**Draft #7 – June 4, 2004**

 

 

**United States Securities and Exchange 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 May 1, 2004.**                                                     |
|       |                                                                                                |
|       |                                                                                                | **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 as specified in itscharter)

 
| **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 all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or if suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

 

| Yes ý | No o |
|------------|------|

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Exchange Act Rule12b-2)

 

| Yes ý | No o |
|------------|------|

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate:

 

| **Class**                    |   | **Outstanding as of June 4, 2004** |
|------------------------------|--------|-----------------------------------------|
|                         |   |                                    |
| Common Stock, $.01 par value |   | 10,645,908                              |

 

 

----

 

Jos. A. BankClothiers, Inc.

 

Index

 
| Part I.    |    | Financial  Information                                                                                   |   |
|------------|---------|----------------------------------------------------------------------------------------------------------|--------|
|       |    |                                                                                                     |   |   |
|       | Item 1. | Condensed Consolidated (unaudited) Financial  Statements                                                 |   |
|       |    |                                                                                                     |   |   |
|       |    | Condensed  Consolidated Statements  of Income – Three Months ended  May 3, 2003 and May 1, 2004     |   |
|       |    |                                                                                                     |   |   |
|       |    | Condensed  Consolidated Balance  Sheets – as of January 31, 2004 and  May 1, 2004              |   |
|       |    |                                                                                                     |   |   |
|       |    | Condensed  Consolidated Statements  of Cash Flows – Three Months ended  May 3, 2003 and May 1, 2004 |   |
|       |    |                                                                                                     |   |   |
|       |    | 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. | Internal Controls and Procedures                                                                         |   |
|       |    |                                                                                                     |   |   |
| Part  II.  |    | Other  Information                                                                                       |   |
|       |    |                                                                                                     |   |   |
|       | Item 1. | Legal Proceedings                                                                                        |   |
|       |    |                                                                                                     |   |   |
|       | Item 6. | Exhibits  and Reports on Form 8-K                                                                        |   |
|       |    |                                                                                                     |   |   |
| Signatures |    |

 

2

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**PARTI.****                                                                            FINANCIALINFORMATION**

 

**Item1.****                                   CondensedConsolidated Financial Statements**

 

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

**Condensed Consolidated Statements of Income**

(In thousandsexcept per share data)

(Unaudited)

 
|                                     |   | **Three  Months Ended** |       |
|------------------------------------------|--------|-------------------------|------------|
|                                     |   | **May 3,  2003**        |       | **May 1,  2004** |   |
|                                     |   |                    |       |   |   |
| Net sales                                |   | **$**                   | 62,272     | ** ** | **$** | **79,929** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Cost of goods sold                       |   | 26,672                  | ** ** | **30,894** | ** ** |
|                                     |   |                    |       |   |   |
| Gross profit                             |   | 35,600                  | ** ** | **49,035** | ** ** |
|                                     |   |                    |       |   |   |
| Operating expenses:                      |   |                    |       |   |   |
| Sales and marketing                      |   | 24,114                  |       | **30,651** |   |
| General and administrative               |   | 7,043                   | ** ** | **8,584** | ** ** |
| Store opening costs                      |   | 366                     | ** ** | **231** | ** ** |
| Total operating expenses                 |   | 31,523                  | ** ** | **39,466** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Operating income                         |   | 4,077                   | ** ** | **9,569** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Interest expense, net                    |   | 303                     | ** ** | **481** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Income before provision for income taxes |   | 3,774                   | ** ** | **9,088** | ** ** |
| Provision for income taxes               |   | 1,600                   | ** ** | **3,753** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Net income                               |   | **$**                   | 2,174      | ** ** | **$** | **5,335** | ** ** |
|                                     |   |                    | ** ** |   | ** ** |
| Earnings per share:                      |   |                    | ** ** |   | ** ** |
| Net income:                              |   |                    | ** ** |   | ** ** |
| Basic                                    |   | **$**                   | 0.23       | ** ** | **$** | **0.50** | ** ** |
| Diluted                                  |   | **$**                   | 0.20       | ** ** | **$** | **0.47** | ** ** |
| Weighted average shares outstanding:     |   |                    | ** ** |   | ** ** |
| Basic                                    |   | 9,299                   | ** ** | **10,597** | ** ** |
| Diluted                                  |   | 10,866                  | ** ** | **11,370** | ** ** |

 

See accompanyingnotes

 

3

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**JOS. A. BANK CLOTHIERS, INC. ANDSUBSIDIARIES**

**CondensedConsolidated Balance Sheets**

(In Thousands)

(Unaudited)

 
|                                                      |   | **January 31, 200****4** |       | **May 1, 2004** |       |
|-----------------------------------------------------------|--------|-------------------------------|------------|-----------------|------------|
| **ASSETS**                                                |   |                          | ** ** |            | ** ** |
| CURRENT  ASSETS:                                          |   |                          | ** ** |            | ** ** |
| Cash and cash  equivalents                                |   | $                             | 875        | ** **      | **$**      | **904** | ** ** |
| Accounts  receivable, net                                 |   | 4,201                         | ** ** | **6,158**       | ** ** |
| Inventories:                                              |   |                          | ** ** |            | ** ** |
| Raw materials                                             |   | 11,652                        | ** ** | **7,718**       | ** ** |
| Finished goods                                            |   | 109,136                       | ** ** | **118,182**     | ** ** |
| Total  inventories                                        |   | 120,788                       | ** ** | **125,900**     | ** ** |
| Prepaid  expenses and other current assets                |   | 10,323                        | ** ** | **10,058**      | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| Total current  assets                                     |   | 136,187                       | ** ** | **143,020**     | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| NONCURRENT  ASSETS:                                       |   |                          | ** ** |            | ** ** |
| Property,  plant and equipment, net                       |   | 47,401                        | ** ** | **47,749**      | ** ** |
| Other  noncurrent assets                                  |   | 1,235                         | ** ** | **970**         | ** ** |
| Deferred  income taxes                                    |   | 1,688                         | ** ** | **1,688**       | ** ** |
| Total assets                                              |   | $                             | 186,511    | ** **      | **$**      | **193,427** | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**            |   |                          | ** ** |            | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| CURRENT  LIABILITIES:                                     |   |                          | ** ** |            | ** ** |
| Accounts  payable                                         |   | $                             | 28,748     | ** **      | **$**      | **27,180** | ** ** |
| Accrued  expenses                                         |   | 32,677                        | ** ** | **29,733**      | ** ** |
| Current  portion of long-term debt                        |   | 1,245                         | ** ** | **1,006**       | ** ** |
| Deferred  income taxes                                    |   | 1,308                         | ** ** | **1,308**       | ** ** |
| Total current  liabilities                                |   | 63,978                        | ** ** | **59,227**      | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| NONCURRENT  LIABILITIES:                                  |   |                          | ** ** |            | ** ** |
| Long-term  debt, net of current portion                   |   | 28,618                        | ** ** | **34,856**      | ** ** |
| Noncurrent  lease obligations                             |   | 5,213                         | ** ** | **5,177**       | ** ** |
| Other  noncurrent liabilities                             |   | 1,200                         | ** ** | **908**         | ** ** |
| Total  liabilities                                        |   | 99,009                        | ** ** | **100,168**     | ** ** |
|                                                      |   |                          | ** ** |            | ** ** |
| COMMITMENTS  AND CONTINGENCIES STOCKHOLDERS’ EQUITY: |   |                          | ** ** |            | ** ** |
| Common Stock                                              |   | 122                           | ** ** | **123**         | ** ** |
| Additional  paid-in capital                               |   | 64,207                        | ** ** | **64,628**      | ** ** |
| Retained  earnings                                        |   | 28,231                        | ** ** | **33,566**      | ** ** |
|                                                      |   | 92,560                        |       | **98,317**      | ** ** |
| Treasury stock                                            |   | (5,058                        | **)**      | **(5,058**      | **)**      |
| Total  stockholders’ equity                          |   | 87,502                        | ** ** | **93,259**      | ** ** |
| Total  liabilities and stockholders’ equity          |   | $                             | 186,511    | ** **      | **$**      | **193,427** | ** ** |

 

See accompanyingnotes

 

4

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**JOS. A. BANK CLOTHIERS, INC. ANDSUBSIDIARIES**

**CondensedConsolidated Statements of Cash Flows**

(In Thousands)(Unaudited)

 
|                                                                           |   | **Three  Months Ended** |   |
|--------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                           |   | **May 3,  2003**        |   | **May 1,  2004** |   |
|                                                                           |   |                    |   |   |   |
| Cash flows from operating activities:                                          |   |                    |   |   | ** ** |
| Net income                                                                     |   | $                       | 2,174  |   | **$** | **5,335** | ** ** |
| Adjustments to reconcile net income to net  cash used in operating activities: |   |                    |   |   | ** ** |
| Depreciation and amortization                                                  |   | 1,500                   |   | **1,939** | ** ** |
| Net increase in operating working capital                                      |   | (21,023                 | )      | **(11,379** | **)** |
|                                                                           |   |                    |   |   | ** ** |
| **Net cash used in****operating  activities**                                  |   | (17,349                 | )      | **(4,105** | **)** |
|                                                                           |   |                    |   |   | ** ** |
| Cash flows from investing activities:                                          |   |                    |   |   | ** ** |
| Capital expenditures                                                           |   | (3,823                  | )      | **(3,137** | **)** |
| Proceeds from disposal of assets                                               |   | —                  |   | **850** | ** ** |
|                                                                           |   |                    |   |   | ** ** |
| **Net cash used in investing activities**                                      |   | (3,823                  | )      | **(2,287** | **)** |
|                                                                           |   |                    |   |   | ** ** |
| Cash flows from financing activities:                                          |   |                    |   |   | ** ** |
| Borrowings under long-term Credit Agreement                                    |   | 19,957                  |   | **27,520** | ** ** |
| Repayments under long-term Credit Agreement                                    |   | (5,546                  | )      | **(19,869** | **)** |
| Repayment of other long-term debt                                              |   | (294                    | )      | **(1,652** | **)** |
| Net proceeds from issuance of common stock                                     |   | 20                      |   | **422** | ** ** |
|                                                                           |   |                    |   |   | ** ** |
| **Net cash provided by financing activities**                                  |   | 14,137                  |   | **6,421** | ** ** |
|                                                                           |   |                    |   |   | ** ** |
| Net (decrease) increase in cash and cash  equivalents                          |   | (7,035                  | )      | **29** | ** ** |
|                                                                           |   |                    |   |   | ** ** |
| Cash and cash equivalents – beginning of  period                          |   | 8,389                   |   | **875** | ** ** |
|                                                                           |   |                    |   |   | ** ** |
| Cash and cash equivalents – end of period                                 |   | $                       | 1,354  |   | **$** | **904** | ** ** |

 

See accompanyingnotes

 

5

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**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Unaudited)

(Amounts inThousands Except Per Share Amounts and the Number of Stores)

 

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

 

Jos. A. BankClothiers, Inc. (the “Company”) is a nationwide retailer of classic men’sclothing through conventional retail stores and catalog and internet directmarketing.  The consolidated financialstatements include the accounts of the Company and its wholly-ownedsubsidiaries.  All significantintercompany balances and transactions have been eliminated in consolidation.

 

The results ofoperations for the interim periods shown in this report are not necessarilyindicative of results to be expected for the fiscal year.  In the opinion of management, theinformation contained herein reflects all adjustments necessary to make theresults of operations for the interim periods a fair statement of the operatingresults for these periods.  Theseadjustments are of a normal recurring nature.

 

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 January 31, 2004 Annual Reporton Form 10-K.

 

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

 

**Inventories** -Inventories are stated at the lower of first-in, first-out cost or market.  The Company capitalizes into inventorycertain warehousing and delivery costs associated with shipping its merchandiseto the point of sale.

 

**Catalog** - Costsrelated to mail order catalogs and promotional materials are included inprepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, which istypically four months.

 

**SupplementalCash Flow Information** - Interest and income taxespaid were as follows:

 

|              |   | **Three  Months Ended  May 3, 2003** |       | **Three  Months Ended  May 1, 2004** |       |
|-------------------|--------|--------------------------------------|------------|--------------------------------------|------------|
|              |   |                                 | ** ** |                                 | ** ** |
| Interest paid     |   | $                                    | 257        | ** **                           | **$**      | **480** | ** ** |
| Income taxes paid |   | $                                    | 2,130      | ** **                           | **$**      | **5,472** | ** ** |

 

***StockOption Plan*** - The Company applies theintrinsic-value-based method of accounting prescribed by Accounting PrinciplesBoard (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”,and related interpretations including Financial Accounting Standards Board  Interpretation No. 44, “Accounting forCertain Transactions Involving Stock Compensation”, issued in March 2000,to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grantonly if the current market price of the underlying stock exceeds the exerciseprice. There was no stock-based compensation expense

 

6

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***recognized in thestatement of income for the periods ended May 3, 2003 and May 1, 2004.Statement of Financial Accounting Standards (“SFAS”) No. 123,“Accounting for Stock-Based Compensation” as amended by SFAS No. 148,“Accounting for Stock Based Compensation-Transition and Disclosure”, establishedaccounting and disclosure requirements using a fair-value-based method ofaccounting for stock-based employee compensation plans.  As allowed by SFAS No. 123, the Companyhas elected to continue to apply the intrinsic-value-based method of accountingdescribed above, and has adopted only the disclosure requirements of SFASNo. 123 as amended by SFAS No. 148. The following table illustrates the effect on net income if thefair-value-based method had been applied to all outstanding and unvested awardsin each quarter:***

 
|                                                                                                                        |   | **Three Months Ended  May 3, 2003** |       | **Three Months Ended  May 1, 2004** |       |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|-------------------------------------|------------|
|                                                                                                                        |   |                                | ** ** |                                | ** ** |
| Net income as  reported                                                                                                     |   | $                                   | 2,174      |                                | $          | **5,335** |   |
|                                                                                                                        |   |                                | ** ** |                                | ** ** |
| Deduct total stock-based employee compensation expense determined  under fair-value-based method for all awards, net of tax |   | 672                                 | ** ** | **150**                             | ** ** |
| Pro forma net  income                                                                                                       |   | $                                   | 1,502      |                                | $          | **5,185** |   |
|                                                                                                                        |   |                                | ** ** |                                | ** ** |
| Pro forma  basic net income per common share                                                                                |   | $                                   | 0.16       |                                | $          | **0.49** |   |
|                                                                                                                        |   |                                | ** ** |                                | ** ** |
| Pro forma  diluted net income per common share                                                                              |   | $                                   | 0.14       |                                | $          | **0.46** |   |

 

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 first fiscal quarter ended May 3,2003.  For the fiscal quarter ended May1, 2004, there were no stock options granted.

 
|                           |   | **Three Months Ended  May 3, 2003** |   | **Three Months Ended  May 1, 2004** |   |
|--------------------------------|--------|-------------------------------------|--------|-------------------------------------|--------|
|                           |   |                                |   |                                |   |
| Risk free  interest rate       |   | 3.3                                 | %      | —                              |   |
| Expected  volatility           |   | 52.9                                | %      | —                              |   |
| Expected life                  |   | 7                                   | Years  | —                              |   |
| Contractual  life              |   | 10                                  | Years  | —                              |   |
| Expected  dividend yield       |   | —                              | %      | —                              |   |
| Fair value of  options granted |   | $                                   | 13.20  |                                | — |   |
| # of Options  granted          |   | 203                                 |   | —                              |   |
|                                |        |                                     |        |                                     |        |  |

 

**Reclassifications**– Certain reclassifications have been made to the May 3, 2003 financialstatements in order to conform with the May 1, 2004 presentation.

 

7

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**3.****                          WORKINGCAPITAL**

 

The net change inoperating working capital is composed of the following:

 
|                                                |   | **Three  Months Ended** |    |
|-----------------------------------------------------|--------|-------------------------|---------|
|                                                |   | **May 3,  2003**        |    | **May 1,  2004** |   |
|                                                |   |                    |    |   | ** ** |
| Increase in accounts receivable                     |   | $                       | (2,030  | ) | **$** | **(1,957** | **)** |
| Increase in inventories                             |   | (18,302                 | )       | **(5,112** | **)** |
| (Increase) decrease in prepaids and other  assets   |   | (167                    | )       | **530** | ** ** |
| Increase (decrease) in accounts payable             |   | 1,839                   |    | **(1,568** | **)** |
| Decrease in accrued expenses and other  liabilities |   | (2,363                  | )       | **(3,272** | **)** |
|                                                |   |                    |    |   | ** ** |
| Net increase in operating working capital           |   | $                       | (21,023 | ) | **$** | **(11,379** | **)** |

 

**4.****                          EARNINGSPER SHARE**

 

Basic net income per share is calculated by dividing net income by theweighted average number of common shares outstanding for the year.  Diluted net income per share is calculatedby dividing 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** |       |
|------------------------------------------------------|--------|-------------------------|------------|
|                                                 |   | **May 3,  2003**        |       | **May 1,  2004** |   |
|                                                 |   |                    |       |   |   |
| Weighted average shares outstanding for  basic EPS   |   | 9,299                   | ** ** | **10,597** | ** ** |
|                                                 |   |                    | ** ** |   | ** ** |
| Dilutive  effect of common stock equivalents         |   | 1,567                   | ** ** | **733** | ** ** |
|                                                 |   |                    | ** ** |   | ** ** |
| Weighted average shares outstanding for  diluted EPS |   | 10,866                  | ** ** | **11,370** | ** ** |

 

The Company uses the treasury method for calculating the dilutiveeffect of stock options.

 

**5.****                          SEGMENTREPORTING**

 

The Company hastwo reportable segments: stores and direct marketing.  While each segment offers a similar mix of men’s clothing to theretail customer, the full line stores also provide alterations.

 

The accountingpolicies of the segments are the same as those described in the Company’sJanuary 31, 2004 Annual Report on Form 10-K.  The Company evaluates performance of the segments based on “fourwall” contribution which excludes any allocation of “management company” costs,distribution center costs (except order fulfillment costs which are allocatedto direct marketing), interest and income taxes.

 

8

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The Company’ssegments are strategic business units that offer similar products to the retailcustomer by two distinctively different methods.  In stores the typical customer travels to the store and purchasesmen’s clothing and/or alterations and takes their purchases with them.  The direct marketing customer receives acatalog in his or her home and/or office and/or visits our web page via theinternet and places an order by phone, mail, fax or on line.  The merchandise is then shipped to thecustomer. Segment data is presented in the following table:

 

**Three Months ended May 1, 2004**

 
|                          |   | **Stores** |   | **Direct  Marketing** |   | **Other** |   | **Total** |   |
|-------------------------------|--------|------------|--------|-----------------------|--------|-----------|--------|-----------|--------|
|                          |   |       |   |                  |   |      |   |      |   |
| Net sales (a)                 |   | $          | 69,758 |                  | $      | 8,003     |   | $         | 2,168  |   | $ | 79,929 |   |
| Depreciation and amortization |   | 1,357      |   | 16                    |   | 566       |   | 1,939     |   |
| Operating income (b)          |   | 15,634     |   | 2,784                 |   | (8,849    | )      | 9,569     |   |
| Identifiable assets (c)       |   | 151,623    |   | 28,514                |   | 13,290    |   | 193,427   |   |
| Capital expenditures (d)      |   | 2,957      |   | 5                     |   | 175       |   | 3,137     |   |
|                               |        |            |        |                       |        |           |        |           |        |  |  |  |  |

 

Three Months endedMay 3, 2003

 
|                          |   | **Stores** |   | **Direct  Marketing** |   | **Other** |   | **Total** |   |
|-------------------------------|--------|------------|--------|-----------------------|--------|-----------|--------|-----------|--------|
|                          |   |       |   |                  |   |      |   |      |   |
| Net sales (a)                 |   | $          | 53,402 |                  | $      | 6,740     |   | $         | 2,130  |   | $ | 62,272 |   |
| Depreciation and amortization |   | 1,097      |   | 16                    |   | 387       |   | 1,500     |   |
| Operating income (b)          |   | 9,601      |   | 2,222                 |   | (7,746    | )      | 4,077     |   |
| Identifiable assets (c)       |   | 118,230    |   | 18,941                |   | 14,573    |   | 151,744   |   |
| Capital expenditures (d)      |   | 3,045      |   | —                |   | 778       |   | 3,823     |   |
|                               |        |            |        |                       |        |           |        |           |        |  |  |  |  |

 

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(a)          Directmarketing net sales represent catalog and internet sales including catalogorders placed in new stores.  Netsales  from segments below thequantitative thresholds are attributable primarily to three operating segmentsof the Company. Those segments are factory stores, franchise stores andregional tailor shops.  None of thesesegments have ever met any of the quantitative thresholds for determiningreportable segments and are included in “other”.

(b)         Operating income for Stores and Direct Marketing segments representsprofit before allocations of overhead from the corporate office and thedistribution center (which are included in the “other” segment), interest andincome taxes.  Total Operating Incomerepresents profit before interest and income taxes.

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

(d)         Capital expenditures include purchases of property, plant and equipmentmade for the reportable segment.

 

**6.****                          LEGALMATTERS**

 

From time to time,legal matters in which the Company may be named as a defendant arise in thenormal course of the Company's business activities.  Although the outcome of these lawsuits or other proceedingsagainst the Company cannot be accurately predicted, the Company does not expectthat any such liability will have a material adverse effect on the business,net assets or financial position of the Company.

 

**7.****                          COMMONSTOCK DIVIDEND**

 

OnJanuary 13, 2004, the Company’s Board of Directors declared a 50% Commonstock dividend payable on February 18, 2004 to stockholders of record asof January 30, 2004.  Allhistorical

 

9

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weighted averageshare and per share amounts and all references to the number of common shareselsewhere in the consolidated financial statements, and notes thereto, havebeen restated to reflect the stock dividend.

 

**8.****                          SUBSEQUENTEVENT**

 

On June 8, 2004,the Company's Board of Directors declared a 25% stock dividend payable onAugust 18, 2004 to stockholders of record as of July 30, 2004.  There have been no restatements to anyweighted average share or per share amounts due to the record date not occuringuntil July 30, 2004.

 

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

 

The followingdiscussion should be read in conjunction with the attached condensed consolidatedfinancial statements and notes thereto and with the Company’s audited financialstatements and notes thereto included in its Annual Report on Form 10-K for thefiscal year ended January 31, 2004.

 

**Overview**- Forthe first quarter of the Company’s fiscal year ending January 29, 2005(“fiscal 2004”), the Company’s net income increased 141% to $5.3 millioncompared with net income of $2.2 million for the first quarter of the Company’sfiscal year ended January 31, 2004 (“fiscal 2003”). The Company earned$0.47 per diluted share in the first quarter of fiscal 2004 compared with $0.20per diluted share in the first quarter of fiscal 2003.  As such, diluted earnings per shareincreased 135% compared with the prior year period.  The increased earnings were primarily attributable to:

 

•                  28.3% increase in net sales withincreases in both the store and direct marketing (catalog and internet)segments;

•                  410 basis point increase in grossprofit margins; and

•                  increased leverage of expenses.

 

Managementbelieves that the chain can grow to approximately 500 stores from the fiscal2003 year-end base of 210 stores.  TheCompany plans to open between 55 to 65 stores in 2004 and up to 75 stores eachyear thereafter to grow the chain to the 500 store level. The store growth ispart of a strategic plan the Company initiated in fiscal 2000.  In the past four years, the Company hascontinued to increase the amount of store openings as its infrastructure andperformance improved.  As such, therewere ten new stores opened in fiscal 2000 (including two factory stores), 21new stores in fiscal 2001, 25 new stores in fiscal 2002 and 50 new stores infiscal 2003. The Company opened 9 stores in the first quarter of fiscal 2004and expects to open approximately 10 stores in the second quarter, with theremaining stores to be opened in the second half of the year.

 

Capitalexpenditures should range between $17 and $20 million in fiscal 2004, primarilyto fund the opening of 55 to 65 new stores, the renovation and/or relocation ofat least two major stores, an expansion in distribution center capacity, andthe implementation of various systems initiatives.  The Company also expects inventories to increase in 2004 tosupport new store openings, sales growth in existing segments and otherinitiatives.

 

*Common StockDividend.* On January 13, 2004, the Company’sBoard of Directors declared a 50% Common stock dividend payable onFebruary 18, 2004 to stockholders of record as of January 30,2004.  All historical weighted averageshare and per share amounts and all references to the number of common shareselsewhere in the consolidated financial statements, and notes hereto, have beenrestated to reflect the stock dividend.

 

##### **Critical accounting policies and estimates******-In preparing the consolidated financial statements, a number of assumptions andestimates are made that, in the judgment of management, are proper in light

 

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of existing general economic and company-specific circumstances. For a detaileddiscussion on the application of this and other accounting policies, see Note 1in the Consolidated Financial Statements in the Company’s January 31, 2004Annual Report on Form 10-K.

 

##### *Inventory.* The Company records inventory at thelower of cost or market. Cost is determined using the first-in, first-outmethod.   The estimated market value isbased on assumptions for future demand and related pricing. The Company reducesthe carrying value of inventory to net realizable value where cost exceeds estimatedselling price less costs of disposal. Management’s sales assumptions are based on the Company’s experiencethat historically most of the Company’s inventory is sold through the Company’sprimary sales channels with virtually no inventory being liquidated throughbulk sales to third parties. If actual market conditions are less favorablethan those projected by management, reductions in the value of inventory may berequired.

###### ** **

##### *Asset Valuation.* Long-lived assets, such asproperty, plant, and equipment, subject to depreciation, are reviewed forimpairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Recoverability of assets tobe held and used is measured by a comparison of the carrying amount of an assetto estimated undiscounted future cash flows expected to be generated by theasset. If the carrying amount of an asset exceeds its estimated future cashflows, an impairment charge is recognized by the amount by which the carryingamount of the asset exceeds the fair value of the asset. The valuation of theseassets is dependent on the Company’s ability to continue to generate profits atboth the Company and store levels.

 

While the Company has taken reasonable care in preparing these estimatesand making these judgments, actual results could and probably will differ fromthe estimates.  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.

 

**Results of Operations**

 

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

 
|                                     |   | **Percentage  of Net Sales  Three Months Ended** |       |
|------------------------------------------|--------|--------------------------------------------------|------------|
|                                     |   | **May 3,  2003**                                 |       | **May 1,  2004** |   |
|                                     |   |                                             |       |   |   |
| Net sales                                |   | 100.0                                            | %          | **100.0** | **%** |
| Cost of goods sold                       |   | 42.8                                             | ** ** | **38.7** | ** ** |
|                                     |   |                                             | ** ** |   | ** ** |
| Gross profit                             |   | 57.2                                             | ** ** | **61.3** | ** ** |
| General and administrative expenses      |   | 11.3                                             | ** ** | **10.7** | ** ** |
| Sales and marketing expenses             |   | 38.7                                             | ** ** | **38.3** | ** ** |
| Store opening costs                      |   | 0.6                                              | ** ** | **0.3** | ** ** |
|                                     |   |                                             | ** ** |   | ** ** |
| Operating income                         |   | 6.6                                              | ** ** | **12.0** | ** ** |
| Interest expense, net                    |   | 0.5                                              | ** ** | **0.6** | ** ** |
| Income before provision for income taxes |   | 6.1                                              | ** ** | **11.4** | ** ** |
| Provision for income taxes               |   | 2.6                                              | ** ** | **4.7** | ** ** |
| Net income                               |   | 3.5                                              | %          | **6.7** | **%** |

 

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**Net sales**- Netsales increased 28.3% or $17.6 million to $79.9 million in the first quarter offiscal 2004 compared with $62.3 million in the first quarter of fiscal2003.  The sales increase was primarilyrelated to a 30.6% increase in store sales and a 18.7% increase in directmarketing sales. The sales increases were primarily due to increases in salesof suits, shirts, ties and sportswear..

 

The followingtable summarizes store opening and closing activity during the respectiveperiods.

 
|                                        |   | **Three  Months Ended** |   |
|---------------------------------------------|--------|-------------------------|--------|
|                                        |   | **May 3,  2003**        |   | **May 1,  2004** |   |
|                                        |   | **Stores**              |   | **Square  Feet*** |   | **Stores** |   | **Square  Feet*** |   |
|                                        |   |                    |   |   |   |   |   |   |   |
| Stores open at the beginning of the quarter |   | 160                     |   | 846 |   | **210** | ** ** | **1,062** | ** ** |
| Stores opened                               |   | 15                      |   | 69 |   | **9** | ** ** | **38** | ** ** |
| Stores closed                               |   | 0                       |   | 0 |   | **(1** | **)** | **(5** | **)** |
| Stores open at the end of the quarter       |   | 175                     |   | 915 |   | **218** | ** ** | **1,095** | ** ** |

 

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*square feet is presented in thousands and excludes franchise stores

 

**Gross profit**-Gross profit (net sales less cost of goods sold) increased to $49.0 million or61.3% of net sales in the first quarter of fiscal 2004 from $35.6 million or57.2% of net sales in the first quarter of fiscal 2003.  The increased gross profit percentage isprimarily due to the continued improvement in sourcing of merchandise, thusreducing the cost of items purchased, and increases in retail prices primarilyas sales of more luxurious Signature and Signature Gold productsincreased.  Gross profit margins increasedin substantially all major product categories. The Company is continuing its efforts to maintain and achieve furtherincreases in gross profit percent of sales in the future.

 

**Sales and Marketing Expenses**– Sales and marketing expenses, which consist primarily of a) full-line store,factory store and direct marketing occupancy, payroll, selling and othervariable costs and b) total Company advertising and marketing expenses,increased to $30.7 million or 38.3% of sales in the first quarter of fiscal2004 from $24.1 million or 38.7% of sales in the first quarter of fiscal2003.  The $6.6 million increase insales and marketing expenses relates primarily to a) $4.8 million of additionalcosts incurred in the 43 stores opened since the end of the first quarter offiscal 2003 and the incremental costs for the 15 stores which opened in thefirst quarter of fiscal 2003 and b) $1.8 million additional costs related toexpenses in the stores which were open prior to fiscal 2003 as well as totalCompany marketing costs.  The Companyexpects sales and marketing expenses to increase in fiscal 2004 primarily as aresult of opening 55 to 65 new stores, the full year operation of stores thatwere opened during fiscal 2003, and an increase in advertising expenditures.

 

**General and Administrative Expenses**– General and administrative expenses, which consist primarily of corporatepayroll costs and overhead and distribution center costs, increased to $8.6million or 10.7% of sales in the first quarter of fiscal 2004 from $7.0 millionor 11.3% in the first quarter of 2003. The increases were primarily due to higher payroll and payroll relatedcosts, travel related costs and other expenses related to businessexpansion.  Continued growth in storesand the direct segment may result in

 

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increases in theseexpenses.  The increased expenses werepartially offset by a gain of $0.3 million related to the settlement of adispute in favor of the Company at the end of the quarter.

 

**Store Opening Costs**– Store opening costs, which include the initial promotional advertising costsas well as other start-up costs such as travel for recruitment, training, andsetup of new stores, decreased $0.1 million to $0.2 million in the firstquarter of fiscal 2004 from $0.3 million for the same period of 2003 dueprimarily to the opening of fewer stores in the first quarter of 2004 comparedwith the same period of 2003.

 

**Interest Expense, net**– Interest expense increased $0.2 million to $0.5 million in the first quarterof fiscal 2004 from $0.3 million for the same period of 2003.  The increase was due primarily to higherborrowing levels due to higher inventory and capital expenditures related tothe opening of new stores and was offset by a lower average interest rate.  Average monthly borrowings increased $20.6million to $24.9 million in the first quarter of fiscal 2004 compared with $4.3for the same period of fiscal 2003.  Theaverage interest rate was 2.97% for the first fiscal quarter of 2004 comparedwith 3.93% for the same period of 2003.

 

**Income Taxes** –The first quarter of fiscal 2004 effective income tax rate decreased to 41.3%compared with 42.4% in the first quarter of fiscal 2003.  The decrease was primarily due to higherprojected full year profitability of the Company while non-deductiblecompensation under Section 162 (m) of the Internal Revenue Code isexpected to decrease.

 

**Liquidityand Capital Resources** - The Company maintains a bank credit agreement (the “CreditAgreement”), which provides for a revolving loan having a limit determined by aformula based on the Company’s inventories and accounts receivable. InJanuary 2004, the Company extended the maturity date under the CreditAgreement to April 2008. The amended Credit Agreement increased theavailable maximum revolving amount under the facility up to $100 million.In addition, at any time prior to April 30, 2006, the Company has theoption to increase the amount which may be borrowed to $125 million. TheCredit Agreement also includes a) financial covenants concerning minimumEBITDA, b) limitations on capital expenditures and additional indebtednessand c) a restriction on the payment of dividends. The financial covenantsare in effect only if the Company’s availability in excess of outstandingborrowings is less than $7.5 million. The Company does not believe itsavailability in excess of borrowings will be less than $7.5 million duringfiscal 2004. As of May 1, 2004, the Company was in compliance with all loancovenants. Interest rates under the amended agreement are either at the primerate or at LIBOR plus 1.5% which are the same rates that existed for the sameperiod of fiscal 2003. The agreement also includes provisions for a seasonalover-advance.

 

The Company’savailability in excess of outstanding borrowings, as supported by the existingborrowing base under its Credit Agreement, was $52.9 million at May 1,2004 compared with $52.4 million at January 31, 2004.

 

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The followingtable summarizes the Company’s sources and uses of funds as reflected in theCondensed Consolidated Statements of Cash Flows (in thousands):

 
|                                                  |   | **Three  Months Ended** |    |
|-------------------------------------------------------|--------|-------------------------|---------|
|                                                  |   | **May 3,  2003**        |    | **May 1,  2004** |   |
| Cash (used in) provided by:                           |   |                    |    |   | ** ** |
| Operating activities                                  |   | $                       | (17,349 | ) | **$** | **(4,105** | **)** |
| Investing activities                                  |   | (3,823                  | )       | **(2,287** | **)** |
| Financing activities                                  |   | 14,137                  |    | **6,421** | ** ** |
| Net (decrease) increase in cash and cash  equivalents |   | $                       | (7,035  | ) | **$** | **29** | ** ** |

 

Cash used by theCompany’s operating activities in the first quarter of fiscal 2004 decreasedprimarily due to lower expenditures for inventory compared with the same periodof 2003.  Cash used for purchase ofinventory was $5.1 million for the first quarter of 2004 compared with $18.3million for the first quarter of 2003. Cash used in investing activities in the first quarter of 2004 relatesprimarily to capital expenditures for 9 new stores and was partially offset bythe proceeds for the disposal of certain equipment.  Cash provided by financing activities relates primarily to $7.7million from the Company’s revolving loan under the Credit Agreement and $0.4million from the proceeds of the exercise of stock options.  Also, the Company used $1.7 million for therepayment of long-term debt.

 

For fiscal 2004,the Company expects to spend between $17 to $20 million on capitalexpenditures, primarily to fund the opening of approximately 55 to 65 newstores, the renovation and/or relocation of at least two major stores, anexpansion of distribution center capacity and the implementation of varioussystems initiatives. Management believes that the Company’s cash fromoperations and availability under its Credit Agreement will be sufficient tofund its planned capital expenditures and operating expenses for fiscal2004.  The cost to open new stores isnet of negotiated landlord contributions to help fund the construction ofleasehold improvements for new stores. These amounts are typically paid by the landlords after the completionof construction by the Company and the receipt of appropriate lien waivers fromcontractors.  For the stores opened infiscal 2003, the Company negotiated approximately $9 million of landlordcontributions of which approximately $7 million have been collected, includingapproximately $1 million which was collected in the first quarter of 2004. Theremaining amount is expected to be received in fiscal 2004.  For the stores opened in the first quarterof fiscal 2004, the Company negotiated approximately $2 million of landlordcontributions, which is expected to be received by the end of fiscal 2004.

 

**Additional Information**

 

On or about April 22, 2004, the Company received a sub poena from theNew York Attorney General requiring the production of certain documentsrelating to the Company’sadvertising and in store promotions. The Company has produced documents in response to the subpoena and hasnot been notified of any further action. At this time, the Company is unable to determine whether it may be aparty to any proceedings, the nature of any such proceeding, the factual basisof any such potential proceeding, the relief which may be sought in any suchproceeding or whether such proceeding could have a material adverse effect onthe business, net assets or financial position of the Company.

 

**Subsequent Event**

 

On June 8, 2004, the Company's Board of Directors declared a 25% stockdividend payable on August 18, 2004 to stockholders of record as of July 30,2004.  There have been no restatementsto any weighted average share or per share amounts due to the record date notoccuring until July 30, 2004.

 

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 as risks associated with economic, weather, public health andother factors affecting consumer spending, the ability of the Company tofinance its expansion plans, the mix and pricing of goods sold, the marketprice of key raw materials such as wool and cotton, availability of lease sitesfor new stores, the ability to source product from its global supplier base andother competitive factors. These cautionary statements qualify all of theforward-looking statements the Company makes herein. The Company cannot assureyou 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

 

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dates, and assumes no obligation to updateany of the forward-looking statements. These risks should be carefully reviewedbefore making any investment decision.

 

**Item 3****.**                                   **Quantitative and Qualitative Disclosuresabout Market Risk**

 

At May 1, 2004, there were no derivative financialinstruments.  In addition, the Companydoes not believe it is materially at risk for changes in market interest ratesor foreign currency fluctuations. The Company’s interest on borrowings underits Credit Agreement is at a variable rate based on the prime rate or a spreadover the LIBOR.

 

**Item 4.**                                   **Internal****Controlsand Procedures**

 

Within90 days prior to the date of this report, the Company carried out, underthe supervision and with the participation of the Company’s management,including the Company’s Chief Executive Officer and the Company’s ChiefFinancial Officer, an evaluation of the effectiveness of the design and operationof the Company’s disclosure controls and procedures pursuant toRule 13a-14 of the Securities Exchange Act of 1934. Based on thatevaluation, the Company’s Chief Executive Officer and Chief Financial Officerconcluded that as of May 1, 2004 the Company’s disclosure controls andprocedures are effective to ensure that information required to be disclosed bythe Company in the reports it files or submits under the Securities ExchangeAct of 1934, as amended, is recorded, processed, summarized and reported withinthe time periods specified in the SEC’s rules and forms.

 

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

 

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**PARTII.****                                                OTHERINFORMATION**

 

**Item1.****                                   LegalProceedings**

 

From time to time,legal matters in which the Company may be named as a defendant arise in thenormal course of the Company's business activities.  Although the outcome of these lawsuits or other proceedingsagainst the Company cannot be accurately predicted, the Company does not expectthat any such liability will have a material adverse effect on the business,net assets or financial position of the Company.

 

**Item 6.****                                   Exhibitsand Reports on Form 8-K**

 

(a) Exhibits

 
| 31.1 |   | Certification of Chief Executive Officer pursuant to Rule 13a-14 or  15d-14(a).                                                                                |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification of Chief Financial Officer pursuant to Rule 13a-14 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. |

 

 

(b) Reports onform 8-K

 

On April 8, 2004, the Company filed a Form 8-K, Item 12,disclosing that on April 7, 2004 the Company issued a press release inwhich the Company announced, among other things, certain sales information forfiscal March 2004 and earnings guidance for the first quarter of fiscal2004.

 

OnApril 21, 2004, the Company filed a report on Form 8-K, Item 4, announcingthat on April 19, 2004 the Company dismissed KPMG as its principal accountant.On April 20, 2004 the Company engaged Ernst & Young LLP as itsprincipal accountant to audit the Company’s financial statements.

 

OnMay 14, 2004, the Company filed a report on Form 8-K, Item 4, announcing thaton May 12, 2004, Deloitte & Touche LLP was engaged as our principalaccountant to audit our financial statements for the 2004 Fiscal Year.

 

OnJune 9, 2004, the Company filed a report on Form 8-K, Item 5, announcing thaton June 8, 2004, the Company's Board of Directors declared a 25% stock dividendpayable on August 18, 2004 to stockholders of record as of July 30, 2004.

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
| Dated:  June 9, 2004 | Jos. A. Bank Clothiers,  Inc.                       |
|--------------------------------|-----------------------------------------------------|
|                           | (Registrant)                                        |
|                           |                                                |
|                           |   /s/   David E. Ullman                   |   |
|                           | David E. Ullman                                     |
|                           | Executive Vice  President,  Chief Financial Officer |

 

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