |                                          | 13,395     | ** **                      |       |   | **13,681** | ** ** |   |   | 13,324 | ** ** |   |   | **13,573** | ** ** |   |
| Diluted                                  |       |                                          | 14,285     | ** **                      |       |   | **14,460** | ** ** |   |   | 14,231 | ** ** |   |   | **14,394** | ** ** |   |

 

See accompanying notes.

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**JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIESCondensed ConsolidatedBalance Sheets(In Thousands)(Unaudited)**

| ** **                                      | ** ** | **January 29,  2005** | ** ** | **October 29,  2005** | ** ** |
|-------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **ASSETS**                                      | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| CURRENT ASSETS:                                 | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Cash and cash equivalents                       |       |                       | $          | 1,425                      | ** ** |   |   | **$** | **1,532** | ** ** |   |
| Accounts receivable, net                        |       |                       | 4,798      | ** **                 |       |   | **8,047** | ** ** |   |
| Inventories:                                    | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Raw materials                                   |       |                       | 8,550      | ** **                 |       |   | **8,490** | ** ** |   |
| Finished goods                                  |       |                       | 119,143    | ** **                 |       |   | **182,142** | ** ** |   |
| Total inventories                               |       |                       | 127,693    | ** **                 |       |   | **190,632** | ** ** |   |
| Prepaid expenses and other  current assets      |       |                       | 11,892     | ** **                 |       |   | **11,534** | ** ** |   |
| Deferred income taxes                           |       |                       | 893        | ** **                 |       |   | — | ** ** |   |
| Total current assets                            |       |                       | 146,701    | ** **                 |       |   | **211,745** | ** ** |   |
| NONCURRENT ASSETS:                              | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Property, plant and equipment,  net             |       |                       | 83,621     | ** **                 |       |   | **97,728** | ** ** |   |
| Other noncurrent assets                         |       |                       | 1,508      | ** **                 |       |   | **572** | ** ** |   |
| Total assets                                    |       |                       | $          | 231,830                    | ** ** |   |   | **$** | **310,045** | ** ** |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| CURRENT LIABILITIES:                            | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Accounts payable                                |       |                       | $          | 40,133                     | ** ** |   |   | **$** | **37,631** | ** ** |   |
| Accrued expenses                                |       |                       | 37,505     | ** **                 |       |   | **43,176** | ** ** |   |
| Current portion of long-term  debt              |       |                       | 917        | ** **                 |       |   | **948** | ** ** |   |
| Deferred tax liability—current             |       |                       | —     | ** **                 |       |   | **6,893** | ** ** |   |
| Total current liabilities                       |       |                       | 78,555     | ** **                 |       |   | **88,648** | ** ** |   |
| NONCURRENT LIABILITIES:                         | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Long-term debt, net of current  portion         |       |                       | 5,942      | ** **                 |       |   | **49,778** | ** ** |   |
| Noncurrent lease obligations                    |       |                       | 30,318     | ** **                 |       |   | **32,768** | ** ** |   |
| Deferred tax  liability—noncurrent         |       |                       | 1,753      | ** **                 |       |   | **1,639** | ** ** |   |
| Other noncurrent liabilities                    |       |                       | 938        | ** **                 |       |   | **1,112** | ** ** |   |
| Total liabilities                               |       |                       | 117,506    | ** **                 |       |   | **173,945** | ** ** |   |
| COMMITMENTS AND CONTINGENCIES                   | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| STOCKHOLDERS’ EQUITY:                      | ** ** |                       | ** ** | ** **                 |       |   | ** ** | ** ** |   |
| Common stock                                    |       |                       | 124        | ** **                 |       |   | **127** | ** ** |   |
| Additional paid-in capital                      |       |                       | 67,594     | ** **                 |       |   | **72,639** | ** ** |   |
| Retained earnings                               |       |                       | 51,664     | ** **                 |       |   | **68,392** | ** ** |   |
|                                            | ** ** |                       | 119,382    | ** **                 |       |   | **141,158** | ** ** |   |
| Treasury stock                                  |       |                       | (5,058     | )                          |       |   | **(5,058** | **)** |   |
| Total stockholders’ equity                 |       |                       | 114,324    | ** **                 |       |   | **136,100** | ** ** |   |
| Total liabilities and stockholders’ equity | ** ** |                       | **$**      | **231,830**                | ** ** |   |   | **$** | **310,045** | ** ** |   |

 

See accompanying notes.

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**JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIESCondensed ConsolidatedStatements of Cash Flows(In Thousands)(Unaudited)**

| ** **                                                                                   | ** ** | **Nine Months Ended**               | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                   | ** ** | **October 30, 2004**                | ** ** | **October 29, 2005** | ** ** |
| ** **                                                                                   | ** ** | **(As Restated,  See Note 3)** | ** ** | ** ** | ** ** |
| Cash flows from  operating activities:                                                       | ** ** |                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net income                                                                                   |       |                                          | $          | 11,905 | ** ** |   |   | **$** | **16,728** | ** ** |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: | ** ** |                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Increase in deferred income taxes                                                            |       |                                          | 678        | ** ** |   |   | **7,672** | ** ** |   |
| Depreciation and amortization                                                                |       |                                          | 7,497      | ** ** |   |   | **9,460** | ** ** |   |
| Loss on disposals of plant and equipment                                                     |       |                                          | —     | ** ** |   |   | **24** | ** ** |   |
| Income tax benefit from exercise of stock options                                            |       |                                          | —     | ** ** |   |   | **3,749** | ** ** |   |
| Net increase in operating working capital and other                                          |       |                                          | (12,168    | ) |   |   | **(64,636** | **)** |   |
| **Net cash provided by (used in) operating  activities**                                     |       |                                          | 7,912      | ** ** |   |   | **(27,003** | **)** |   |
| Cash flows from  investing activities:                                                       | ** ** |                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Capital expenditures                                                                         |       |                                          | (21,781    | ) |   |   | **(18,056** | **)** |   |
| Proceeds from disposal of assets                                                             |       |                                          | 851        | ** ** |   |   | — | ** ** |   |
| **Net cash used in investing activities**                                                    |       |                                          | (20,930    | ) |   |   | **(18,056** | **)** |   |
| Cash flows from  financing activities:                                                       | ** ** |                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Borrowings under long-term Credit Agreement                                                  |       |                                          | 75,377     | ** ** |   |   | **92,731** | ** ** |   |
| Repayments under long-term Credit Agreement                                                  |       |                                          | (62,374    | ) |   |   | **(48,186** | **)** |   |
| Repayment of other long-term debt                                                            |       |                                          | (2,181     | ) |   |   | **(678** | **)** |   |
| Net proceeds from issuance of common stock                                                   |       |                                          | 2,573      | ** ** |   |   | **1,299** | ** ** |   |
| **Net cash provided by financing activities**                                                |       |                                          | 13,395     | ** ** |   |   | **45,166** | ** ** |   |
| Net increase in cash and cash equivalents                                                    |       |                                          | 377        | ** ** |   |   | **107** | ** ** |   |
| Cash and cash equivalents—beginning of period                                           |       |                                          | 875        | ** ** |   |   | **1,425** | ** ** |   |
| Cash and cash  equivalents—end of period                                                |       |                                          | $          | 1,252 | ** ** |   |   | **$** | **1,532** | ** ** |   |

 

See accompanying notes.

5

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

**1.  **BASIS OFPRESENTATION

Jos. A. Bank Clothiers, Inc. (the “Company”) is anationwide retailer of classic men’s clothing through conventional retailstores and catalog and Internet direct marketing. The Condensed ConsolidatedFinancial Statements include the accounts of the Company and its wholly-ownedsubsidiaries. All significant intercompany balances and transactions have beeneliminated in consolidation.

The results of operations for the interim periodsshown in this report are not necessarily indicative of results to be expectedfor the fiscal year. In the opinion of management, the information containedherein reflects all adjustments necessary to make the results of operations forthe interim periods a fair statement of the operating results for these periods.These adjustments are of a normal recurring nature.

The accompanying unauditedCondensed Consolidated Financial Statements have been prepared in accordancewith generally accepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Rule 10-01 ofRegulation S-X and therefore do not include all of the information andfootnotes required by accounting principles accepted in the United States forcomparable annual financial statements. Certain notes and other informationhave been condensed or omitted from the interim financial statements presentedin this Quarterly Report on Form 10-Q. Therefore, these financialstatements should be read in conjunction with the Company’s Annual Report on Form 10-Kfor the fiscal year ended January 29, 2005.

**2.  **SIGNIFICANTACCOUNTING POLICIES

***Inventories***—TheCompany records inventory at the lower of cost or market (“LCM”). Cost isdetermined using the first-in, first-out method. The Company capitalizes intoinventory certain warehousing and freight delivery costs associated withshipping its merchandise to the point of sale. The Company periodically reviewsquantities of inventories on hand and compares these amounts to the expectedsale of each product. The Company records a charge to cost of goods sold forthe amount required to reduce the carrying value of inventory to net realizablevalue.

***Vendor Rebates***—TheCompany receives credits from vendors in connection with inventory purchases. Thecredits are separately negotiated with each vendor. Substantially all of thesecredits are earned in one of two ways: a) as a fixed percentage of purchaseswhen an invoice is paid or b) as an agreed-upon amount in the month a new storeis opened. There are no contingent minimum purchase amounts, milestones orother contingencies that are required to be met to earn the credits. Thecredits described in a) above are recorded as a reduction to inventories in theCondensed Consolidated Balance Sheet as the inventories are purchased and thecredits described in b) above are recorded as a reduction to inventories as newstores are opened. In both cases, the credits are recognized as reductions tocost of goods sold as the product is sold.

***LandlordContributions***—Landlord contributions are accountedfor as an increase to noncurrent lease obligations and as an increase toprepaid and other current assets until collected. When collected, the Companyrecords cash and reduces the prepaid and other current assets account. Thelandlord contributions are presented in the Condensed Consolidated Statementsof Cash Flows as an operating activity. The noncurrent lease obligations areamortized over the life of the lease in a manner that is consistent with theCompany’s policy to straight-line rent expense over the term of the lease. The 

6

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amortization is recordedas a reduction to sales and marketing expense which is consistent with theclassification of lease expense.

***Stock Option Plan******—******To***accountfor its fixed-plan stock options, the Company applies the intrinsic-value-basedmethod of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25,“Accounting for Stock Issued to Employees,” and related interpretationsincluding Financial Accounting Standards Board Interpretation No. 44, “Accountingfor Certain Transactions Involving Stock Compensation,” issued in March 2000.Under this method, compensation expense is recorded on the date of grant onlyif the then-current market price of the underlying stock exceeds the exerciseprice. Historically, the Company has issued all options at the market price onthe date of grant. There was no stock-based compensation expense recognized inthe Condensed Consolidated Statements of Income for the three and nine monthperiods ended October 30, 2004 and October 29, 2005. Statement ofFinancial Accounting Standards (“SFAS”) No. 123, “Accounting forStock-Based Compensation” as amended by SFAS No. 148, “Accounting forStock Based Compensation-Transition and Disclosure,” established accounting anddisclosure requirements using a fair-value-based method of accounting forstock-based employee compensation plans. As allowed by SFAS No. 123, theCompany has elected to continue to apply the intrinsic-value-based method ofaccounting described above, and has adopted only the disclosure requirements ofSFAS No. 123 as amended by SFAS No. 148. The following tableillustrates the effect on net income if the fair-value-based method had beenapplied to all outstanding and unvested awards in each quarter and compensationexpense had been recorded:

| ** **                                                                                                                        | ** ** | **Three Months Ended**                        | ** ** | **Nine Months Ended**          | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                        | ** ** | **October 30, 2004**                | ** ** | **October 29, 2005** | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| ** **                                                                                                                        | ** ** | **(As Restated,  See Note 3)** | ** ** | ** **                     | ** ** | **(As Restated,  See Note 3)** | ** ** | ** ** | ** ** |
| Net income as reported                                                                                                            |       |                                          | $          | 3,202                          | ** ** |   |   | **$** | **4,652** |   |   |   | $ | 11,905 | ** ** |   |   | **$** | **16,728** | ** ** |   |
| Deduct total stock-based employee  compensation expense determined under fair-value-based method for all awards,  net of tax |       |                                          | 252        | ** **                     |       |   | **46** |   |   |   | 478 | ** ** |   |   | **180** | ** ** |   |
| Pro forma net income                                                                                                              |       |                                          | $          | 2,950                          | ** ** |   |   | **$** | **4,606** |   |   |   | $ | 11,427 | ** ** |   |   | **$** | **16,548** | ** ** |   |
| Pro forma basic net income per  common share                                                                                 |       |                                          | $          | 0.22                           | ** ** |   |   | **$** | **0.34** |   |   |   | $ | 0.86 | ** ** |   |   | **$** | **1.22** | ** ** |   |
| Pro forma diluted net income per common share                                                                                     |       |                                          | $          | 0.21                           | ** ** |   |   | **$** | **0.32** |   |   |   | $ | 0.80 | ** ** |   |   | **$** | **1.15** | ** ** |   |

 

7

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Thefair value of each stock option granted is estimated on the date of grant usingthe Black-Scholes option pricing model with the following weighted averageassumption used for grants in the nine months ended October 29, 2005. Forthe three months ended October 29, 2005, there were no stock optionsgranted. As of October 29, 2005, all of the Company’s outstanding stockoptions were vested.

| ** **                    | ** ** | **Three Months Ended** | ** **         | **Nine Months Ended** | ** ** |
|-------------------------------|------------|----------------------------------|--------------------|---------------------------------|------------|
| ** **                    | ** ** | **October 30, 2004**   | ** **         | **October 29, 2005**  | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| ** **                    | ** ** | ** **                       | ** **         | **(no options  granted)**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Risk free interest rate       |       |                             | 2.9%  - 3.2%       |                            |       | — |   |   |   | 2.9%  - 3.2% |   |   | **3.88%** |   |
| Expected volatility           |       |                             | 49%  - 50%         |                            |       | — |   |   |   | 49%  - 50% |   |   | **34%** |   |
| Expected life                 |       |                             | 3  Years           |                            |       | — |   |   |   | 3  Years |   |   | **3 Years** |   |
| Contractual life              |       |                             | 1 – 10  Years |                            |       | — |   |   |   | 1 – 10  Years |   |   | **1 – 10 Years** |   |
| Expected dividend yield       |       |                             | —%            |                            |       | — |   |   |   | —% |   |   | **—%** |   |
| Fair value of options granted |       |                             | $8.81  - $10.04    |                            |       | — |   |   |   | $8.81  - $10.04 |   |   | **$32.86** |   |
| #  of options granted         |       |                             | 29.6               |                            |       | — |   |   |   | 29.6 |   |   | **29.1** |   |

*** ***

***New AccountingPronouncements******—******In***December 2004,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(Revised 2004), Share-Based Payments (“SFAS 123(R)”). This Statement requirescompanies to expense the estimated fair value of stock options and similarequity instruments issued to employees. Currently, companies are required tocalculate the estimated fair value of these share-based payments and can electto either include the estimated cost in earnings or disclose the pro formaeffect in the notes to their financial statements. As stated above, the Companyhas chosen to disclose the pro forma effect in the notes to its financialstatements until SFAS 123(R) becomes effective for the Company. The fairvalue concepts were not changed significantly in SFAS 123(R); however, inadopting this Standard, companies mustchoose among alternative valuation models and amortization assumptions. Thevaluation model and amortization assumption the Company has used continues tobe available, but we have not yet completed our assessment of the alternatives.SFAS 123(R) will be effective for the Company beginning with the firstquarter of the fiscal year ending February 2, 2007 (“fiscal 2006”). Transitionoptions allow companies to choose whether to adopt prospectively, restateresults to the beginning of the year, or to restate prior periods with theamounts that have been included in their footnotes. The Company has not yetdetermined which transition option it will select.

***Reclassifications******—******Certain***amountsin the Condensed Consolidated Financial Statements for the three and ninemonths ended October 30, 2004 have been reclassified in order to conformto the October 29, 2005 presentation. 

**3.  **RESTATEMENT OF FINANCIALSTATEMENTS

On February 7, 2005, in a letter to the Centerfor Public Company Audit Firms-American Institute of Certified PublicAccountants (the “SEC Letter”), the Chief Accountant of the Securities andExchange Commission (the “SEC”) expressed the views of the SEC staff concerningcertain operating lease accounting issues and their application under generallyaccepted accounting principles (“GAAP”). Specifically, the SEC Letter addressedthe appropriate accounting for: (1) the amortization of leaseholdimprovements by a lessee in an operating lease with lease renewals, (2) thepattern of recognition of rent when the lease term in an operating leasecontains a period where there are free or reduced rents (commonly referred toas “rent holidays”), and (3) incentives related to leasehold improvementsprovided by a landlord/lessor to a tenant/lessee in an operating lease. Likemany other companies in the retail industry, the Company re-evaluated its leaseaccounting practices in light of the SEC Letter.

8

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*Amortizationof Leasehold Improvements—**In*order to complywith GAAP regarding amortization of leasehold improvements discussed in the SECLetter, the Company revised the straight-line rent schedules for thirteen ofits stores to achieve consistency with the corresponding leasehold amortizationschedules.

*RentHolidays—**In*the SEC Letter, the SEC staffreiterated that GAAP requires rent holidays in an operating lease to berecognized by the lessee on a straight-line basis over the lease term (includingany rent holiday period). In periods prior to fiscal 2005, the Companygenerally recognized the straight-line expense for a lease beginning on thedate the store opened, which was generally the date the lease term commenced inaccordance with the lease. The period during which the store was beingconstructed was excluded from the straight-line rent schedule because theconstruction period was not considered to be part of the lease term inaccordance with the lease. Based on our re-evaluation, the Company concludedthat the construction period should be included in the straight-line rentschedule.

As a result of the correction to its rent schedules,the Company restated the Condensed Consolidated Financial Statements forperiods prior to fiscal 2005, including the three and nine months ended October 30,2004. The foregoing corrections are inclusive of the immaterial changesresulting from the modification of the rent schedules to achieve consistencywith the corresponding leasehold amortization schedules, as set forth above.

*LandlordContributions—**Leasehold*improvement incentivesprovided by a landlord to the Company were previously recorded by the Companyas a reduction of the property, plant and equipment account on its balancesheet and amortized as a reduction to depreciation expense in its incomestatement. However, GAAP requires that such incentives be recorded as deferredrent and amortized as reductions to lease expense. As a result, the Company’sproperty, plant and equipment asset account and deferred rent liability accountfor the periods prior to fiscal 2005 were increased which resulted in increasesto cash flows provided by operating activities and cash flows used forinvesting activities in equal amounts. Accordingly, the Company restated theCondensed Consolidated Financial Statements for such prior periods, includingthe three and nine months ended October 30, 2004. These landlordcontributions are amortized over the life of the lease as a reduction to rentexpense.

The impact of the restatement on the CondensedConsolidated Balance Sheet as of October 30, 2004 was an increase in thetotal property, plant and equipment account of $20,329 and an increase in thedeferred rent liability account of $22,659. The restatement also had acumulative decrease on retained earnings of $1,421 and an increase to deferredincome taxes of $909 as of October 30, 2004. The restatement did not haveany impact on our previously reported sales or comparable store sales or on ourcompliance with any financial covenant under our line of credit facility orother debt instruments. For the three and nine months ended October 30,2004, the impact of the restatement was a decrease in reported net income of$212 and $373, respectively, and a decrease in reported diluted earnings pershare of $0.02 for each period.

9

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The following is a summaryof the significant effects of the restatement on the Company’s CondensedConsolidated Statements of Income, Condensed Consolidated Balance Sheets andCondensed Consolidated Statements of Cash Flows for the three and nine months endedOctober 30, 2004.

**Condensed ConsolidatedStatements of Income**

| ** **                               | ** ** | **Three Months EndedOctober 30, 2004** | ** ** | **Nine Months EndedOctober 30, 2004** | ** ** |
|------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                               | ** ** | **As Reported  Previously**                           | ** ** | **Adjustments**                                           | ** ** | **As Restated** | ** ** | **As Reported  Previously** | ** ** | **Adjustments** | ** ** | **As Restated** | ** ** |
| **NET SALES**                            | ** ** |                                                       | **$**      | **82,634**                                                | ** ** |   |   | **$** | **—** | ** ** |   |   | **$** | **82,634** | ** ** |   |   | **$** | **244,557** |   |   |   | **$** | **—** | ** ** |   |   | **$** | **244,557** | ** ** |   |
| Cost of goods sold                       |       |                                                       | 34,094     | ** **                                                |       |   | — | ** ** |   |   | 34,094 | ** ** |   |   | 97,871 |   |   |   | — | ** ** |   |   | 97,871 | ** ** |   |
| **GROSS PROFIT**                         | ** ** |                                                       | **48,540** | ** **                                                |       |   | **—** | ** ** |   |   | **48,540** | ** ** |   |   | **146,686** |   | ** ** | ** ** | **—** | ** ** |   |   | **146,686** | ** ** |   |
| OPERATING  EXPENSES:                     | ** ** |                                                       | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |   |   |   |   |   | ** ** |   |   |   | ** ** |   |
| Sales and marketing                      |       |                                                       | 34,266     | ** **                                                |       |   | 350 | ** ** |   |   | 34,616 | ** ** |   |   | 96,928 |   |   |   | 616 | ** ** |   |   | 97,544 | ** ** |   |
| General and administrative               |       |                                                       | 8,436      | ** **                                                |       |   | — | ** ** |   |   | 8,436 | ** ** |   |   | 27,273 |   |   |   | — | ** ** |   |   | 27,273 | ** ** |   |
| Store opening costs                      |       |                                                       | 346        | ** **                                                |       |   | — | ** ** |   |   | 346 | ** ** |   |   | 846 |   |   |   | — | ** ** |   |   | 846 | ** ** |   |
| Total operating  expenses                |       |                                                       | 43,048     | ** **                                                |       |   | 350 | ** ** |   |   | 43,398 | ** ** |   |   | 125,047 |   |   |   | 616 | ** ** |   |   | 125,663 | ** ** |   |
| **OPERATING INCOME**                     | ** ** |                                                       | **5,492**  | ** **                                                |       |   | **(350** | **)** |   |   | **5,142** | ** ** |   |   | **21,639** |   | ** ** | ** ** | **(616** | **)** |   |   | **21,023** | ** ** |   |
| Interest expense, net                    |       |                                                       | 449        | ** **                                                |       |   | — | ** ** |   |   | 449 | ** ** |   |   | 1,363 |   |   |   | — | ** ** |   |   | 1,363 | ** ** |   |
| Income before provision for income taxes |       |                                                       | 5,043      | ** **                                                |       |   | (350 | ) |   |   | 4,693 | ** ** |   |   | 20,276 |   |   |   | (616 | ) |   |   | 19,660 | ** ** |   |
| Provision for income taxes               |       |                                                       | 1,629      | ** **                                                |       |   | (138 | ) |   |   | 1,491 | ** ** |   |   | 7,998 |   |   |   | (243 | ) |   |   | 7,755 | ** ** |   |
| **NET INCOME**                           | ** ** |                                                       | **$**      | **3,414**                                                 | ** ** |   |   | **$** | **(212** | **)** |   |   | **$** | **3,202** | ** ** |   |   | **$** | **12,278** |   | ** ** | ** ** | **$** | **(373** | **)** |   |   | **$** | **11,905** | ** ** |   |
| **EARNINGS PER SHARE**                   | ** ** |                                                       | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |   |   |   |   |   | ** ** |   |   |   | ** ** |   |
| **Net  Income per share:**               | ** ** |                                                       | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |   |   |   |   |   | ** ** |   |   |   | ** ** |   |
| **Basic**                                | ** ** |                                                       | **$**      | **0.25**                                                  | ** ** |   |   | **$** | **(0.01** | **)** |   |   | **$** | **0.24** | ** ** |   |   | **$** | **0.92** |   | ** ** | ** ** | **$** | **(0.03** | **)** |   |   | **$** | **0.89** | ** ** |   |
| **Diluted**                              | ** ** |                                                       | **$**      | **0.24**                                                  | ** ** |   |   | **$** | **(0.02** | **)** |   |   | **$** | **0.22** | ** ** |   |   | **$** | **0.86** |   | ** ** | ** ** | **$** | **(0.02** | **)** |   |   | **$** | **0.84** | ** ** |   |
| Weighted average shares outstanding | ** ** |                                                       | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |   |   |   |   |   | ** ** |   |   |   | ** ** |   |
| Basic                                    |       |                                                       | 13,395     | ** **                                                |       |   | — | ** ** |   |   | 13,395 | ** ** |   |   | 13,324 |   |   |   | — | ** ** |   |   | 13,324 | ** ** |   |
| Diluted                                  |       |                                                       | 14,285     | ** **                                                |       |   | — | ** ** |   |   | 14,285 | ** ** |   |   | 14,231 |   |   |   | — | ** ** |   |   | 14,231 | ** ** |   |

 

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**Condensed Consolidated BalanceSheet**

| ** **                                           | ** ** | **October 30, 2004**   | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | **As Reported  Previously** | ** ** | **Adjustments** | ** ** | **As Restated** | ** ** |
| **ASSETS**                                           |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| CURRENT  ASSETS:                                     |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                            |       |                             | $          | 1,252 |   |   |   | $ | — |   |   |   | $ | 1,252 |   |   |
| Accounts receivable, net                             |       |                             | 6,059      |   |   |   | — |   |   |   | 6,059 |   |   |
| Inventories:                                         |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Raw materials                                        |       |                             | 7,727      |   |   |   | — |   |   |   | 7,727 |   |   |
| Finished goods                                       |       |                             | 123,764    |   |   |   | — |   |   |   | 123,764 |   |   |
| Total inventories                                    |       |                             | 131,491    |   |   |   | — |   |   |   | 131,491 |   |   |
| Prepaid expenses and other current  assets      |       |                             | 15,837     |   |   |   | — |   |   |   | 15,837 |   |   |
| Deferred income taxes                                |       |                             | —     |   |   |   | — |   |   |   | — |   |   |
| Total current assets                                 |       |                             | 154,639    |   |   |   | — |   |   |   | 154,639 |   |   |
| NONCURRENT  ASSETS:                                  |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Property, plant and equipment, net                   |       |                             | 56,027     |   |   |   | 20,329 |   |   |   | 76,356 |   |   |
| Other noncurrent assets                              |       |                             | 1,043      |   |   |   | — |   |   |   | 1,043 |   |   |
| Deferred income  taxes                               |       |                             | 1,791      |   |   |   | 909 |   |   |   | 2,700 |   |   |
| Total assets                                         |       |                             | $          | 213,500 |   |   |   | $ | 21,238 |   |   |   | $ | 234,738 |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**        |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| CURRENT  LIABILITIES:                                |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                                     |       |                             | $          | 29,687 |   |   |   | $ | — |   |   |   | $ | 29,687 |   |   |
| Accrued expenses and other                           |       |                             | 32,447     |   |   |   | — |   |   |   | 32,447 |   |   |
| Current portion of long-term debt                    |       |                             | 912        |   |   |   | — |   |   |   | 912 |   |   |
| Deferred tax liability—current                  |       |                             | 2,332      |   |   |   | — |   |   |   | 2,332 |   |   |
| Total current liabilities                            |       |                             | 65,378     |   |   |   | — |   |   |   | 65,378 |   |   |
| NONCURRENT  LIABILITIES:                             |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Long-term debt, net of current portion               |       |                             | 39,773     |   |   |   | — |   |   |   | 39,773 |   |   |
| Noncurrent lease obligations                         |       |                             | 5,996      |   |   |   | 22,659 |   |   |   | 28,655 |   |   |
| Deferred tax liability—noncurrent               |       |                             | —     |   |   |   | — |   |   |   | — |   |   |
| Total liabilities                                    |       |                             | 111,147    |   |   |   | 22,659 |   |   |   | 133,806 |   |   |
| STOCKHOLDERS’  EQUITY:                          |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                         |       |                             | 124        |   |   |   | — |   |   |   | 124 |   |   |
| Additional paid-in capital                           |       |                             | 66,778     |   |   |   | — |   |   |   | 66,778 |   |   |
| Retained earnings                                    |       |                             | 40,509     |   |   |   | (1,421 | ) |   |   | 39,088 |   |   |
| Treasury stock                                       |       |                             | (5,058     | ) |   |   | — |   |   |   | (5,058 | ) |   |
| Total stockholders’ equity                      |       |                             | 102,353    |   |   |   | (1,421 | ) |   |   | 100,932 |   |   |
| Total liabilities and stockholders’ equity |       |                             | $          | 213,500 |   |   |   | $ | 21,238 |   |   |   | $ | 234,738 |   |   |

 

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**CondensedConsolidated Statement of Cash Flows**

| ** **                                                                          | ** ** | **Nine Months EndedOctober 30, 2004** | ** ** |
|-------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **As Reported  Previously**                          | ** ** | **Adjustments** | ** ** | **As  Restated** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                              | ** ** |                                                      | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Net income                                                                          |       |                                                      | $          | 12,278 | ** ** |   |   | $ | (373 | ) |   | $ | 11,905 |   |
| Adjustments to reconcile  net income to net cash used in operating activities: |       |                                                      |       | ** ** |   |   |   | ** ** |   |   |   |
| Deferred income taxes                                                               |       |                                                      | 921        | ** ** |   |   | (243 | ) |   | 678 |   |
| Depreciation and amortization                                                       |       |                                                      | 5,867      | ** ** |   |   | 1,630 | ** ** |   | 7,497 |   |
| Net (increase) decrease in  operating working capital                               |       |                                                      | (19,988    | ) |   |   | 7,820 | ** ** |   | (12,168 | ) |
| **Net cash provided by (used in) operating  activities**                            |       |                                                      | (922       | ) |   |   | 8,834 | ** ** |   | 7,912 |   |
| CASH FLOWS USED  FOR INVESTING ACTIVITIES:                                          | ** ** |                                                      | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Capital expenditures                                                                |       |                                                      | (12,947    | ) |   |   | (8,834 | ) |   | (21,781 | ) |
| Proceeds from disposal of  assets                                                   |       |                                                      | 851        | ** ** |   |   | — | ** ** |   | 851 |   |
| **Net cash used in investing  activities**                                          |       |                                                      | (12,096    | ) |   |   | (8,834 | ) |   | (20,930 | ) |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                              |       |                                                      |       | ** ** |   |   |   | ** ** |   |   |   |
| Borrowings under revolving loan agreement                                      |       |                                                      | 75,377     | ** ** |   |   | — | ** ** |   | 75,377 |   |
| Repayment of borrowings under  revolving loan agreement                             |       |                                                      | (62,374    | ) |   |   | — | ** ** |   | (62,374 | ) |
| Repayment of other long-term  debt                                                  |       |                                                      | (2,181     | ) |   |   | — | ** ** |   | (2,181 | ) |
| Net proceeds from issuance of  common stock                                         |       |                                                      | 2,573      | ** ** |   |   | — | ** ** |   | 2,573 |   |
| **Net cash provided by financing  activities**                                      |       |                                                      | 13,395     | ** ** |   |   | — | ** ** |   | 13,395 |   |
| Net increase in cash and cash  equivalents                                          |       |                                                      | 377        | ** ** |   |   | — | ** ** |   | 377 |   |
| CASH AND CASH EQUIVALENTS, beginning of period                                      |       |                                                      | 875        | ** ** |   |   | — | ** ** |   | 875 |   |
| CASH  AND CASH EQUIVALENTS, end of period                                           |       |                                                      | $          | 1,252 | ** ** |   |   | $ | — | ** ** |   | $ | 1,252 |   |

 

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**4.  **SUPPLEMENTALCASH FLOW DISCLOSURE

Thenet change in operating working capital and other components consist of thefollowing:

| ** **                                                     | ** ** | **Nine Months Ended**                    | ** ** |
|----------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                     | ** ** | **October 30, 2004**                | ** ** | **October 29, 2005** | ** ** |
| ** **                                                     | ** ** | **(As Restated,  See Note 3)** | ** ** | ** ** | ** ** |
| Increase in  accounts receivable                               |       |                                          | $          | (1,858 | ) |   |   | **$** | **(3,249** | **)** |   |
| Increase in  inventories                                       |       |                                          | (10,703    | ) |   |   | **(62,939** | **)** |   |
| (Increase)  decrease in prepaids and other assets              |       |                                          | (5,322     | ) |   |   | **1,294** | ** ** |   |
| Increase  (decrease) in accounts payable                       |       |                                          | 939        |   |   |   | **(2,502** | **)** |   |
| Increase  (decrease) in accrued expenses and other liabilities |       |                                          | (3,044     | ) |   |   | **310** | ** ** |   |
| Increase in  noncurrent lease liabilities                      |       |                                          | 7,820      |   |   |   | **2,450** | ** ** |   |
| Net increase in operating working capital and other            |       |                                          | $          | (12,168 | ) |   |   | **$** | **(64,636** | **)** |   |

 

**Interest and Income Taxes Paid:**

| ** **                                       | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **October 30, 2004**  | ** ** | **October 29, 2005** | ** ** |
| Interest and income  taxes paid were as follows: |       |                            |       |   |   |   |   |   |   |
| Interest paid                                    |       |                            | $          | 1,440 |   | ** ** | ** ** | **$** | **1,012** |   |   |
| Income taxes paid                                |       |                            | $          | 12,896 |   | ** ** | ** ** | **$** | **4,609** |   |   |

 

**5.**   EARNINGSPER SHARE

Basicnet income per share is calculated by dividing net income by the weightedaverage number of common shares outstanding for the period. Diluted net incomeper share is calculated by dividing net income by the diluted weighted averagecommon shares, which reflect the potential dilution of stock options. Theweighted average shares used to calculate basic and diluted earnings per shareare as follows:

| ** **                                       | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **October 30, 2004**   | ** ** | **October 29, 2005**  | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| Weighted average  shares outstanding for basic   |       |                             | 13,395     | ** **                      |       |   | **13,681** |   |   |   | 13,324 | ** ** |   |   | **13,573** | ** ** |   |
| Dilutive effect  of stock options           |       |                             | 890        | ** **                      |       |   | **779** |   |   |   | 907 | ** ** |   |   | **821** | ** ** |   |
| Weighted average  shares outstanding for diluted |       |                             | 14,285     | ** **                      |       |   | **14,460** |   |   |   | 14,231 | ** ** |   |   | **14,394** | ** ** |   |

 

The Company uses thetreasury method for calculating the dilutive effect of stock options. Therewere no anti-dilutive options as of October 30, 2004 and October 29,2005.

**6.**   SEGMENT REPORTING

The Company has two reportable segments: stores anddirect marketing. The stores segment includes all Company owned storesexcluding factory stores. The direct marketing segment includes all salesthrough catalog and Internet. Each segment offers a similar mix of men’sclothing to the retail customer. In addition, the stores segment providescomplete alterations, while the direct marketing segment only provides certainalterations.

The accounting policies of the segments are the sameas those described in the Company’s Annual Report on Form 10-K forthe fiscal year ended January 29, 2005. The Company evaluates performanceof 

13

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the segments based on “fourwall” contribution which excludes any allocation of “management company” costs,distribution center costs (except order fulfillment costs which are allocatedto direct marketing), interest and income taxes. The Company’s segments arestrategic business units that offer similar products to the retail customer bytwo distinctively different methods. In the stores segment, the typicalcustomer travels to the store and purchases men’s clothing and/or alterationsand takes their purchases with them. The direct marketing customer receives acatalog in his or her home and/or office and/or visits our web page viathe Internet and places an order by phone, mail, fax or online. The merchandiseis then shipped to the customer.

Segment data is presentedin the following table:

**Threemonths ended October 29, 2005**

| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other**  | ** ** | **Total**   | ** ** |
|--------------------------------|------------|------------|------------|---------------------------|------------|------------|------------|-------------|------------|
| Net sales(a)                   | ** ** | **$**      | **92,836** | ** **                |       | **$**      | **9,662**  | ** **  |       | **$** | **3,141** | ** ** | **$** | **105,639** | ** ** |
| Depreciation and  amortization | ** ** | **2,590**  | ** ** |                      | **17**     | ** ** |       | **568**     | ** ** | **3,175** | ** ** |
| Operating income  (loss)(b)    | ** ** | **17,164** | ** ** |                      | **3,221**  | ** ** |       | **(11,839** | **)**      | **8,546** | ** ** |
| Capital expenditures(d)        | ** ** | **5,730**  | ** ** |                      | **4**      | ** ** |       | **442**     | ** ** | **6,176** | ** ** |
|                                |            |            |            |                           |            |            |            |             |            |  |  |  |  |  |  |

 

**Threemonths ended October 30, 2004 (as restated)**

| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|---------------------------|------------|-----------|------------|-----------|------------|
| Net sales(a)                   |       | $          | 72,011     |                      |       | $         | 7,883      |      |       | $ | 2,740 |   | $ | 82,634 |   |
| Depreciation and  amortization |       | 2,271      |       |                      | 17         |      |       | 305       |       | 2,593 |   |
| Operating income  (loss)(b)    |       | 11,841     |       |                      | 2,216      |      |       | (8,915    | )          | 5,142 |   |
| Capital expenditures(d)        |       | 11,553     |       |                      | 5          |      |       | 819       |       | 12,377 |   |
|                                |            |            |            |                           |            |           |            |           |            |  |  |  |  |  |  |

 

**NineMonths ended October 29, 2005**

| ** **                     | ** ** | **Stores**  | ** **  | **Direct Marketing** | ** ** | **Other**  | ** ** | **Total**   | ** ** |
|--------------------------------|------------|-------------|-------------|---------------------------|------------|------------|------------|-------------|------------|
| Net sales(a)                   | ** ** | **$**       | **263,644** | ** **                |       | **$**      | **28,838** | ** **  |       | **$** | **8,320** | ** ** | **$** | **300,802** | ** ** |
| Depreciation and  amortization | ** ** | **7,822**   | ** **  |                      | **52**     | ** ** |       | **1,586**   | ** ** | **9,460** | ** ** |
| Operating income (loss)(b)     | ** ** | **53,122**  | ** **  |                      | **10,013** | ** ** |       | **(33,410** | **)**      | **29,725** | ** ** |
| Identifiable  assets(c)        | ** ** | **253,046** | ** **  |                      | **37,899** | ** ** |       | **19,100**  | ** ** | **310,045** | ** ** |
| Capital expenditures(d)        | ** ** | **16,488**  | ** **  |                      | **13**     | ** ** |       | **1,555**   | ** ** | **18,056** | ** ** |
|                                |            |             |             |                           |            |            |            |             |            |  |  |  |  |  |  |

 

**Nine Months ended October 30, 2004 (as restated)**

| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|---------------------------|------------|-----------|------------|-----------|------------|
| Net sales(a)                   |       | $          | 214,009    |                      |       | $         | 23,241     |      |       | $ | 7,307 |   | $ | 244,557 |   |
| Depreciation and  amortization |       | 6,255      |       |                      | 51         |      |       | 1,191     |       | 7,497 |   |
| Operating income  (loss)(b)    |       | 41,653     |       |                      | 7,215      |      |       | (27,845   | )          | 21,023 |   |
| Identifiable  assets(c)        |       | 196,803    |       |                      | 24,686     |      |       | 13,249    |       | 234,738 |   |
| Capital expenditures(d)        |       | 20,613     |       |                      | 18         |      |       | 1,150     |       | 21,781 |   |
|                                |            |            |            |                           |            |           |            |           |            |  |  |  |  |  |  |

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(a)           Direct Marketing net sales represent catalog and Internet sales includingcatalog orders placed in stores. Net sales from operating segments below thequantitative thresholds for determining reportable segments are attributableprimarily to factory stores, franchise stores and regional tailor shops. Noneof these operating segments have ever met any of the quantitative thresholdsfor determining reportable segments and are included in “Other.”

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(b)          Operating income for each of the Stores and Direct Marketing segmentsrepresents profit before allocations of overhead from the corporate office andthe distribution center (which are included in the “Other” segment), interestand income taxes. Total Operating income represents profit before interest andincome taxes.

(c)           Identifiable assets include cash and cash equivalents, accountsreceivable, inventories, prepaid expenses and other current assets andproperty, plant and equipment residing in or related to the reportable segment.Assets which have not been assigned to one of the reportable segments areincluded in Other and are primarily cash and cash equivalents, property, plantand equipment associated with the corporate office and distribution center, deferredtax assets and inventories.

(d)          Capital expenditures include cash paid forproperty, plant and equipment for the reportable segment.

**7.**   COMMON STOCKDIVIDENDS

On January 13, 2004,the Company’s Board of Directors declared a 50% common stock dividend payableon February 18, 2004 to stockholders of record as of January 30, 2004.On June 8, 2004, the Company’s Board of Directors declared a 25% commonstock dividend payable on August 18, 2004 to stockholders of record as of July 30,2004. Unless otherwise indicated, all historical weighted average share and pershare amounts and all references to the number of common shares elsewhere inthe consolidated financial statements, and notes thereto, have been restated toreflect the two stock dividends.

**8.**   COMMITMENTS ANDCONTINGENCIES

From time to time, legal matters in which the Companymay be named as a defendant arise in the normal course of the Company’sbusiness activities. The resolution of these legal matters against the Companycannot be accurately predicted. The Company does not anticipate that theoutcome of such matters will have a material adverse effect on the business,net assets or financial position of the Company.

The bank that provides credit card services to theCompany has informed the Company of claims arising from the allegedly improperstorage of credit card data. The Company estimates the potential liabilityarising from such claims to be approximately $285 and accrued this amount inthe second quarter of fiscal 2005 in accordance with SFAS No. 5. TheCompany does not anticipate that any further claims in this matter would have amaterial adverse effect on the business, net assets or financial position ofthe Company.

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**Item 2.**                        Management’s Discussion andAnalysis of Financial Condition and Results of Operations

The following discussion should be read in conjunctionwith the condensed consolidated financial statements and notes thereto includedin this Form 10-Q and with the Company’s audited financialstatements and notes thereto included in its Annual Report on Form 10-Kfor the fiscal year ended January 29, 2005.

The financial information for fiscal 2004 included inthis Item 2 has been restated to reflect the correction of the Company’shistoric practices of accounting for lease transactions as discussed in theCompany’s Annual Report on Form 10-K for the fiscal year ended January 29,2005 and Note 3 to this Form 10-Q.

***Overview******—For***thethird quarter of the Company’s fiscal year ending January 28, 2006 (“fiscal2005”), the Company’s net income increased to $4.7 million compared with netincome of $3.2 million for the third quarter of the Company’s fiscal year endedJanuary 29, 2005 (“fiscal 2004”). The Company earned $0.32 per dilutedshare in the third quarter of fiscal 2005 compared with $0.22 per diluted sharein the third quarter of fiscal 2004. As such, diluted earnings per shareincreased 45% compared with the prior year period. The increased earnings wereprimarily attributable to:

·       27.8%increase in the fiscal third quarter net sales, with increases in both thestore and direct marketing (catalog and Internet) segments;

·       Over140 basis point increase in gross profit margins; and

·       Theopening of 56 new stores since the end of the third quarter of fiscal 2004.

Management believes that the Company’s chain of retailstores can grow to approximately 500 stores from the current base of over 300stores. The Company plans to open approximately 53 to 57 stores in fiscal 2005as part of its plan to grow the chain to the 500 store level. The Companyopened 39 stores in the first three quarters of fiscal 2005 and expects to openthe remaining stores in the last quarter of the year. The store growth is partof a strategic plan the Company initiated in the year ended February 3,2001 (“fiscal 2000”). In the past five years, the Company has continued toincrease the number of stores as infrastructure and performance has improved. Assuch, there were ten new stores opened in fiscal 2000 (including two factorystores), 21 new stores in the year ended February 2, 2002 (“fiscal 2001”),25 new stores in the year ended February 1, 2003 (“fiscal 2002”), 50 newstores in the year ended January 31, 2004 (“fiscal 2003”) and 60 newstores in fiscal 2004.

Capital expenditures are expected to be approximately$33 million in fiscal 2005, primarily to fund the opening of 53 to 57 newstores, the renovation and/or relocation of several stores and theimplementation of various systems initiatives. The capital expenditures includethe cost of the construction of leasehold improvements for new stores, of whichapproximately $10 million is expected to be reimbursed through landlordcontributions.

*CommonStock Dividends.**  *OnJanuary 13, 2004, the Company’s Board of Directors declared a 50% commonstock dividend payable on February 18, 2004 to stockholders of record asof January 30, 2004. On June 8, 2004, the Company’s Board ofDirectors declared a 25% common stock dividend payable on August 18, 2004to stockholders of record as of July 30, 2004. Unless otherwise indicated,all historical weighted average share and per share amounts and all referencesto the number of common shares elsewhere in the consolidated financial statements,and notes thereto, have been restated to reflect the two stock dividends.

***Critical accountingpolicies and estimates******—******In*******preparing the Condensed Consolidated Financial Statements,a number of assumptions and estimates are made that, in the judgment ofmanagement, are proper in light of existing general economic andcompany-specific circumstances. For a detailed discussion 

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on the application of thisand other accounting policies, see Note 1 to the Consolidated FinancialStatements in the Company’s Annual Report on Form 10-K for fiscal2004.

*Inventory.*   TheCompany records inventory at the lower of cost or market (“LCM”). Cost isdetermined using the first-in, first-out method. The estimated market value isbased on assumptions for future demand and related pricing. The Company reducesthe carrying value of inventory to net realizable value where cost exceedsestimated selling price less costs of disposal.

Management’s sales assumptions are based on theCompany’s experience that most of the Company’s inventory is sold through theCompany’s primary sales channels with virtually no inventory being liquidatedthrough bulk sales to third parties. The Company’s LCM reserve estimates forinventory that have been made in the past have been very reliable as asignificant portion of its sales (approximately 67% in fiscal 2004) are classictraditional products that are on-going programs and that bear low risk ofwrite-down. These products include items such as navy and grey suits, navyblazers, white and blue button-down shirts, etc. The portion of the productsthat have seasonal or fashion elements are monitored closely to ensure thataging goals are achieved to limit the need to sell significant amounts ofproduct below cost. In addition, the Company’s strong gross profit marginsenable the Company to sell substantially all of its products at levels abovecost.

To calculate the estimated market value, the Companyperiodically performs a detailed review of all of its major inventory classesand stock-keeping units. The Company compares the on-hand units and season-to-dateunit sales (including actual selling prices) to the sales trend and estimatedprices required to sell the units in the future, which enables the Company toestimate the amount which may have to be sold below cost. Substantially allunits sold below cost are sold in the Company’s factory stores withintwenty-four months of purchase. The Company’s costs in excess of selling price,plus the cost of disposal in its factory stores, were $0.6 million for thefirst nine months of fiscal 2005 and $1.1 million in each of fiscal 2003 and2004. The inventory component of these costs is recorded in cost of goods sold,whereas the related costs of disposal are recorded as selling and marketingexpenses. If the inventory required to be sold through the factory stores orliquidated through other means varies from the estimate, the Company’s LCMreserve could change.

*AssetValuation.*   Long-lived assets, such as property,plant and equipment subject to depreciation, are periodically reviewed forimpairment to determine whether events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. Recoverability ofassets to be held and used is measured by a comparison of the carrying amountof an asset to estimated undiscounted future cash flows expected to begenerated by the asset. If the carrying amount of an asset exceeds itsestimated future cash flows, an impairment charge is recognized in the amountby which the carrying amount of the asset exceeds the fair value of the asset. Theasset valuation estimate is principally dependent on the Company’s ability togenerate profits at both the Company and store levels. These levels areprincipally driven by the sales and gross profit trends that are closelymonitored by the Company. There were no asset valuation charges recorded forthe three and nine month periods ended October 30, 2004 and October 29,2005.

*LeaseAccounting.**  *TheCompany uses a consistent lease period (generally, the initial non-cancelablelease term plus renewal options periods provided for in the lease that can bereasonably assured) when calculating depreciation of leasehold improvements andin determining straight-line rent expense and classification of its leases aseither an operating lease or a capital lease. The lease term and straight-linerent expense (inclusive of the construction period) commence on the date whenthe Company takes possession and has the right to control use of the leasedpremises. Funds received from the lessor intended to reimburse the Company forthe costs of leasehold improvements are recorded as deferred credits resultingfrom a lease incentive and amortized over the lease term as a reduction to rentexpense.

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While the Company hastaken reasonable care in preparing these estimates and making these judgments,actual results could differ from the estimates. Although no assurances can begiven, management believes any difference in the actual results from theestimates will not have a material effect upon the Company’s financial positionor results of operations.

***Results ofOperations***

Thefollowing table is derived from the Company’s Condensed Consolidated Statementsof Income and sets forth, for the periods indicated, the items included in theCondensed Consolidated Statements of Income expressed as a percentage of netsales.

| ** **                                | ** ** | **Percentage of Net Sales** | ** ** | **Percentage of Net Sales** | ** ** |
|-------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                | ** ** | **Three Months Ended**           | ** ** | **Nine Months Ended**            | ** ** |
| ** **                                | ** ** | **October 30, 2004**             | ** ** | **October 29, 2005**             | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| ** **                                | ** ** | **(As Restated)**                     | ** ** | ** **                                 | ** ** | **(As Restated)** | ** ** | ** ** | ** ** |
| Net sales                                 |       |                                       | 100.0      | %                                          |       |   | **100.0** | **%** |   |   | 100.0 | % |   |   | **100.0** | **%** |   |
| Cost of goods  sold                       |       |                                       | 41.3       |                                       |       |   | **39.9** | ** ** |   |   | 40.0 |   |   |   | **38.4** | ** ** |   |
| Gross profit                              |       |                                       | 58.7       |                                       |       |   | **60.1** | ** ** |   |   | 60.0 |   |   |   | **61.6** | ** ** |   |
| Sales and  marketing expenses             |       |                                       | 41.9       |                                       |       |   | **41.0** | ** ** |   |   | 39.9 |   |   |   | **41.1** | ** ** |   |
| General and  administrative expenses      |       |                                       | 10.2       |                                       |       |   | **10.9** | ** ** |   |   | 11.2 |   |   |   | **10.5** | ** ** |   |
| Store opening  costs                      |       |                                       | 0.4        |                                       |       |   | **0.2** | ** ** |   |   | 0.3 |   |   |   | **0.1** | ** ** |   |
| Operating income                          |       |                                       | 6.2        |                                       |       |   | **8.1** | ** ** |   |   | 8.6 |   |   |   | **9.9** | ** ** |   |
| Interest expense,  net                    |       |                                       | 0.5        |                                       |       |   | **0.6** | ** ** |   |   | 0.6 |   |   |   | **0.4** | ** ** |   |
| Income before  provision for income taxes |       |                                       | 5.7        |                                       |       |   | **7.5** | ** ** |   |   | 8.0 |   |   |   | **9.4** | ** ** |   |
| Provision for  income taxes               |       |                                       | 1.8        |                                       |       |   | **3.1** | ** ** |   |   | 3.2 |   |   |   | **3.9** | ** ** |   |
| Net income                                |       |                                       | 3.9        |                                       |       |   | **4.4** | ** ** |   |   | 4.9 |   |   |   | **5.6** | ** ** |   |

 

***Net Sales******—******Net*******sales increased 27.8% to $105.6 million in the thirdquarter of fiscal 2005 compared with $82.6 million in the third quarter offiscal 2004. Net sales for the first nine months of fiscal 2005 increased 23.0%to $300.8 million, compared with $244.6 million in the first nine months offiscal 2004. The sales increase was primarily related to increases in storesales (including new stores as shown below) and in direct marketing sales. Comparablestore sales increased 14.1% and 7.7% in the third quarter and first nine monthsof fiscal 2005, respectively, as compared to the same respective periods offiscal 2004. During the third quarter and first nine months of fiscal 2005,sportswear led all major product categories in comparable store sales increasesas compared to the same periods in fiscal 2004. In addition, all other majorproduct categories generated comparable store sales increases over the sameperiods in fiscal 2004.

In comparable stores, traffic (as measured bytransactions) and items per transaction increased in the third quarter offiscal 2005, while average dollars per transaction increased slightly ascompared with the same prior year period. These trends were driven primarily byaggressive promotional activity that was set in place for September 2005to offset the potential negative impact of hurricanes that affected the countryduring that month. As of the start of fiscal 2005, comparable store salesinclude merchandise sales generated in all stores that have been open for atleast thirteen full months.

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Thefollowing table summarizes store opening and closing activity during therespective fiscal periods.

| ** **                                       | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **October 30, 2004**   | ** ** | **October 29, 2005**  | ** ** | **October 30, 2004** | ** ** | **October 29, 2005** | ** ** |
| ** **                                       | ** ** | ** **                       | ** ** | **Square**                      | ** ** | ** ** | ** ** | **Square** | ** ** | ** ** | ** ** | **Square** | ** ** | ** ** | ** ** | **Square** | ** ** |
| ** **                                       | ** ** | **Stores**                       | ** ** | **Feet***                       | ** ** | **Stores** | ** ** | **Feet*** | ** ** | **Stores** | ** ** | **Feet*** | ** ** | **Stores** | ** ** | **Feet*** | ** ** |
| Stores open at  the beginning of the period |       |                             | 229        |                            |       |   | 1,139 | ** ** |   |   | **282** | ** ** |   |   | **1,364** |   |   |   | 210 |   |   |   | 1,062 | ** ** |   |   | **269** | ** ** |   |   | **1,318** | ** ** |   |
| Stores opened                                    |       |                             | 23         |                            |       |   | 98 | ** ** |   |   | **25** | ** ** |   |   | **96** |   |   |   | 43 |   |   |   | 180 | ** ** |   |   | **39** | ** ** |   |   | **150** | ** ** |   |
| Stores closed                                    |       |                             | —     |                            |       |   | — | ** ** |   |   | **—** | ** ** |   |   | **—** |   |   |   | (1 | ) |   |   | (5 | ) |   |   | **(1** | **)** |   |   | **(8** | **)** |   |
| Stores open at  the end of the period            |       |                             | 252        |                            |       |   | 1,237 | ** ** |   |   | **307** | ** ** |   |   | **1,460** |   |   |   | 252 |   |   |   | 1,237 | ** ** |   |   | **307** | ** ** |   |   | **1,460** | ** ** |   |

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*                    Squarefeet isgross square feet presented in thousands and excludes franchise stores

***Gross Profit******—******Gross*******profit (net sales less cost of goods sold) represented60.1% of net sales in the third quarter of fiscal 2005 compared with 58.7% ofnet sales in the third quarter of fiscal 2004. For the first nine months offiscal 2005, gross profit represented 61.6% of net sales compared with 60.0%for the same period of fiscal 2004. The increased gross profit percentage isprimarily due to the continued improvement in sourcing of merchandise, thusreducing the cost of items purchased, and increases in retail prices. Grossprofit margins increased in substantially all major product categories.

***Sales and MarketingExpenses******—******Sales*******and marketing expenses consist primarily of a) full-linestore, factory store and direct marketing, occupancy, payroll, selling andother variable costs and b) total Company advertising, display and marketingexpenses. These expenses increased by $8.7 million and $26.1 million in thethird quarter and first nine months of fiscal 2005, respectively, as comparedto the same respective periods of fiscal 2004. The increase in sales andmarketing expenses relates in part to higher aggregate expenditures relating tothe 60 new stores opened in fiscal 2004, which together with the expendituresrelating to the 38 (net) stores opened throughout the first nine months offiscal 2005, was $6.4 million and $18.7 million higher in the third quarter andnine months ended October 29, 2005, respectively. Sales and marketingexpenses for stores that were open prior to fiscal 2004 were higher by $1.9million and $5.7 million in the third quarter and nine months ended October 29,2005, respectively, than in the same periods in fiscal 2004, primarily as aresult of higher sales commissions on higher sales and increased occupancy andadvertising costs. In addition, direct marketing sales and marketing expensesincreased $0.4 million and $1.6 million, respectively, in the three and ninemonths ended October 29, 2005, as compared to the same respective periodsof fiscal 2004. These expense increases related to direct marketing resultedprimarily from increased Internet sales commissions and other variable costsrelated to higher sales and higher catalog circulation.

The Company expects sales and marketing expenses toincrease in the fourth quarter of fiscal 2005 as compared with the same periodof fiscal 2004, primarily as a result of a) opening approximately 53 to 57 newstores in fiscal year 2005, b) higher aggregate expenditures relating to the 60new stores opened in fiscal 2004, and c) an increase in planned advertisingexpenditures.

***General andAdministrative Expenses******—******General***andadministrative expenses (“G&A”), which consist primarily of corporatepayroll and overhead costs and distribution center costs, increased $3.0million and $4.2 million in the third quarter and first nine months of fiscal2005, respectively, as compared to the same respective periods of fiscal 2004. Theincreases were due to higher payroll costs, including incentive compensation,distribution center occupancy costs and other expenses related to businessexpansion. Continued growth in the stores and the direct marketing segments mayresult in further increases in G&A expenses.

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***Store Opening Costs******—******Store*** openingcosts, which include the initial promotional advertising costs as well as otherstart-up costs such as travel for recruitment, training, and setup of newstores, decreased $0.1 million to $0.2 million in the third quarter offiscal 2005 from $0.3 million for the same period of fiscal 2004. For the firstnine months of fiscal 2005, store opening costs decreased $0.4 million from$0.8 million in the prior fiscal year. These reductions were the result offewer new stores opening and planned reductions of advertising for new storesin each of the third quarter and first nine months of fiscal 2005, as comparedto the same periods in fiscal 2004.

***Interest Expense,net******—******Interest***expense,net, increased $0.2 million in the third quarter of fiscal 2005 and decreased$0.1 million in the first nine months of fiscal 2005, respectively, as comparedto the same respective periods of fiscal 2004. The increase in the thirdquarter was a result of a higher average interest rate and larger averagebalances outstanding under the Company’s bank credit facility than the sameprior year quarter. The decrease in the first nine months of fiscal 2005 wasdue primarily to lower average balances outstanding under the Company’s bankcredit facility, partially offset by higher interest rates. Average revolverloan borrowings increased $2.8 million to $30.5 million in the third quarter offiscal 2005 compared with $27.7 for the same period of fiscal 2004. Averagerevolver loan borrowings for the first nine months of fiscal 2005 decreased$7.8 million to $19.3 million as compared with $27.1 million in the prior yearperiod.

***Income Taxes******—******The***effectiveincome tax rate for the nine months ended October 29, 2005 was 41.2%compared with 39.4% for the nine months ended October 30, 2004. The incometax rate for the first nine months of fiscal 2004 was lower due to a reductionof previously recorded income tax liabilities settled or otherwise resolved inthe third quarter of fiscal 2004 of approximately $0.4 million. During thefirst quarter of 2005, the Company adopted the retail method of accounting forinventory for tax purposes, which resulted in an increase in deferred taxes of$8.3 million. The impact on the Company’s tax position was to decrease taxescurrently payable and increase deferred tax liabilities.

***Liquidity andCapital Resources******—******The***Companyfunds its operations and meets its capital expenditure requirements primarilythrough cash generated from operations and borrowings under its bank creditagreement (the “Credit Agreement”). At October 29, 2005, the Company had$1.5 million in cash and cash equivalents and net accounts receivable of $8.0million, which represents an increase of $3.2 million from its net accountsreceivable balance at January 29, 2005. Net accounts receivable primarilyrepresents funds due from credit card companies for sales occurring nearmonth-end and receivables from franchisees. The Company’s Credit Agreementprovides for a revolving loan whose limit is determined by a formula based onthe Company’s inventories and accounts receivable. The Credit Agreement allowsthe Company to borrow a maximum revolving amount under the facility up to$100 million. In addition, the Company has the option to increase theamount which may be borrowed to $125 million if requested prior to April 30,2006, if needed and if supported by its borrowing base formula under the CreditAgreement. The Credit Agreement also includes a) financial covenantsconcerning minimum earnings before interest, taxes, depreciation andamortization (“EBITDA”), b) limitations on capital expenditures andadditional indebtedness and c) a restriction on the payment of cashdividends to shareholders. EBITDA, as defined by the Credit Agreement, may notbe less than $27.5 million and the bank may set a higher minimum EBITDA forfuture periods based on 85% of the Company’s performance projections. The financialcovenants are triggered only if the Company’s availability in excess ofoutstanding borrowings is less than $7.5 million. The Company does notbelieve its availability in excess of borrowings will be less than$7.5 million during fiscal 2005. As of October 29, 2005, the Companywas in compliance with all loan covenants. Interest rates under the CreditAgreement are either at the prime rate or at LIBOR plus 1.25%, which arevariable rates and are the same basis as the rates that existed for the sameperiod of fiscal 2004. The agreement also includes provisions for a seasonalover-advance.

The Company also has $5.8 million of term debtoutstanding as of October 29, 2005.

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The Company’s availability in excess of outstandingborrowings, as supported by the existing borrowing base under its CreditAgreement, was $55.1 million at October 29, 2005 compared with$74.6 million at January 29, 2005.

Thefollowing table summarizes the Company’s sources and uses of funds as reflectedin the Condensed Consolidated Statements of Cash Flows (in thousands):

| ** **                                 | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|
| ** **                                 | ** ** | **October 30, 2004**  | ** ** | **October 29, 2005** | ** ** |
| Cash provided by  (used in):               | ** ** |                            | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Operating activities                       |       |                            | $          | 7,912 | ** ** |   |   | **$** | **(27,003** | **)** |   |
| Investing activities                       |       |                            | (20,930    | ) |   |   | **(18,056** | **)** |   |
| Financing activities                       |       |                            | 13,395     | ** ** |   |   | **45,166** | ** ** |   |
| Net increase in cash and  cash equivalents |       |                            | $          | 377 | ** ** |   |   | **$** | **107** | ** ** |   |

 

Cash used in the Company’s operating activities in thefirst nine months of fiscal 2005 increased primarily due to significantlyhigher purchases of inventory compared with the same period of fiscal 2004. Cashused for purchases of inventory was $62.9 million for the first nine months offiscal 2005 compared with $10.7 million for the first nine months of fiscal2004. Inventories have increased as a result of a) 22% increase in the numberof stores and b) expansion of core items for the fall season. This cash usedfor the purchase of inventory was partially offset by the deferral of $7.7million of cash tax payments resulting from the change to the retail method ofaccounting for inventory for tax purposes. Cash used in investing activities inthe first nine months of fiscal 2005 relates primarily to capital expendituresfor building out new stores. Cash provided by financing activities for thefirst nine months of fiscal 2005 relates primarily to a net $44.5 millionborrowed under the Company’s revolving loan under the Credit Agreement and $1.3million from the proceeds of the exercise of stock options. Also, the Companyused $0.7 million of cash for the repayment of long-term debt. Proceeds fromfinancing activities were primarily used to fund new store openings and thepurchase of additional inventory.

For the 2005 fiscal year, the Company expects to makeapproximately $33 million of capital expenditures, primarily to fund theopening of approximately 53 to 57 new stores, the renovation and/or relocationof several stores and the implementation of various systems initiatives, ofwhich a portion will be paid in fiscal 2006. The Company paid for approximately$18.1 million of capital expenditures in the first nine months of fiscal 2005. Managementbelieves that the Company’s cash from operations and availability under itsCredit Agreement will be sufficient to fund its planned capital expendituresand operating expenses through fiscal 2006. The capital expenditures includethe cost of the construction of leasehold improvements for new stores, of whichapproximately $10 million is expected to be reimbursed through landlordcontributions. These amounts are typically paid by the landlords after thecompletion of construction by the Company and the receipt of appropriate lienwaivers from contractors. For the stores opened in fiscal 2004, the Companynegotiated approximately $12.6 million of landlord contributions, of whichapproximately $11.6 million have been collected, including approximately $6.5million which was collected in the first nine months of fiscal 2005. Theremaining $1.0 million is expected to be collected in last quarter of fiscal2005. For the stores opened in the first nine months of fiscal 2005, theCompany negotiated approximately $6.8 million of landlord contributions, ofwhich $2.7 million was received in the first nine months of fiscal 2005 and theremainder is expected to be received within the next twelve months.

*Off-Balance SheetArrangements—**The* Company has no off-balancesheet arrangements other than its operating lease agreements and letters ofcredit outstanding under its bank credit facility as discussed below.

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***Disclosures about ContractualObligations and Commercial Commitments***

The Company’s principal commitments are non-cancelable operating leasesin connection with its retail stores, certain tailoring spaces and equipment.Under the terms of certain of these leases, the Company is required to pay abase annual rent plus a contingent amount based on sales. In addition, many ofthese leases include scheduled rent increases.

The following table reflects a summary of the Company’scontractual cash obligations and other commercial commitments for fiscal 2005,including amounts paid in the first three quarters of fiscal 2005.

| ** **                      | ** ** | **Payments Due by Fiscal Year** | ** ** |
|---------------------------------|------------|-----------------------------------------------------|------------|
| ** **                      | ** ** | **(in thousands)**                             | ** ** |
| ** **                      | ** ** | **2005**                                            | ** ** | **2006-2008** | ** ** | **2009-2010** | ** ** | **Beyond  2010** | ** ** | **Total** | ** ** |
| Long-term debt                  |       | $                                                   | 917        |   | $ | 47,695 |   |   | $ | 1,317 |   |   | $ | 1,475 |   | $ | 51,404 |   |
| Operating  leases(a)            |       | 33,479                                              |       | 105,863 |   |   | 59,597 |   |   | 91,635 |   | 290,574 |   |
| Stand-by  Letter-of-credit(b)   |       | 400                                                 |       | — |   |   | — |   |   | — |   | 400 |   |
| Purchase  Commitment(c)         |       | 361                                                 |       | — |   |   | — |   |   | — |   | 361 |   |
| Scheduled  Interest Payments(d) |       | 2,015                                               |       | 6,931 |   |   | 333 |   |   | 134 |   | 9,413 |   |
| License Agreement               |       | 150                                                 |       | 495 |   |   | 330 |   |   | — |   | 975 |   |
|                                 |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           Includes various lease agreements for stores to be opened and equipmentplaced in service subsequent to October 29, 2005. See Note 10 to the Company’s Annual Report on Form 10-Kfor the fiscal year ended January 29, 2005.

(b)          To secure the payment of rent at one leased location included in “OperatingLeases” above and is renewable each year through the end of the lease term(2009).

(c)           The Company generally does not make unconditional, noncancelable purchasecommitments. In fiscal 2003, the Company entered into an agreement with one rawmaterial supplier to purchase a specified quantity of fabric into fiscal 2005.

(d)          These scheduled interest payments consist ofinterest payments on the outstanding long-term debt. For borrowings under theCompany’s revolving loan agreement, projected interest is calculated based onthe outstanding principal balance as of October 29, 2005. For borrowings under the Company’svariable rate debt instruments (including the revolving loan agreement),interest is calculated based on the interest rates in effect on October 29, 2005. The principal balance of the revolver andall variable interest rates may, and probably will, vary in future periods.

***Additional Information***

The bank that provides credit card services to theCompany has informed the Company of claims arising from the allegedly improperstorage of credit card data. The Company estimates the potential liabilityarising from such claims to be approximately $285,000 and has accrued thisamount in the second quarter of fiscal 2005 in accordance with SFAS No. 5.The Company does not anticipate that any further claims in this matter wouldhave a material adverse effect on the business, net assets or financialposition of the Company.

TheCompany’s statements concerning future operations contained herein areforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Actual results may differ materially from thoseforecasted due to a variety of factors outside of the Company’s control thatcan affect the Company’s operating results, liquidity and financial condition. Suchfactors include risks associated with economic, weather, public health andother factors affecting consumer spending, the ability of the Company tofinance its expansion plans, the mix and pricing of goods sold, the marketprice of key raw materials such as wool and cotton, availability of lease sitesfor new stores, the ability to source product 

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from its global supplier base and other competitivefactors. Other factors and risks that may affect our business or futurefinancial results are detailed in our filings with the Securities and ExchangeCommission, including the Company’s Annual Report on Form 10-K forthe year ended January 29, 2005. These cautionary statements qualify allof the forward-looking statements the Company makes herein. The Company cannotassure you that the results or developments anticipated by the Company will berealized or, even if substantially realized, that those results or developmentswill result in the expected consequences for the Company or affect the Company,its business or its operations in the way the Company expects. The Companycautions you not to place undue reliance on these forward-looking statements,which speak only as of their respective dates, and assumes no obligation toupdate any of the forward-looking statements. These risks should be carefullyreviewed before making any investment decision.

**Item 3.**                        Quantitativeand Qualitative Disclosures about Market Risk

At October 29,2005, the Company had no derivative financial instruments. In addition, theCompany does not believe it is materially at risk for changes in marketinterest rates or foreign currency fluctuations. The Company’s interest onborrowings under its Credit Agreement is at a variable rate based on the primerate or a spread over the LIBOR.

**Item 4.**                        Controlsand Procedures

*Limitationson Controls and Procedures.**  *Becauseof their inherent limitations, disclosure controls and procedures and internalcontrol over financial reporting (collectively, “Control Systems”) may notprevent or detect all failures or misstatements of the type sought to beavoided by Control Systems. Also, projections of any evaluation of theeffectiveness of the Company’s Control Systems to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate. Management, including the Company’s Chief Executive Officer (the “CEO”)and Chief Financial Officer (the “CFO”), does not expect that the Company’sControl Systems will prevent all error or all fraud. A Control System, nomatter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the Control System are met. Further,the design of a Control System must reflect the fact that there are resourceconstraints, and the benefits of Control Systems must be considered relative totheir costs. Because of the inherent limitations in all Control Systems, noevaluation can provide absolute assurance that all control issues and instancesof fraud, if any, within the Company have been detected. The following reportby management, including the CEO and CFO, on the effectiveness of the Company’sdisclosure controls and procedures expresses only reasonable assurance of theconclusions reached.

*DisclosureControls and Procedures**  *The Company maintains disclosure controls andprocedures that are designed to ensure that information required to bedisclosed by the Company in the reports that it files or submits under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto management, including the CEO and CFO, as appropriate, to allow timelydecisions regarding required disclosure.

Management has evaluated, with the participation ofthe CEO and CFO, the effectiveness of the Company’s disclosure controls andprocedures as of October 29, 2005. Based on that evaluation, the CEO andCFO have concluded that the Company’s disclosure controls and procedures wereeffective as of October 29, 2005.

There have been no changes in the Company’s internalcontrol over financial reporting that occurred during the fiscal quartercovered by this report that have materially affected, or are reasonable likelyto materially affect, the Company’s internal control over financial reporting.

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**PART II.**   OTHERINFORMATION

**Item 1.**                        LegalProceedings

From time to time, legalmatters in which the Company may be named as a defendant arise in the normalcourse of the Company’s business activities. Although the outcome of theselawsuits or other proceedings against the Company cannot be accuratelypredicted, the Company does not expect that any such liability will have amaterial adverse effect on the business, net assets or financial position ofthe Company.

**Item 6.**                        Exhibits

Exhibits

| 31.1 |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a) or 15d-14(a).                                                                   |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a).                                                                   |
| 32.1 |   | Certification by Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 |   | Certification by Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

| Date: December 5, 2005 |   | JOS. A. BANK  CLOTHIERS, INC.                                          |
|-----------------------------|--------|-----------------------------------------------------------------------------|
|                        |   | (Registrant)                                                                |
|                        |   | /s/ DAVID E. ULLMAN                                                         |
|                        |   | David E. Ullman                                                             |
|                        |   | *Chief Financial Officer*                                                   |
|                        |   | *(Principal Financial and Accounting Officer and  Duly Authorized Officer)* |

 

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**Exhibit Index**

Exhibits

| 31.1 |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a) or 15d-14(a).                                                                   |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a).                                                                   |
| 32.1 |   | Certification by Chief Executive  Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 |   | Certification by Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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