**United States Securities andExchange Commission**

**Washington,DC 20549**

 

**FORM 10-Q**

 
| **ý** | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**             |
|------------|----------------------------------------------------------------------------------------------------------|
|       |                                                                                                     |
|       | **For the quarterly period ended July 30,  2005.**                                                  |
|       |                                                                                                     |
| **or**     |
|       |                                                                                                     |
| o          | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934** |
|       |                                                                                                     |
|       | **Commission File  Number     0-23874**                                         |

 

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

(Exact name of registrant asspecified 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) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or if such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 

Yes ý   No o

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange ActRule 12b-2)

 

Yes ý   No o

 

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2)

 

Yes o   No ý

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date:

 
| **Class**                    | ** ** | **Outstanding  as of September 1, 2005** |
|------------------------------|------------|-----------------------------------------------|
|                         |       |                                          |
| Common Stock, $.01 par value |       | 13,645,296                                    |

 

 

----

 

Jos. A. Bank Clothiers, Inc.

 

Index

 
| Part I.  | Financial Information                                                                            |                                                                                        |
|---------------|--------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|          |                                                                                             |                                                                                        |   |
|          | Item 1.                                                                                          | Condensed Consolidated (unaudited) Financial Statements                                     |   |
|          |                                                                                             |                                                                                        |   |
|          | Condensed Consolidated Statements of Income  – Three and Six Months ended                   |                                                                                        |
|          |                                                                                             | July 31, 2004 (as restated) and July 30, 2005                                     |   |
|          |                                                                                             |                                                                                        |   |
|          | Condensed Consolidated Balance Sheets – as  of January 29, 2005 and July 30, 2005 |                                                                                        |
|          |                                                                                             |                                                                                        |   |
|          | Condensed Consolidated Statements of Cash  Flows – Six Months ended                         |                                                                                        |
|          |                                                                                             | July 31, 2004 (as restated) and July 30, 2005                                     |   |
|          |                                                                                             |                                                                                        |   |
|          | Notes to Condensed Consolidated Financial  Statements                                            |                                                                                        |
|          |                                                                                             |                                                                                        |   |
|          | Item 2.                                                                                          | Management’s Discussion and Analysis of Results of Operations and  Financial Condition |   |
|          |                                                                                             |                                                                                        |   |
|          | Item 3.                                                                                          | Quantitative and Qualitative Disclosures about Market Risk                                  |   |
|          |                                                                                             |                                                                                        |   |
|          | Item 4.                                                                                          | Controls and Procedures                                                                     |   |
|          |                                                                                             |                                                                                        |   |
| Part II. | Other Information                                                                                |                                                                                        |
|          |                                                                                             |                                                                                        |   |
|          | Item  1.                                                                                         | Legal  Proceedings                                                                          |   |
|          |                                                                                             |                                                                                        |   |
|          | Item 4.                                                                                          | Submission of Matters to a Vote of Security Holders                                         |   |
|          |                                                                                             |                                                                                        |   |
|          | Item 6.                                                                                          | Exhibits                                                                                    |   |
|          |                                                                                             |                                                                                        |   |
| Signature     |                                                                                             |

 

2

----

 

**PART I.****                 FINANCIALINFORMATION**

 

**Item 1.****                   Condensed ConsolidatedFinancial Statements**

 

**JOS. A.BANK CLOTHIERS, INC. AND SUBSIDIARIES**

**Condensed Consolidated Statements of Income**

(In thousands except per sharedata)

(Unaudited)

 
| ** **                                | ** ** | **Three Months Ended**         | ** ** | **Six Months Ended**   | ** ** |
|-------------------------------------------|------------|--------------------------------|------------|------------------------|------------|
| ** **                                | ** ** | **July 31, 2004**         | ** ** | **July 30, 2005** | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** |
| ** **                                | ** ** | **(As Restated, See  Note 3)** | ** ** | ** **             | ** ** | **(As Restated, See  Note 3)** | ** ** | ** ** | ** ** |
|                                      |       |                           |       |                   |       |   |   |   |   |
| Net sales                                 | ** ** | $                              | 81,994     | ** **             | **$**      | **98,588** | ** ** | $ | 161,923 | ** ** | **$** | **195,163** | ** ** |
| Cost of  goods sold                       |       | 32,883                         | ** ** | **37,410**             |       | 63,777 | ** ** | **73,372** | ** ** |
| Gross Profit                              |       | 49,111                         | ** ** | **61,178**             |       | 98,146 | ** ** | **121,791** | ** ** |
| ** **                                | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating  expenses:                      | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sales and marketing                       |       | 32,171                         | ** ** | **40,834**             |       | 62,928 | ** ** | **80,374** | ** ** |
| General and administrative                |       | 10,253                         | ** ** | **10,840**             |       | 18,837 | ** ** | **20,019** | ** ** |
| Store opening costs                       |       | 269                            | ** ** | **107**                |       | 500 | ** ** | **219** | ** ** |
| Total  operating expenses                 |       | 42,693                         | ** ** | **51,781**             |       | 82,265 | ** ** | **100,612** | ** ** |
| ** **                                | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating  income                         |       | 6,418                          | ** ** | **9,397**              |       | 15,881 | ** ** | **21,179** | ** ** |
| ** **                                | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest  expense, net                    |       | 433                            | ** ** | **341**                |       | 914 | ** ** | **665** | ** ** |
| ** **                                | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income  before provision for income taxes |       | 5,985                          | ** ** | **9,056**              |       | 14,967 | ** ** | **20,514** | ** ** |
| Provision  for income taxes               |       | 2,553                          | ** ** | **3,717**              |       | 6,264 | ** ** | **8,438** | ** ** |
| ** **                                | ** ** |                           | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income                                | ** ** | $                              | 3,432      | ** **             | **$**      | **5,339** | ** ** | $ | 8,703 | ** ** | **$** | **12,076** | ** ** |
| ** **                                | ** ** |                           | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Earnings per  share:                      | ** ** |                           | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income  per share:                    | ** ** |                           | ** ** | ** **             | ** ** |   | ** ** | ** ** | ** ** |
| Basic                                     | ** ** | $                              | 0.26       | ** **             | **$**      | **0.39** | ** ** | $ | 0.66 | ** ** | **$** | **0.89** | ** ** |
| Diluted                                   | ** ** | $                              | 0.24       | ** **             | **$**      | **0.37** | ** ** | $ | 0.61 | ** ** | **$** | **0.84** | ** ** |
| Weighted  average shares outstanding:     | ** ** |                           | ** ** | ** **             | ** ** |   | ** ** | ** ** | ** ** |
| Basic                                     |       | 13,330                         | ** ** | **13,568**             |       | 13,288 | ** ** | **13,520** | ** ** |
| Diluted                                   |       | 14,196                         | ** ** | **14,401**             |       | 14,204 | ** ** | **14,361** | ** ** |

 

See accompanying notes.

 

3

----

 

**JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES**

**Condensed Consolidated Balance Sheets**

(In Thousands)

(Unaudited)

 
| ** **                                       | ** ** | **January 29, 2005** | ** ** | **July 30, 2005** | ** ** |
|--------------------------------------------------|------------|---------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| **ASSETS**                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| CURRENT ASSETS:                                  | ** ** | ** **                | ** ** | ** **             | ** ** |
| Cash and cash equivalents                        |       | $                         | 1,425      | ** **             | **$**      | **1,072** | ** ** |
| Accounts receivable, net                         |       | 4,798                     | ** ** | **5,453**              | ** ** |
| Inventories:                                     | ** ** | ** **                | ** ** | ** **             | ** ** |
| Raw materials                                    |       | 8,550                     | ** ** | **11,646**             | ** ** |
| Finished goods                                   |       | 119,143                   | ** ** | **160,608**            | ** ** |
| Total inventories                                |       | 127,693                   | ** ** | **172,254**            | ** ** |
| Prepaid expenses and other  current assets       |       | 11,892                    | ** ** | **11,746**             | ** ** |
| Deferred income taxes                            |       | 893                       |       | —                 |       |
| Total current assets                             |       | 146,701                   | ** ** | **190,525**            | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| NONCURRENT ASSETS:                               | ** ** | ** **                | ** ** | ** **             | ** ** |
| Property, plant and equipment,  net              |       | 83,621                    | ** ** | **88,479**             | ** ** |
| Other noncurrent assets                          |       | 1,508                     | ** ** | **601**                | ** ** |
| Total assets                                     |       | $                         | 231,830    | ** **             | **$**      | **279,605** | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**    | ** ** | ** **                | ** ** | ** **             | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| CURRENT LIABILITIES:                             | ** ** | ** **                | ** ** | ** **             | ** ** |
| Accounts payable                                 |       | $                         | 40,133     | ** **             | **$**      | **57,694** | ** ** |
| Accrued expenses                                 |       | 37,505                    | ** ** | **32,181**             | ** ** |
| Current portion of long-term  debt               |       | 917                       | ** ** | **938**                | ** ** |
| Deferred tax liability –  current           |       | —                    | ** ** | **6,963**              | ** ** |
| Total current liabilities                        |       | 78,555                    | ** ** | **97,776**             | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| NONCURRENT LIABILITIES:                          | ** ** | ** **                | ** ** | ** **             | ** ** |
| Long-term debt, net of current  portion          |       | 5,942                     | ** ** | **18,467**             | ** ** |
| Noncurrent lease obligations                     |       | 30,318                    | ** ** | **30,902**             | ** ** |
| Deferred tax liability –  noncurrent        |       | 1,753                     | ** ** | **1,820**              | ** ** |
| Other noncurrent liabilities                     |       | 938                       | ** ** | **939**                | ** ** |
| Total liabilities                                |       | 117,506                   | ** ** | **149,904**            | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| COMMITMENTS AND CONTINGENCIES                    | ** ** | ** **                | ** ** | ** **             | ** ** |
| ** **                                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| STOCKHOLDERS’ EQUITY:                       | ** ** | ** **                | ** ** | ** **             | ** ** |
| Common stock                                     |       | 124                       | ** ** | **126**                | ** ** |
| Additional paid-in capital                       |       | 67,594                    | ** ** | **70,893**             | ** ** |
| Retained earnings                                |       | 51,664                    | ** ** | **63,740**             | ** ** |
|                                             | ** ** | 119,382                   | ** ** | **134,759**            | ** ** |
| Treasury stock                                   |       | (5,058                    | )          | **(5,058**             | **)**      |
| Total stockholders’ equity                  |       | 114,324                   | ** ** | **129,701**            | ** ** |
| Total liabilities and  stockholders’ equity | ** ** | $                         | 231,830    | ** **             | **$**      | **279,605** | ** ** |

 

See accompanying notes.

 

4

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**JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES**

**Condensed Consolidated Statements of Cash Flows**

(In Thousands)

(Unaudited)

 
| ** **                                                                                   | ** ** | **Six Months Ended**           | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                   | ** ** | **July 31, 2004**         |       | **July 30, 2005** | ** ** |
| ** **                                                                                   | ** ** | **(As Restated, See  Note 3)** |       | ** ** | ** ** |
| Cash flows  from operating activities:                                                       | ** ** | ** **                     |       | ** ** | ** ** |
| Net income                                                                                   |       | $                              | 8,703      |   | **$** | **12,076** | ** ** |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities: | ** ** | ** **                     |       | ** ** | ** ** |
| Increase (decrease) in deferred income  taxes                                                |       | (771                           | )          | **7,923** | ** ** |
| Depreciation and amortization                                                                |       | 4,904                          |       | **6,285** | ** ** |
| Loss on disposals of plant and equipment                                                     |       | —                         |       | **24** | ** ** |
| Income tax benefit from exercise of stock  options                                           |       | —                         |       | **2,702** | ** ** |
| Net increase in operating working capital                                                    |       | (5,588                         | )          | **(30,629** | **)** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| **Net cash provided by (used in) operating  activities**                                     |       | 7,248                          |       | **(1,619** | **)** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| Cash flows  from investing activities:                                                       | ** ** | ** **                     |       | ** ** | ** ** |
| Capital expenditures                                                                         |       | (9,404                         | )          | **(11,880** | **)** |
| Proceeds from disposal of assets                                                             |       | 851                            |       | — |   |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| **Net cash used in investing activities**                                                    |       | (8,553                         | )          | **(11,880** | **)** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| Cash flows  from financing activities:                                                       | ** ** | ** **                     |       | ** ** | ** ** |
| Borrowings under long-term Credit Agreement                                                  |       | 44,173                         |       | **42,379** | ** ** |
| Repayments under long-term Credit Agreement                                                  |       | (41,760                        | )          | **(29,376** | **)** |
| Repayment of other long-term debt                                                            |       | (1,906                         | )          | **(457** | **)** |
| Net proceeds from issuance of common stock                                                   |       | 707                            |       | **600** | ** ** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| **Net cash provided by financing activities**                                                |       | 1,214                          |       | **13,146** | ** ** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| Net decrease  in cash and cash equivalents                                                   |       | (91                            | )          | **(353** | **)** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| Cash and  cash equivalents – beginning of period                                        |       | 875                            |       | **1,425** | ** ** |
| ** **                                                                                   | ** ** | ** **                     |       | ** ** | ** ** |
| Cash and  cash equivalents – end of period                                              |       | $                              | 784        |   | **$** | **1,072** | ** ** |

 

See accompanying notes.

 

5

----

 

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Unaudited)

(Amounts in Thousands Except Per Share Amounts and the Number ofStores)

 

**1.****           BASISOF PRESENTATION**

 

Jos. A. Bank Clothiers, Inc. (the “Company”)is a nationwide retailer of classic men’s clothing through conventional retailstores and catalog and Internet direct marketing.  The Condensed Consolidated FinancialStatements include the accounts of the Company and its wholly-ownedsubsidiaries.  All significantintercompany balances and transactions have been eliminated in consolidation.

 

The results of operations for the interimperiods shown in this report are not necessarily indicative of results to beexpected for the fiscal year.  In theopinion of management, the information contained herein reflects alladjustments necessary to make the results of operations for the interim periodsa fair statement of the operating results for these periods.  These adjustments are of a normal recurringnature.

 

The accompanying unaudited CondensedConsolidated Financial Statements have been prepared in accordance withgenerally accepted accounting principles for interim financial information andwith the instructions to Form 10-Q and Rule 10-01 of Regulation S-Xand therefore do not include all of the information and footnotes required byaccounting principles accepted in the United States for comparable annualfinancial statements.  Certain notes andother information have been condensed or omitted from the interim financialstatements presented in this Quarterly Report on Form 10-Q.  Therefore, these financial statements shouldbe read in conjunction with the Company’s Annual Report on Form 10-K forthe fiscal year ended January 29, 2005.

 

**2.****             SIGNIFICANTACCOUNTING POLICIES**

 

**Inventories**- The Company 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 reviews quantities of inventories on hand andcompares these amounts to the expected sale of each product.  The Company records a charge to cost of goodssold for the amount required to reduce the carrying value of inventory to netrealizable value.

 

**VendorRebates**- The Company receives credits fromvendors in connection with inventory purchases. The credits are separately negotiated with each vendor.  Substantially all of these credits are earnedin one of two ways: a) as a fixed percentage of purchases when an invoice ispaid or b) as an agreed-upon amount in the month a new store is opened.  There are no contingent minimum purchaseamounts, milestones or other contingencies that are required to be met to earnthe credits.  The credits described in a)above are recorded as a reduction to inventories in the Condensed ConsolidatedBalance Sheet as the inventories are purchased and the credits described in b)above are recorded as a reduction to inventories as new stores are opened.  In both cases, the credits are recognized asreductions to cost of goods sold as the product is sold.

 

**Landlord Contributions**- Landlord contributions are accounted for as an increase to noncurrent leaseobligations and as an increase to prepaid and other current assets untilcollected.  When collected, the Companyrecords cash and reduces the prepaid and other current assets account.  The landlord contributions are presented in theCondensed Consolidated Statements of 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 amortization is recorded as a reductionto sales and marketing expense which is consistent with the classification oflease expense.

 

6

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***Stock Option Plan*** -The Company applies the intrinsic-value-based method of accounting prescribedby Accounting Principles Board (“APB”) Opinion No. 25, “Accounting forStock Issued to Employees,” and related interpretations including FinancialAccounting Standards Board Interpretation No. 44, “Accounting for CertainTransactions Involving Stock Compensation,” issued in March 2000, toaccount for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grantonly if the then-current market price of the underlying stock exceeds theexercise price. Historically, the Company has issued all options at the marketprice on the date of grant.  There was nostock-based compensation expense recognized in the Condensed ConsolidatedStatements of Income for the three and six month periods ended July 31,2004 and July 30, 2005. Statement of Financial Accounting Standards (“SFAS”) No. 123,“Accounting for Stock-Based Compensation” as amended by SFAS No. 148, “Accountingfor Stock Based Compensation-Transition and Disclosure,” established accountingand disclosure requirements using a fair-value-based method of accounting forstock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue toapply the intrinsic-value-based method of accounting described above, and hasadopted only the disclosure requirements of SFAS No. 123 as amended bySFAS 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**         | ** ** | **Six Months Ended**   | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------------|------------|
| ** **                                                                                                                   | ** ** | **July 31, 2004**         | ** ** | **July 30, 2005** | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** |
| ** **                                                                                                                   | ** ** | **(As Restated, See  Note 3)** | ** ** | ** **             | ** ** | **(As Restated, See  Note 3)** | ** ** | ** ** | ** ** |
| ** **                                                                                                                   | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income as reported                                                                                                       |       | $                              | 3,432      | ** **             | **$**      | **5,339** |   | $ | 8,703 | ** ** | **$** | **12,076** | ** ** |
| ** **                                                                                                                   | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Deduct total stock-based  employee compensation expense determined under fair-value-based method for  all awards, net of tax |       | 75                             | ** ** | **54**                 |       | 225 | ** ** | **134** | ** ** |
| ** **                                                                                                                   | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Pro forma net income                                                                                                         |       | $                              | 3,357      | ** **             | **$**      | **5,285** |   | $ | 8,478 | ** ** | **$** | **11,942** | ** ** |
| ** **                                                                                                                   | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Pro forma basic net income per common share                                                                                  |       | $                              | 0.25       | ** **             | **$**      | **0.39** |   | $ | 0.64 | ** ** | **$** | **0.88** | ** ** |
| ** **                                                                                                                   | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Pro forma diluted net income per common share                                                                                |       | $                              | 0.24       | ** **             | **$**      | **0.37** |   | $ | 0.60 | ** ** | **$** | **0.83** | ** ** |

 

The fair value of each stock option granted is estimated on the date ofgrant using the Black-Scholes option pricing model with the following weightedaverage assumption used for grants in the six months ended July 30,2005.  For the three months ended July 30,2005, and the three and six months ended July 31, 2004, there were nostock options granted.

 
| ** **                    | ** ** | **Three Months Ended**    | ** ** | **Six Months Ended**      | ** ** |
|-------------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                    | ** ** | **July 31, 2004**    | ** ** | **July 30, 2005**    | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** |
| ** **                    | ** ** | **(no options  granted)** | ** ** | **(no options  granted)** | ** ** | **(no options  granted)** | ** ** | ** ** | ** ** |
| Risk free interest rate       |       | —                    |       | —                    |       | — | ** ** | **3.88** | **%** |
| Expected volatility           |       | —                    |       | —                    |       | — | ** ** | **34** | **%** |
| Expected life                 |       | —                    |       | —                    |       | — | ** ** | **3 years** | ** ** |
| Contractual life              |       | —                    |       | —                    |       | — | ** ** | **10 years** | ** ** |
| Expected dividend yield       |       | —                    |       | —                    |       | — | ** ** | **0.0** | **%** |
| Fair value of options granted |       | —                    |       | —                    |       | — | ** ** | **$** | **32.86** | ** ** |
| # of options granted          |       | —                    |       | —                    |       | — | ** ** | **29** | ** ** |
|                               |            |                           |            |                           |            |  |  |  |  |  |

 

**New Accounting Pronouncements** – In December 2004, the FinancialAccounting Standards Board (“FASB”) issued SFAS No. 123 (Revised 2004), *Share-Based Payments* (“SFAS 123(R)”).  This Statement requires companies to expensethe estimated fair value of stock options and similar equity instruments issuedto employees.  Currently, companies arerequired to calculate the estimated fair value of these share-based paymentsand can elect to either include the estimated cost in earnings or disclose thepro forma effect in the notes to their financial statements.  As stated above, the Company has chosen todisclose the pro forma effect until SFAS 123(R) becomes effective for theCompany.  The fair value concepts werenot changed significantly in SFAS 123(R); however, in adopting this Standard,companies must choose among alternative

 

7

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valuation models and amortization assumptions.  The valuation model and amortizationassumption the Company has used continues to be available, but we have not yetcompleted 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”).  Transition options allow companies to choosewhether to adopt prospectively, restate results to the beginning of the year,or to restate prior periods with the amounts that have been included in theirfootnotes.  The Company has not yetdetermined which transition option it will select.

 

**Reclassifications**– Certain amounts in the Condensed Consolidated Financial Statements for thethree and six months ended July 31, 2004 have been reclassified in orderto conform to the July 30, 2005 presentation. 

 

**3.****           RESTATEMENTOF FINANCIAL STATEMENTS**

 

On February 7, 2005, in a letter to the Center for Public CompanyAudit Firms-American Institute of Certified Public Accountants (the “SEC Letter”),the Chief Accountant of the Securities and Exchange Commission (the “SEC”) expressedthe views of the SEC staff concerning certain operating lease accounting issuesand their application under generally accepted accounting principles (“GAAP”).  Specifically, the SEC Letter addressed theappropriate accounting for: (1) the amortization of leasehold improvementsby a lessee in an operating lease with lease renewals, (2) the pattern ofrecognition of rent when the lease term in an operating lease contains a periodwhere there are free or reduced rents (commonly referred to as “rent holidays”),and (3) incentives related to leasehold improvements provided by alandlord/lessor to a tenant/lessee in an operating lease. Like many othercompanies in the retail industry, the Company re-evaluated its lease accountingpractices in light of the SEC Letter.

 

Amortization of Leasehold Improvements– In order to comply with GAAP regarding amortization of leasehold improvementsdiscussed in the SEC Letter, the Company revised the straight-line rentschedules for thirteen of its stores to achieve consistency with thecorresponding leasehold amortization schedules.

 

Rent Holidays – Inthe SEC Letter, the SEC staff reiterated that GAAP requires rent holidays in anoperating lease to be recognized by the lessee on a straight-line basis overthe lease term (including any 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 periodduring which the store was being constructed was excluded from thestraight-line rent schedule because the construction period was notconsidered to be part of the lease term in accordance with the lease. Based onour re-evaluation, the Company concluded that the construction period should beincluded in the straight-line rent schedule.

 

As a result of the correction to its rent schedules, the Companyrestated the Condensed Consolidated Financial Statements for periods prior tofiscal 2005, including the three and six months ended July 31, 2004.  The foregoing corrections are inclusive ofthe immaterial changes resulting from the modification of the rent schedules toachieve consistency with the corresponding leasehold amortization schedules, asset forth above.

 

Landlord Contributions– Leasehold improvement incentives provided by a landlord to the Company werepreviously recorded by the Company as a reduction of the property, plant andequipment account on its balance sheet and amortized as a reduction todepreciation expense in its income statement. However, GAAP requires that such incentives be recorded as deferred rentand amortized as reductions to lease expense. As a result, the Company’s property, plant and equipment asset accountand deferred rent liability account for the periods prior to fiscal 2005 wereincreased which resulted in increases to cash flows provided by operatingactivities and cash flows used for investing activities in equal amounts.  Accordingly, the Company restated theCondensed Consolidated Financial Statements for such prior periods, includingthe three and six months ended July 31, 2004.  These landlord contributions are amortizedover the life of the lease as a reduction to rent expense.

 

The impact of the restatement on the Condensed Consolidated BalanceSheet as of July 31, 2004 was an increase in the total property, plant andequipment account of $15,775 and an increase in the deferred rent liabilityaccount of $17,755.  The restatement alsohad a cumulative decrease on retained earnings of $1,209 and an increase todeferred income taxes of $771 as of July 31, 2004.  The restatement did not have any impact onour previously reported sales or comparable store sales or on our compliancewith any financial covenant under our line of credit facility or other debtinstruments.  For the three and sixmonths ended July 31, 2004, the impact of the restatement is a decrease inreported net income of $97 and $161, respectively, and a decrease in reporteddiluted earnings per share of $0.01 for each period.

 

8

----

 

 

The following is a summary of the significant effects of therestatement on the Company’s Condensed Consolidated Statements of Income,Condensed Consolidated Balance Sheets and Condensed Consolidated Statements ofCash Flows for the three and six months ended July 31, 2004.

 

**Condensed ConsolidatedStatements of Income**

 
| ** **                                | ** ** | **Three Months Ended  July 31, 2004** | ** ** | **Six Months Ended  July 31, 2004** | ** ** |
|-------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------|------------|
| ** **                                | ** ** | **As Reported  Previously**                | ** ** | **Adjustments**                          | ** ** | **As Restated** | ** ** | **As Reported  Previously** | ** ** | **Adjustments** | ** ** | **As Restated** | ** ** |
| ** **                                | ** ** | ** **                                 | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                             | ** ** | **$**                                      | **81,994** | ** **                               | **$**      | **—** | ** ** | **$** | **81,994** | ** ** | **$** | **161,923** | ** ** | **$** | **—** | ** ** | **$** | **161,923** | ** ** |
| Cost of goods sold                        |       | 32,883                                     |       | —                                   | ** ** | **32,883** |   | 63,777 |   | — |   | 63,777 |   |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| **GROSS PROFIT**                          | ** ** | **49,111**                                 | ** ** | **—**                               | ** ** | **49,111** | ** ** | **98,146** | ** ** | **—** | ** ** | **98,146** | ** ** |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                       |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| Sales and marketing                       |       | 32,011                                     | ** ** | **160**                                  | ** ** | **32,171** |   | 62,662 |   | 266 |   | 62,928 |   |
| General and administrative                |       | 10,253                                     |       | —                                   | ** ** | **10,253** |   | 18,837 |   | — |   | 18,837 |   |
| Store opening costs                       |       | 269                                        |       | —                                   | ** ** | **269** |   | 500 |   | — |   | 500 |   |
| Total operating expenses                  |       | 42,533                                     | ** ** | **160**                                  | ** ** | **42,693** |   | 81,999 |   | 266 |   | 82,265 |   |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| **OPERATING INCOME**                      | ** ** | **6,578**                                  | ** ** | **(160**                                 | **)**      | **6,418** | ** ** | **16,147** | ** ** | **(266** | **)** | **15,881** | ** ** |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| Interest expense, net                     |       | 433                                        |       | —                                   | ** ** | **433** |   | 914 |   | — |   | 914 |   |
| Income before provision for  income taxes |       | 6,145                                      | ** ** | **(160**                                 | **)**      | **5,985** |   | 15,233 |   | (266 | ) | 14,967 |   |
| Provision for income taxes                |       | 2,616                                      | ** ** | **(63**                                  | **)**      | **2,553** |   | 6,369 |   | (105 | ) | 6,264 |   |
| **NET INCOME**                            | ** ** | **$**                                      | **3,529**  | ** **                               | **$**      | **(97** | **)** | **$** | **3,432** | ** ** | **$** | **8,864** | ** ** | **$** | **(161** | **)** | **$** | **8,703** | ** ** |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| **EARNINGS PER SHARE**                    |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| **Net Income per share:**                 |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| **Basic**                                 | ** ** | **$**                                      | **0.26**   | ** **                               | **$**      | **(0.00** | **)** | **$** | **0.26** | ** ** | **$** | **0.67** | ** ** | **$** | **(0.01** | **)** | **$** | **0.66** | ** ** |
| **Diluted**                               | ** ** | **$**                                      | **0.25**   | ** **                               | **$**      | **(0.01** | **)** | **$** | **0.24** | ** ** | **$** | **0.62** | ** ** | **$** | **(0.01** | **)** | **$** | **0.61** | ** ** |
|                                      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| Weighted average shares  outstanding      |       |                                       |       |                                     |       |   |   |   |   |   |   |   |   |
| Basic                                     |       | 13,330                                     |       | —                                   |       | 13,330 |   | 13,288 |   | — |   | 13,288 |   |
| Diluted                                   |       | 14,196                                     |       | —                                   |       | 14,196 |   | 14,204 |   | — |   | 14,204 |   |

 

9

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**Condensed Consolidated BalanceSheets**

** **
| ** **                                             | ** ** | **July 31, 2004**      | ** ** |
|--------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                             | ** ** | **As Reported  Previously** | ** ** | **Adjustments** | ** ** | **As Restated** | ** ** |
| ** **                                             | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| **ASSETS**                                             |       |                        |       |   |   |   |   |
| CURRENT ASSETS:                                        |       |                        |       |   |   |   |   |
| Cash and cash equivalents                              |       | $                           | 784        |   | $ | — |   | $ | 784 |   |
| Accounts receivable, net                               |       | 3,942                       |       | — |   | 3,942 |   |
| Inventories:                                           |       |                        |       |   |   |   |   |
| Raw materials                                          |       | 10,203                      |       | — |   | 10,203 |   |
| Finished goods                                         |       | 111,374                     |       | — |   | 111,374 |   |
| Total inventories                                      |       | 121,577                     |       | — |   | 121,577 |   |
| Prepaid expenses and other current  assets        |       | 11,133                      |       | — |   | 11,133 |   |
| Deferred income taxes                                  |       | —                      |       | 2,697 |   | 2,697 |   |
| Total current assets                                   |       | 137,436                     |       | 2,697 |   | 140,133 |   |
|                                                   |       |                        |       |   |   |   |   |
| NONCURRENT  ASSETS:                                    |       |                        |       |   |   |   |   |
| Property, plant and equipment, net                     |       | 49,614                      |       | 15,775 |   | 65,389 |   |
| Other noncurrent assets                                |       | 1,073                       |       | — |   | 1,073 |   |
| Deferred  income taxes                                 |       | 1,688                       |       | (1,688 | ) | — |   |
| Total assets                                           |       | $                           | 189,811    |   | $ | 16,784 |   | $ | 206,595 |   |
|                                                   |       |                        |       |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**          |       |                        |       |   |   |   |   |
| CURRENT LIABILITIES:                                   |       |                        |       |   |   |   |   |
| Accounts payable                                       |       | $                           | 25,259     |   | $ | — |   | $ | 25,259 |   |
| Accrued expenses and other                             |       | 29,785                      |       | — |   | 29,785 |   |
| Current portion of long-term debt                      |       | 971                         |       | — |   | 971 |   |
| Deferred tax liability - current                       |       | 1,308                       |       | (1,308 | ) | — |   |
| Total current liabilities                              |       | 57,323                      |       | (1,308 | ) | 56,015 |   |
|                                                   |       |                        |       |   |   |   |   |
| NONCURRENT  LIABILITIES:                               |       |                        |       |   |   |   |   |
| Long-term debt, net of current portion                 |       | 29,399                      |       | — |   | 29,399 |   |
| Noncurrent lease obligations                           |       | 6,016                       |       | 17,755 |   | 23,771 |   |
| Deferred tax liability - noncurrent                    |       | —                      |       | 1,546 |   | 1,546 |   |
| Total liabilities                                      |       | 92,738                      |       | 17,993 |   | 110,731 |   |
|                                                   |       |                        |       |   |   |   |   |
| STOCKHOLDERS’  EQUITY:                            |       |                        |       |   |   |   |   |
| Common stock                                           |       | 124                         |       | — |   | 124 |   |
| Additional paid-in capital                             |       | 64,912                      |       | — |   | 64,912 |   |
| Retained earnings                                      |       | 37,095                      |       | (1,209 | ) | 35,886 |   |
| Treasury stock                                         |       | (5,058                      | )          | — |   | (5,058 | ) |
| Total stockholders’ equity                        |       | 97,073                      |       | (1,209 | ) | 95,864 |   |
| Total liabilities and  stockholders’  equity |       | $                           | 189,811    |   | $ | 16,784 |   | $ | 206,595 |   |

 

10

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**Condensed ConsolidatedStatements of Cash Flows**

 
| ** **                                                                     | ** ** | **Six Months Ended  July 31, 2004** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                     | ** ** | **As Reported  Previously**              | ** ** | **Adjustments** | ** ** | **As Restated** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                          | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income                                                                     |       | $                                        | 8,864      |   | $ | (161 | ) | 8,703 |   |
| Adjustments to reconcile net income to net  cash used in operating activities: |       |                                     |       |   |   |   |   |
| Deferred income taxes                                                          |       | —                                   |       | (771 | ) | (771 | ) |
| Depreciation and amortization                                                  |       | 3,828                                    |       | 1,076 |   | 4,904 |   |
| Net (increase) decrease in  operating working capital                          |       | (9,171                                   | )          | 3,583 |   | (5,588 | ) |
|                                                                           |       |                                     |       |   |   |   |   |
| **Net cash provided by operating activities**                                  |       | 3,521                                    |       | 3,727 |   | 7,248 |   |
|                                                                           |       |                                     |       |   |   |   |   |
| CASH FLOWS USED FOR INVESTING ACTIVITIES:                                      | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capital expenditures                                                           |       | (5,677                                   | )          | (3,727 | ) | (9,404 | ) |
| Proceeds from disposal of  assets                                              |       | 851                                      |       | — |   | 851 |   |
|                                                                           |       |                                     |       |   |   |   |   |
| **Net cash used in investing  activities**                                     |       | (4,826                                   | )          | (3,727 | ) | (8,553 | ) |
|                                                                           |       |                                     |       |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                          |       |                                     |       |   |   |   |   |
| Borrowings under revolving loan  agreement                                     |       | 44,173                                   |       | — |   | 44,173 |   |
| Repayment of borrowings under  revolving loan agreement                        |       | (41,760                                  | )          | — |   | (41,760 | ) |
| Repayment of other long-term  debt                                             |       | (1,906                                   | )          | — |   | (1,906 | ) |
| Net proceeds from issuance of  common stock                                    |       | 707                                      |       | — |   | 707 |   |
|                                                                           |       |                                     |       |   |   |   |   |
| **Net cash provided by  financing activities**                                 |       | 1,214                                    |       | — |   | 1,214 |   |
|                                                                           |       |                                     |       |   |   |   |   |
| Net decrease in cash and cash  equivalents                                     |       | (91                                      | )          | — |   | (91 | ) |
|                                                                           |       |                                     |       |   |   |   |   |
| CASH AND CASH EQUIVALENTS, beginning of  period                                |       | 875                                      |       | — |   | 875 |   |
| CASH AND CASH EQUIVALENTS, end  of period                                      |       | $                                        | 784        |   | $ | — |   | $ | 784 |   |
|                                                                                |            |                                          |            |  |  |  |  |  |  |  |

 

11

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**4.****             SUPPLEMENTALCASH FLOW DISCLOSURE**

 

The net change in operating working capitaland other components consist of the following:

 
| ** **                                           | ** ** | **Six Months Ended**           | ** ** |
|------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                           | ** ** | **July 31, 2004**         | ** ** | **July 30, 2005** | ** ** |
| ** **                                           | ** ** | **(As Restated,  See Note 3)** | ** ** | ** ** | ** ** |
| (Increase)  decrease in accounts receivable          |       | $                              | 259        |   | **$** | **(655** | **)** |
| Increase in  inventories                             |       | (789                           | )          | **(44,561** | **)** |
| (Increase)  decrease in prepaids and other assets    |       | (648                           | )          | **1,053** | ** ** |
| Increase  (decrease) in accounts payable             |       | (3,489                         | )          | **17,561** | ** ** |
| Decrease in  accrued expenses and other liabilities  |       | (4,504                         | )          | **(4,611** | **)** |
| Increase in  noncurrent lease liabilities            |       | 3,583                          |       | **584** | ** ** |
| ** **                                           | ** ** | ** **                     |       | ** ** | ** ** |
| Net increase  in operating working capital and other |       | $                              | (5,588     | ) | **$** | **(30,629** | **)** |

 

**Interest and Income Taxes Paid:**

** **
| ** **                                       | ** ** | **Six Months Ended**   | ** ** |
|--------------------------------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** |
| ** **                                       | ** ** | ** **             | ** ** | ** ** | ** ** |
| Interest and  income taxes paid were as follows: | ** ** | ** **             | ** ** | ** ** | ** ** |
| Interest  paid                                   |       | $                      | 989        | ** ** | **$** | **613** | ** ** |
| Income taxes  paid                               |       | $                      | 12,245     | ** ** | **$** | **1,712** | ** ** |

 

**5.****             EARNINGSPER SHARE**

 

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

 
| ** **                                       | ** ** | **Three Months Ended** | ** ** | **Six Months Ended**   | ** ** |
|--------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** | **July 31, 2004** | ** ** | **July 30, 2005** | ** ** |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Weighted  average shares outstanding for basic   |       | 13,330                 | ** ** | **13,568**             |       | 13,288 | ** ** | **13,520** | ** ** |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Dilutive effect  of stock options                |       | 866                    | ** ** | **833**                |       | 916 | ** ** | **841** | ** ** |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Weighted  average shares outstanding for diluted |       | 14,196                 | ** ** | **14,401**             |       | 14,204 | ** ** | **14,361** | ** ** |

 

The Company uses the treasury method for calculating the dilutiveeffect of stock options.  There were no anti-dilutiveoptions as of July 31, 2004 and July 30, 2005.

 

**6.****             SEGMENTREPORTING**

 

The Company has two reportable segments:stores and direct marketing.  The storessegment includes all Company owned stores excluding factory stores.  The direct marketing segment includes allsales through catalog and Internet.  Eachsegment offers a similar mix of men’s clothing 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 arethe same as those described in the Company’s Annual Report on Form 10-Kfor the fiscal year ended January 29, 2005.  The Company evaluates performance of thesegments based on “four wall” contribution which excludes any allocation of “managementcompany” costs, distribution center costs (except order fulfillment costs whichare allocated to direct marketing), interest and income taxes.  The Company’s segments are strategic

 

12

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business units that offer similar products tothe retail customer by two distinctively different methods.  In stores the typical customer travels to thestore and purchases men’s clothing and/or alterations and takes their purchaseswith them.  The direct marketing customerreceives a catalog 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 merchandise is then shipped to thecustomer.

 

Segment data is presented in the followingtable:

 

**Three months ended July 30, 2005**

 
| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|----------------------|------------|-----------|------------|-----------|------------|
|                           |       |       |       |                 |       |      |       |      |       |
| Net sales  (a)                 |       | $          | 86,126     |                 | $          | 9,857     |       | $         | 2,605      |   | $ | 98,588 |   |
| Depreciation  and amortization |       | 2,664      |       | 18                   |       | 524       |       | 3,206     |       |
| Operating income  (loss) (b)   |       | 17,282     |       | 3,405                |       | (11,290   | )          | 9,397     |       |
| Capital  expenditures (d)      |       | 5,755      |       | 9                    |       | 984       |       | 6,748     |       |
|                                |            |            |            |                      |            |           |            |           |            |  |  |  |  |

 

**Three months ended July 31, 2004**

 
| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|----------------------|------------|-----------|------------|-----------|------------|
|                           |       |       |       |                 |       |      |       |      |       |
| Net sales  (a)                 |       | $          | 71,612     |                 | $          | 7,983     |       | $         | 2,399      |   | $ | 81,994 |   |
| Depreciation  and amortization |       | 1,965      |       | 18                   |       | 424       |       | 2,407     |       |
| Operating  income (loss) (b)   |       | 13,931     |       | 2,568                |       | (10,081   | )          | 6,418     |       |
| Capital  expenditures (d)      |       | 4,350      |       | 8                    |       | 156       |       | 4,514     |       |
|                                |            |            |            |                      |            |           |            |           |            |  |  |  |  |

 

**Six Months ended July 30, 2005**

 
| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|----------------------|------------|-----------|------------|-----------|------------|
|                           |       |       |       |                 |       |      |       |      |       |
| Net sales  (a)                 |       | $          | 170,808    |                 | $          | 19,176    |       | $         | 5,179      |   | $ | 195,163 |   |
| Depreciation  and amortization |       | 5,232      |       | 35                   |       | 1,018     |       | 6,285     |       |
| Operating  income (loss) (b)   |       | 35,958     |       | 6,792                |       | (21,571   | )          | 21,179    |       |
| Identifiable assets (c)        |       | 227,743    |       | 35,318               |       | 16,544    |       | 279,605   |       |
| Capital  expenditures (d)      |       | 10,758     |       | 9                    |       | 1,113     |       | 11,880    |       |
|                                |            |            |            |                      |            |           |            |           |            |  |  |  |  |

 

**Six Months ended July 31, 2004**

 
| ** **                     | ** ** | **Stores** | ** ** | **Direct Marketing** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------|------------|------------|------------|----------------------|------------|-----------|------------|-----------|------------|
|                           |       |       |       |                 |       |      |       |      |       |
| Net sales  (a)                 |       | $          | 141,998    |                 | $          | 15,358    |       | $         | 4,567      |   | $ | 161,923 |   |
| Depreciation  and amortization |       | 3,984      |       | 34                   |       | 886       |       | 4,904     |       |
| Operating  income (loss) (b)   |       | 29,812     |       | 4,999                |       | (18,930   | )          | 15,881    |       |
| Identifiable  assets (c)       |       | 163,042    |       | 29,652               |       | 13,901    |       | 206,595   |       |
| Capital  expenditures (d)      |       | 9,060      |       | 13                   |       | 331       |       | 9,404     |       |
|                                |            |            |            |                      |            |           |            |           |            |  |  |  |  |

 

----

(a)   Direct Marketing net sales represent catalog andInternet sales including catalog orders placed in new stores.  Net sales from operating segments below thequantitative thresholds for determining reportable segments are attributableprimarily to factory stores, franchise stores and regional tailor shops.  None of these operating segments have evermet any of the quantitative thresholds for determining reportable segments andare included in “Other”.

(b)   Operating income forStores and Direct Marketing segments represents profit before allocations ofoverhead from the corporate office and the distribution center (which areincluded in the “other” segment), interest and income taxes.  Total Operating Income represents profitbefore interest and income taxes.

(c)   Identifiable assetsinclude cash and cash equivalents, accounts receivable, inventories, prepaidexpenses and other current assets and property, plant and equipment residing inor related to the reportable segment. Assets which have not been assigned toone of the reportable segments are included in Other and are primarily cash andcash equivalents, property, plant and equipment associated with the corporateoffice and distribution center, deferred tax assets and inventories.

(d)   Capital expendituresinclude purchases of property, plant and equipment made for the reportablesegment.

 

13

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**7.****             COMMONSTOCK DIVIDENDS**

 

On January 13, 2004, the Company’sBoard of Directors declared a 50% common stock dividend payable on February 18,2004 to stockholders of record as of 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 historicalweighted average share and per share amounts and all references to the numberof common shares elsewhere in the consolidated financial statements, and notesthereto, have been restated to reflect the two stock dividends.

 

**8.****             COMMITMENTSAND CONTINGENCIES**

 

From time to time, legal matters in which theCompany may 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.  TheCompany does not anticipate that the outcome of such matters will have amaterial adverse effect on the business, net assets or financial position ofthe 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 has accrued this amountin the second quarter of fiscal 2005 in accordance with SFAS No. 5.  The Company does not anticipate that anyfurther claims in this matter would have a material adverse effect on thebusiness, net assets or financial position of the Company.

 

14

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**Item 2.****   Management’sDiscussion and Analysis of Results of Operations and Financial****Condition**

 

The following discussion should be read inconjunction with the attached condensed consolidated financial statements andnotes thereto and with the Company’s audited financial statements and notesthereto included in its Annual Report on Form 10-K for the fiscal yearended January 29, 2005.

 

The financial information for fiscal 2004 included in this Item 2 hasbeen restated to reflect the correction of the Company’s historic practices ofaccounting for lease transactions as discussed in the Company’s Annual Reporton Form 10-K for the fiscal year ended January 29, 2005 and Note 3 tothis Form 10-Q.

 

**Overview**– For the second quarter of the Company’s fiscal year ending January 28,2006 (“fiscal 2005”), the Company’s net income increased to $5.3 millioncompared with net income of $3.4 million for the second quarter of the Company’sfiscal year ended January 29, 2005 (“fiscal 2004”). The Company earned$0.37 per diluted share in the second quarter of fiscal 2005 compared with$0.24 per diluted share in the second quarter of fiscal 2004.  As such, diluted earnings per share increased54% compared with the prior year period. The increased earnings were primarily attributable to:

 

•     20.2% increasein net sales with increases in both the store and direct marketing (catalog andInternet) segments;

•     Over 210 basispoint increase in gross profit margins; and

•     The opening of54 new stores since the end of the second quarter of fiscal 2004.

 

The increased earnings in the second quarterof fiscal 2005 follow an increase of 54% in diluted earnings per share in thesecond quarter of fiscal 2004 above the results of the second quarter of thefiscal year ended January 31, 2004 (“fiscal 2003”).

 

Management believes that the chain can growto approximately 500 stores from the fiscal 2004 year-end base of 269stores.  The Company plans to openapproximately 60 stores in fiscal 2005 as part of its plan to grow the chain tothe 500 store level. The Company opened 14 stores in the first half of fiscal2005 and expects to open at least 25 stores in the third quarter, with theremaining stores to be opened in the last quarter of the year. The store growthis part of a strategic plan the Company initiated in the year ended February 3,2001 (“fiscal 2000”).  In the past fiveyears, the Company has continued to increase the number of store openings asinfrastructure and performance has improved. As such, there were ten new stores opened in fiscal 2000 (including twofactory stores), 21 new stores in the year ended February 2, 2002 (“fiscal2001”), 25 new stores in the year ended February 1, 2003 (“fiscal 2002”),50 new stores in fiscal 2003 and 60 new stores in fiscal 2004.

 

Capital expenditures are expected to beapproximately $35 million in fiscal 2005, primarily to fund the opening ofapproximately 60 new stores, the renovation and/or relocation of several storesand the implementation of various systems initiatives.  The capital expenditures include the cost ofthe construction of leasehold improvements for new stores, of whichapproximately $12 million is expected to be reimbursed through landlordcontributions.  The Company also expectsinventories to increase in 2005 to support new store openings, sales growth inexisting segments and other initiatives.

 

*Common Stock Dividends.*  On January 13, 2004, the Company’s Boardof Directors declared a 50% common stock dividend payable on February 18,2004 to stockholders of record as of 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 financialstatements, and notes thereto, have been restated to reflect the two stockdividends.

 

**Critical accounting policies and estimates**- In preparing the Condensed Consolidated Financial Statements, a number ofassumptions and estimates are made that, in the judgment of management, areproper in light of existing general economic and company-specificcircumstances. For a detailed discussion on the application of this and otheraccounting policies, see Note 1 to the Consolidated Financial Statements in theCompany’s Annual Report on Form 10-K for fiscal 2004.

 

*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 is based onassumptions for future demand and related pricing. The Company reduces thecarrying value of inventory to net realizable value where cost exceedsestimated selling price less costs of disposal.

 

Management’s sales assumptions are based onthe Company’s experience that most of the Company’s inventory is sold throughthe Company’s primary sales channels with virtually no inventory beingliquidated through bulk sales to third

 

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parties. The Company’s LCM reserve estimatesfor inventory 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 of write-down.  These products include items such as navy andgrey suits, navy blazers, white and blue button-down shirts, etc.  The portion of the products that haveseasonal or fashion elements are monitored closely to ensure that aging goalsare achieved to limit the need to sell significant amounts of product belowcost.  In addition, the Company’s stronggross profit margins enable the Company to sell substantially all of itsproducts at levels above cost.

 

To calculate the estimated market value, theCompany periodically performs a detailed review of all of its major inventoryclasses and stock-keeping units.  TheCompany compares the on-hand units and season-to-date unit sales (includingactual selling prices) to the sales trend and estimated prices required to sellthe units in the future, which enables the Company to estimate the amount whichmay have to be sold below cost. Substantially all units sold below cost are sold in the Company’sfactory stores within twenty-four months of purchase.  The Company’s costs in excess of sellingprice, plus the cost of disposal in its factory stores, were $1.1 million ineach of fiscal 2003 and 2004.  TheCompany anticipates similar results or better in fiscal 2005.  The inventory component of these costs isrecorded in cost of goods sold, whereas the related costs of disposal arerecorded as selling and marketing expenses. 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.

 

*Asset Valuation.*Long-lived assets, such as property, plant and equipment subject todepreciation, are periodically reviewed for impairment to determine whetherevents or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Recoverability of assets to be held and used ismeasured by a comparison of the carrying amount of an asset to estimatedundiscounted future cash flows expected to be generated by the asset. If thecarrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized in the amount by which the carrying amount ofthe asset exceeds the fair value of the asset. The asset valuation estimate is principally dependent on the Company’sability to generate profits at both the Company and store levels.  These levels are principally driven by thesales and gross profit trends that are closely monitored by the Company.  There were no asset valuation chargesrecorded for the three and six month periods ended July 31, 2004 and July 30,2005.

 

*Lease Accounting. *The Company uses aconsistent lease period (generally, the initial non-cancelable lease term plusrenewal options periods provided for in the lease that can be reasonablyassured) when calculating depreciation of leasehold improvements and indetermining straight-line rent expense and classification of its leases aseither an operating lease or a capital lease. The lease term and straight-line rent expense (inclusive of theconstruction period) commence on the date when the Company takes possession andhas the right to control use of the leased premises.  Funds received from the lessor intended toreimburse the Company for the costs of leasehold improvements are recorded asdeferred credits resulting from a lease incentive and amortized over the leaseterm as a reduction to rent expense.

 

While the Company has taken reasonable care in preparing theseestimates and making these judgments, actual results could differ from theestimates.  Management believes anydifference in the actual results from the estimates will not have a materialeffect upon the Company’s financial position or results of operations.

 

16

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**Results ofOperations**

 

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

 
| ** **                                | ** ** | **Percentage of Net Sales** | ** ** | **Percentage of Net Sales** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                | ** ** | **Three Months Ended**      | ** ** | **Six Months Ended**        | ** ** |
| ** **                                | ** ** | **July 31, 2004**      |       | **July 31, 2005**      | ** ** | **July 31, 2004** |   | **July 31, 2005** | ** ** |
|                                      |       |                        |       |                        | ** ** |   |   |   | ** ** |
| Net sales                                 |       | 100.0                       | %          | **100.0**                   | **%**      | 100.0 | % | **100.0** | **%** |
| Cost of  goods sold                       |       | 40.1                        |       | **38.0**                    | ** ** | 39.4 |   | **37.6** | ** ** |
| Gross profit                              |       | 59.9                        |       | **62.0**                    | ** ** | 60.6 |   | **62.4** | ** ** |
| Sales and  marketing expenses             |       | 39.2                        |       | **41.4**                    | ** ** | 38.9 |   | **41.2** | ** ** |
| General and  administrative expenses      |       | 12.5                        |       | **11.0**                    | ** ** | 11.6 |   | **10.3** | ** ** |
| Store  opening costs                      |       | 0.2                         |       | **0.1**                     | ** ** | 0.3 |   | **0.1** | ** ** |
| Operating  income                         |       | 7.8                         |       | **9.5**                     | ** ** | 9.8 |   | **10.8** | ** ** |
| Interest  expense, net                    |       | 0.5                         |       | **0.4**                     | ** ** | 0.6 |   | **0.3** | ** ** |
| Income  before provision for income taxes |       | 7.3                         |       | **9.1**                     | ** ** | 9.2 |   | **10.5** | ** ** |
| Provision  for income taxes               |       | 3.1                         |       | **3.7**                     | ** ** | 3.9 |   | **4.3** | ** ** |
| Net income                                |       | 4.2                         |       | **5.4**                     | ** ** | 5.3 |   | **6.2** | ** ** |

 

**Net sales**- Net sales increased 20.2% to $98.6 million in the second quarter offiscal 2005 compared with $82.0 million in the second quarter of fiscal2004.  Net sales for the first six monthsof fiscal 2005 increased 20.6% to $195.2 million, compared with $161.9 millionin the first six months of fiscal 2004. The sales increase was primarily related to increases in store sales(including new stores as shown below) and in direct marketing sales.  Comparable store sales increased 4.9% and4.5% in the second quarter and first half of fiscal 2005, respectively, ascompared to the same respective periods of fiscal 2004.  During the second quarter of fiscal 2005,sportswear sales were up 28.9% in comparable stores and accessory and tie saleswere up in the comparable stores 7.7% and 6.0%, respectively, as compared tothe same respective periods of fiscal 2004. For the first half of fiscal 2005 versus the same prior year period,sportswear sales increased 11.8% and dress shirts increased 11.4%.

 

For comparable stores, the average dollars per transaction remainedconsistent in the second quarter of fiscal 2005 with the second quarter infiscal 2004.  Traffic (as measured bytransactions) in comparable stores increased in the second quarter of fiscal2005 and items per transaction also increased. Beginning in fiscal 2005, comparable store sales include merchandisesales generated in all stores that have been open for at least thirteen fullmonths.

 

The following table summarizes store openingand closing activity during the respective periods.

 
| ** **                                  | ** ** | **Three Months Ended** | ** ** | **Six Months Ended**   | ** ** |
|---------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **July 31, 2004** | ** ** | **July 31, 2005** | ** ** | **July 31, 2004** |   | **July 31, 2005** | ** ** |
| ** **                                  | ** ** | ** **             | ** ** | **Square**             | ** ** | ** ** | ** ** | **Square** | ** ** | ** ** | ** ** | **Square** |   | ** ** | ** ** | **Square** | ** ** |
| ** **                                  | ** ** | **Stores***            | ** ** | **Feet****             | ** ** | **Stores*** | ** ** | **Feet**** | ** ** | **Stores*** | ** ** | **Feet**** |   | **Stores*** | ** ** | **Feet**** | ** ** |
|                                        |       |                   |       |                   |       |   |   |   | ** ** |   |   |   |   |   |   |   |   |
| Stores open  at the beginning of the period |       | 218                    |       | 1,095                  | ** ** | **275** | ** ** | **1,341** | ** ** | 210 |   | 1,062 |   | **269** | ** ** | **1,318** | ** ** |
| Stores opened                               |       | 11                     |       | 44                     | ** ** | **8** | ** ** | **31** | ** ** | 20 |   | 82 |   | **14** | ** ** | **54** | ** ** |
| Stores closed                               |       | —                 |       | —                 | ** ** | **(1** | **)** | **(8** | **)** | (1 | ) | (5 | ) | **(1** | **)** | **(8** | **)** |
| Stores open  at the end of the period       |       | 229                    |       | 1,139                  | ** ** | **282** | ** ** | **1,364** | ** ** | 229 |   | 1,139 |   | **282** | ** ** | **1,364** | ** ** |

 

----

*excludes franchise stores

**square feet is gross square feet presentedin thousands

 

**Grossprofit**- Gross profit (net sales less cost ofgoods sold) represented 62.0% of net sales in the second quarter of fiscal 2005compared with 59.9% of net sales in the second quarter of fiscal 2004.  For the first six months of fiscal 2005,gross profit represented 62.4% of net sales compared with 60.6% for the sameperiod of fiscal 2004.  The increasedgross profit

 

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percentage is primarily due to the continuedimprovement in sourcing of merchandise, thus reducing the cost of itemspurchased, and increases in retail prices. Gross profit margins increased in substantially all major productcategories.

 

**Sales andMarketing Expenses** – Sales and marketing expensesconsist primarily of a) full-line store, factory store and direct marketingoccupancy, payroll, selling and other variable costs and b) total Companyadvertising, display and marketing expenses. These expenses increased by $8.7 million and $17.4 million in the secondquarter and first six months of fiscal 2005, respectively, as compared to thesame respective periods of fiscal 2004. The increase in sales and marketing expenses is from the 54 stores whichopened since the end of the second quarter of fiscal 2004, plus the incrementalincrease in expense in the 14 stores opened throughout the first half of fiscal2005, was $6.3 million and $12.4 million in the second quarter and six monthsended July 30, 2005, respectively. Sales and marketing expenses in the stores which were open prior tofiscal 2004 were $1.6 million and $3.8 million higher in the second quarter andsix months ended July 30, 2005, respectively, than in the same periods infiscal 2004 primarily as a result of higher sales commissions on higher salesand increased occupancy costs and advertising costs. In addition, directmarketing sales and marketing expenses increased $0.6 million and $1.0 million,respectively, in the three and six months ended July 30, 2005, as comparedto the same respective periods of fiscal 2004. These expense increases related to direct marketing resulted primarilyfrom increased sales and higher catalog circulation.

 

The Company expects sales and marketingexpenses to increase in fiscal 2005 primarily as a result of a) openingapproximately 60 new stores, b) the full year operation of stores that wereopened during fiscal 2004, and c) an increase in advertising expenditures.

 

**Generaland Administrative Expenses** – General and administrativeexpenses (“G&A”), which consist primarily of corporate payroll and overheadcosts and distribution center costs, increased $0.6 million and $1.2 million inthe second quarter and first six months of fiscal 2005, respectively, ascompared to the same respective periods of fiscal 2004.  The increases were due to higher distributioncenter occupancy costs and other expenses related to business expansion.  G&A for the second quarter of fiscal 2004included a loss contingency in the amount of $0.5 million that was paid in thethird quarter of fiscal 2004.  Continuedgrowth in the stores and the direct marketing segments may result in furtherincreases in G&A expenses.

 

**StoreOpening Costs** – Store opening costs, which includethe initial promotional advertising costs as well as other start-up costs suchas travel for recruitment, training, and setup of new stores, decreased $0.2million to $0.1 million in the second quarter of fiscal 2005 from $0.3 millionfor the same period of fiscal 2004.  Forthe first six months of fiscal 2005, store opening costs decreased $0.3 millionfrom $0.5 million in the prior fiscal year. These reductions were the result of fewer new stores opening and plannedreductions of advertising for new stores in the each of the second quarter andfirst six months of fiscal 2005, as compared to the same periods in fiscal2004.

 

**InterestExpense, net** – Interest expense decreased $0.1million and $0.2 million in the second quarter and first six months of fiscal2005, respectively, as compared to the same respective periods of fiscal2004.  The decrease was due primarily tolower borrowing levels partially offset by higher interest rates.  Average revolver loan borrowings decreased$18.4 million to $8.1 million in the second quarter of fiscal 2005 comparedwith $26.5 for the same period of fiscal 2004. The average interest rate was 6.05% for the second quarter of fiscal2005 compared with 3.05% for the same period of fiscal 2004.

 

**IncomeTaxes** – The first half of fiscal 2005 effective incometax rate decreased slightly to 41.1% compared with 41.8% in the first half offiscal 2004, reflecting greater leverage of the nondeductible items.  During the first quarter of 2005 the Companyadopted the retail method of accounting for inventory for tax purposes, whichresulted in an increase in deferred taxes of $8.3 million.  The impact on the Company’s tax position asreflected in the second quarter fiscal 2005 balance sheet was to decrease taxescurrently payable and increase deferred tax liabilities.

 

**Liquidity and CapitalResources**–  The Company maintains a bankcredit agreement (the “Credit Agreement”), which provides for a revolving loanwhose limit is determined by a formula based on the Company’s inventories andaccounts receivable. The Credit Agreement allows the Company to borrow amaximum revolving amount under the facility up to $100 million. Inaddition, the Company has the option to increase the amount which may beborrowed to $125 million if requested prior to April 30, 2006, ifneeded 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 dividendsto shareholders. EBITDA, as defined by the Credit Agreement, shall not be lessthan $27.5 million and the bank may set a higher minimum EBITDA for futureperiods based on 85% of the Company’s performance projections.  The financial covenants are in effect only ifthe Company’s availability in excess of outstanding borrowings is less than$7.5 million. The Company does not believe its availability in excess ofborrowings will be less than $7.5 million during

 

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fiscal 2005. As of July 30, 2005, theCompany was in compliance with all loan covenants. Interest rates under theCredit Agreement 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. Additionally, the agreement includes provisions for aseasonal over-advance.  The Company alsohas $6.0 million of term debt.

 

The Company’s availability in excess ofoutstanding borrowings, as supported by the existing borrowing base under itsCredit Agreement, was $85.5 million at July 30, 2005 compared with$74.6 million at January 29, 2005.

 

The following table summarizes the Company’ssources and uses of funds as reflected in the Condensed Consolidated Statementsof Cash Flows (in thousands):

 
| ** **                                 | ** ** | **Six Months Ended**   | ** ** |
|--------------------------------------------|------------|------------------------|------------|
| ** **                                 | ** ** | **July 31, 2004** |       | **July 30, 2005** | ** ** |
|                                       |       |                   |       |   |   |
| Cash  provided by (used in):               | ** ** | ** **             |       | ** ** | ** ** |
| Operating activities                       |       | $                      | 7,248      |   | **$** | **(1,619** | **)** |
| Investing activities                       |       | (8,553                 | )          | **(11,880** | **)** |
| Financing activities                       |       | 1,214                  |       | **13,146** | ** ** |
| Net decrease  in cash and cash equivalents |       | $                      | (91        | ) | **$** | **(353** | **)** |

 

Cash used by the Company’s operatingactivities in the first half of fiscal 2005 increased primarily due to higherexpenditures for inventory compared with the same period of 2004.  Cash used for purchase of additionalinventory was $44.6 million for the first half of fiscal 2005 compared with$0.8 million for the first half of 2004. Inventories have increased as a result of a) 23% increase in the numberof stores and b) expansion of core items for the fall season.  This cash used for the purchase of inventorywas partially offset by $8.3 million of cash tax payments deferred by thechange to the retail method of accounting for inventory for tax purposes. Cashused in investing activities in the first half of 2005 relates primarily tocapital expenditures for new stores. Cash provided by financing activities relates primarily to a net $13.0million borrowed under the Company’s revolving loan under the Credit Agreementand $0.6 million from the proceeds of the exercise of stock options.  Also, the Company used $0.5 million of cashfor the repayment of long-term debt. Proceeds from financing activities were primarily used to fund new storeopenings and the purchase of additional inventory (finished goods and rawmaterials).

 

For fiscal 2005, the Company expects to spendapproximately $35 million on capital expenditures, primarily to fund theopening of approximately 60 new stores, the renovation and/or relocation ofseveral stores and the implementation of various systems initiatives. TheCompany spent $11.9 million on capital expenditures in the first half of fiscal2005.  Management believes that theCompany’s cash from operations and availability under its Credit Agreement willbe sufficient to fund its planned capital expenditures and operating expensesfor fiscal 2005.  The capitalexpenditures include the cost of the construction of leasehold improvements fornew stores, of which approximately $12 million is expected to be reimbursedthrough landlord contributions.  Theseamounts are typically paid by the landlords after the completion ofconstruction by the Company and the receipt of appropriate lien waivers fromcontractors.  For the stores opened infiscal 2004, the Company negotiated approximately $12.6 million of landlordcontributions, of which approximately $11.0 million have been collected,including approximately $5.9 million, which was collected in the first half offiscal 2005. The remaining $1.6 million is expected to be collected in fiscal2005.  For the stores opened in the firsthalf of fiscal 2005, the Company negotiated approximately $2.4 million of landlordcontributions, which is expected to be received by the end of fiscal 2005.

 

*Off-Balance Sheet Arrangements*–The Company has no off-balance sheet arrangements other than its operatinglease agreements and letters of credit outstanding under its bank creditfacility as discussed below.

 

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**Disclosures about Contractual Obligations and Commercial Commitments**

 

The Company’sprincipal commitments are non-cancelable operating leases in connection withits retail stores, certain tailoring spaces and equipment.  Under the terms of certain of these leases,the Company is required to pay a base annual rent plus a contingent amountbased on sales.  In addition, many ofthese leases include scheduled rent increases.

 

The followingtable reflects a summary of the Company’s contractual cash obligations andother commercial commitments for fiscal 2005, including amounts paid in thefirst two quarters of fiscal 2005.

 
| ** **                       | ** ** | **Payments Due by Fiscal Year** | ** ** |
|----------------------------------|------------|---------------------------------|------------|
| ** **                       | ** ** | **(in thousands)**              | ** ** |
| ** **                       | ** ** | **2005**                        | ** ** | **2006-2008** | ** ** | **2009-2010** | ** ** | **Beyond  2010** | ** ** | **Total** | ** ** |
|                             |       |                            |       |   |   |   |   |   |   |   |   |
| Long-term  debt                  |       | $                               | 917        |   | $ | 16,152 |   | $ | 1,317 |   | $ | 1,475 |   | $ | 19,861 |   |
| Operating  leases (a)            |       | 33,452                          |       | 103,991 |   | 58,446 |   | 89,697 |   | 285,586 |   |
| Stand-by  Letter-of-credit (b)   |       | 400                             |       | — |   | — |   | — |   | 400 |   |
| Purchase  Commitment (c)         |       | 361                             |       | — |   | — |   | — |   | 361 |   |
| Scheduled  Interest Payments (d) |       | 1,025                           |       | 2,570 |   | 333 |   | 413 |   | 4,341 |   |
| License  Agreement               |       | 150                             |       | 495 |   | 330 |   | — |   | 975 |   |
|                                  |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(a)    Includes various lease agreements for stores tobe opened and equipment placed in service subsequent to July 30, 2005.  See Note 10 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 29, 2005.

(b)    To secure the payment of rent at one leasedlocation included in “Operating Leases” above and is renewable each yearthrough the end of the lease term (2009).

(c)    The Company generally does not makeunconditional, noncancelable purchase commitments.  In fiscal 2003, the Company entered into anagreement with one raw material supplier to purchase a specified quantity offabric into fiscal 2005.

(d)    These scheduled interest payments consist ofinterest payments on the outstanding long term debt.  For borrowings under the Company’s revolvingloan agreement, projected interest is calculated based on the outstandingprincipal balance as of July 30, 2005. For borrowings under the Company’s variable rate debt instruments(including the revolving loan agreement), interest is calculated based on theinterest rates in effect on July 30, 2005. The principal balance of the revolver and all variable interest rates may,and probably will, vary in future periods.

 

**Additional Information**

 

The bank which provides credit card servicesto the Company has informed the Company of claims arising from the allegedlyimproper storage of credit card data. The Company estimates the potentialliability arising from such claims to be approximately $285 thousand and hasaccrued this amount in the second quarter of fiscal 2005 in accordance withSFAS No. 5.  The Company does notanticipate that any further claims in this matter would have a material adverseeffect on the business, net assets or financial position of the Company.

 

The Company’s statements concerning futureoperations contained herein are forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995.  Actual results may differ materially fromthose forecasted due to a variety of factors outside of the Company’s controlthat can affect the Company’s operating results, liquidity and financialcondition.  Such factors include risksassociated with economic, weather, public health and other factors affectingconsumer spending, the ability of the Company to finance its expansion plans,the mix and pricing of goods sold, the market price of key raw materials suchas wool and cotton, availability of lease sites for new stores, the ability tosource product from its global supplier base and other competitivefactors.  Other factors and risks thatmay affect our business or future financial results are detailed in our filingswith the Securities and Exchange Commission, including the Company’s AnnualReport on Form 10-K for the year ended January 29, 2005.  These cautionary statements qualify all ofthe 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.

 

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**Item 3.**           **Quantitative and Qualitative Disclosures about Market Risk**

 

AtJuly 30, 2005, the Company had no derivative financial instruments.  In addition, the Company does not believe itis materially at risk for changes in market interest rates or foreign currencyfluctuations. The Company’s interest on borrowings under its Credit Agreementis at a variable rate based on the prime rate or a spread over the LIBOR.

 

**Item 4.**           **Controls and Procedures**

 

*Limitations on Controls and Procedures. *Because of theirinherent limitations, disclosure controls and procedures and internal controlover financial reporting (collectively, “Control Systems”) may not prevent ordetect all failures or misstatements of the type sought to be avoided byControl Systems. Also, projections of any evaluation of the effectiveness ofthe Company’s Control Systems to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.  Management, including the Company’s ChiefExecutive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), does notexpect that the Company’s Control Systems will prevent all error or allfraud.  A Control System, no matter howwell conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the Control System are met.  Further, the design of a Control System mustreflect the fact that there are resource constraints, and the benefits ofControl Systems must be considered relative to their costs.  Because of the inherent limitations in allControl Systems, no evaluation can provide absolute assurance that all controlissues and instances of fraud, if any, within the Company have been detected.The following report by management, including the CEO and CFO, on theeffectiveness of the Company’s disclosure controls and procedures expresses onlyreasonable assurance of the conclusions reached.

 

*Disclosure Controls and Procedures-*TheCompany maintains disclosure controls and procedures that are designed toensure that information required to be disclosed by the Company in the reportsthat it files or submits under the Securities Exchange Act of 1934, as amended(the “Exchange Act”), is recorded, processed, summarized, and reported withinthe time periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to management, including the CEOand CFO, as appropriate, to allow timely decisions regarding requireddisclosure.

 

Management has evaluated, with the participation of the CEO and CFO,the effectiveness of the Company’s disclosure controls and procedures as of July 30,2005. Based on that evaluation, the CEO and CFO have concluded that the Company’sdisclosure controls and procedures were effective as of July 30, 2005.

 

Therehave been no changes in the Company’s internal control over financial reportingthat occurred during the fiscal quarter covered by this report that havematerially affected, or are reasonable likely to materially affect, the Company’sinternal control over financial reporting.

 

# **PART II.**               OTHER INFORMATION

# ** **

**Item 1.****   Legal Proceedings**

 

From time to time, legal matters in which the Company may be named as adefendant arise in the normal course of the Company’s business activities.  Although the outcome of these lawsuits orother proceedings against the Company cannot be accurately predicted, theCompany does not expect that any such liability will have a material adverseeffect on the business, net assets or financial position of the Company.

 

**Item 4.  Submission of Matters to a Vote of Security Holders**

 

The following information is furnished withrespect to matters submitted to a vote of security holders during the periodcovered by this report:

 

a)    The 2005 annual meeting of shareholders ofthe Company was held on June 24, 2005.

 

b)    David A. Preiser and Robert N. Wildrick wereelected directors at the meeting.  AndrewA. Giordano, Gary S. Gladstein and William E. Herron continued in theirrespective terms of office as directors.

 

c)     The matters voted upon at the meeting and thevotes were as follows:

 

1.     Election of Directors(a)

 

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| ** **       | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|------------------|------------|------------|------------|--------------|------------|
| David A. Preiser |       | 11,844,537 |       | 715,092      |       |

 
| ** **         | ** ** | **For**   | ** ** | **Withheld** | ** ** |
|--------------------|------------|-----------|------------|--------------|------------|
| Robert N. Wildrick |       | 8,367,041 |       | 4,192,588    |       |

 

2.     Ratification of selection of Deloitte and Touche, LLP as the Company’s independentpublic accountants for the fiscal year ending January 28, 2006(b).

 
| **For**    | ** ** | **Against** | ** ** | **Abstaining** | ** ** |
|------------|------------|-------------|------------|----------------|------------|
| 12,375,597 |       | 176,879     |       | 7,153          |       |

 

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(a)   There were no abstentions or broker non-votes in the election ofdirectors.

(b)   There were no broker non-votes in the ratification of selection ofDeloitte and Touche, LLP as the Company’s independent public accountants forthe fiscal year ending January 28, 2006.

 

**Item 6.****   Exhibits**

 
| a)     |   | 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. |

 

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

 

 
| Date: September 6, 2005 | Jos. A. Bank Clothiers, Inc. |
|------------------------------|-----------------------------------|
|                         | (Registrant)                      |
|                         |                              |
|                         |  /s/ David E. Ullman         |   |
|                         | David E. Ullman                   |
|                         | Chief Financial Officer           |

 

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