XNAS:JOSB Quarterly Report 10-Q Filing - 4/28/2012

Effective Date 4/28/2012



 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 28, 2012.
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number 0-23874
Jos. A. Bank Clothiers, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
36-3189198
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
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, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer þ
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class
 
Outstanding as of May 23, 2012
Common Stock, $.01 par value
 
27,836,804
 
 
 
 
 




JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



Cautionary Statement

This Quarterly Report on Form 10-Q includes and incorporates by reference certain statements that may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words “estimate,” “project,” “plan,” “will,” “anticipate,” “expect,” “intend,” “outlook,” “may,” “believe,” “assume,” and other similar expressions are intended to identify forward-looking statements and information.

Actual results may differ materially from those forecasted due to a variety of factors outside of our control that can affect our operating results, liquidity and financial condition. Such factors include risks associated with economic, weather, public health and other factors affecting consumer spending, including negative changes to consumer confidence and other recessionary pressures, higher energy and security costs, the successful implementation of our growth strategy, including our ability to finance our expansion plans, the mix and pricing of goods sold, the effectiveness and profitability of new concepts, the market price of key raw materials such as wool and cotton, seasonality, merchandise trends and changing consumer preferences, the effectiveness of our marketing programs, including compliance with relevant legal requirements, the availability of suitable lease sites for new stores, doing business on an international basis, the ability to source product from our global supplier base, legal and regulatory matters and other competitive factors. The identified risk factors and other factors and risks that may affect our business or future financial results are detailed in our filings with the Securities and Exchange Commission, including, but not limited to, those described under “Risk Factors” in our Annual Report on Form 10-K for fiscal year 2011 and this Quarterly Report on Form 10-Q, and in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. These risks should be carefully reviewed before making any investment decisions. These cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure you that the results or developments anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution you not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. We do not undertake an obligation to update or revise any forward-looking statements to reflect actual results or changes in our assumptions, estimates or projections.



3



PART I. FINANCIAL INFORMATION

Item 1.
Unaudited Condensed Consolidated Financial Statements

JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)

 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands, except per share information)
Net sales
$
193,270

 
$
201,354

Cost of goods sold
67,957

 
73,593

Gross profit
125,313

 
127,761

Operating expenses:
 
 
 
Sales and marketing, including occupancy costs
78,852

 
85,762

General and administrative
17,424

 
17,591

Total operating expenses
96,276

 
103,353

Operating income
29,037

 
24,408

Other income (expense):
 
 
 
Interest income
132

 
68

Interest expense
(3
)
 
(12
)
Total other income (expense)
129

 
56

Income before provision for income taxes
29,166

 
24,464

Provision for income taxes
11,356

 
9,632

Net income
$
17,810

 
$
14,832

Per share information:
 
 
 
Earnings per share:
 
 
 
Basic
$
0.64

 
$
0.53

Diluted
$
0.64

 
$
0.53

Weighted average shares outstanding:
 
 
 
Basic
27,622

 
27,831

Diluted
27,928

 
27,995

See accompanying notes.


4



JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

 
January 28, 2012
 
April 28, 2012
 
(In thousands)
 
(Audited)
 
(Unaudited)
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
87,230

 
$
30,371

Short-term investments
240,252

 
233,564

Accounts receivable, net
15,906

 
19,309

Inventories:
 
 
 
Finished goods
288,182

 
332,832

Raw materials
16,473

 
18,060

Total inventories
304,655

 
350,892

Prepaid expenses and other current assets
20,886

 
25,545

Total current assets
668,929

 
659,681

NONCURRENT ASSETS:
 
 
 
Property, plant and equipment, net
144,392

 
142,671

Other noncurrent assets
291

 
280

Total assets
$
813,612

 
$
802,632

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
66,664

 
$
52,058

Accrued expenses
92,937

 
83,297

Deferred tax liability — current
8,479

 
8,483

Total current liabilities
168,080

 
143,838

NONCURRENT LIABILITIES:
 
 
 
Deferred rent
47,600

 
46,073

Deferred tax liability — noncurrent
11,973

 
11,314

Other noncurrent liabilities
1,025

 
1,400

Total liabilities
228,678

 
202,625

COMMITMENTS AND CONTINGENCIES


 


STOCKHOLDERS’ EQUITY:
 
 
 
Common stock
277

 
277

Additional paid-in capital
91,766

 
92,007

Retained earnings
493,022

 
507,854

Accumulated other comprehensive income (loss)
(131
)
 
(131
)
Total stockholders’ equity
584,934

 
600,007

Total liabilities and stockholders’ equity
$
813,612

 
$
802,632

See accompanying notes.


5



JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
17,810

 
$
14,832

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
6,246

 
6,820

Loss on disposals of property, plant and equipment
61

 
42

Non-cash equity compensation
558

 
599

Increase (decrease) in deferred taxes
418

 
(655
)
Net (increase) in operating working capital and other components
(37,978
)
 
(78,890
)
Net cash (used in) operating activities
(12,885
)
 
(57,252
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(5,592
)
 
(5,937
)
Proceeds from maturities of short-term investments
179,814

 
118,958

Payments to acquire short-term investments
(158,979
)
 
(112,270
)
Net cash provided by investing activities
15,243

 
751

Cash flows from financing activities:
 
 
 
Income tax benefit from equity compensation plans
61

 
14

Net proceeds from issuance of common stock
67

 

Tax payments related to equity compensation plans


(372
)
Net cash provided by (used in) financing activities
128

 
(358
)
Net increase (decrease) in cash and cash equivalents
2,486

 
(56,859
)
Cash and cash equivalents — beginning of period
80,979

 
87,230

Cash and cash equivalents — end of period
$
83,465

 
$
30,371

See accompanying notes.


6



JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.
BASIS OF PRESENTATION

Jos. A. Bank Clothiers, Inc. is a nationwide designer, manufacturer, retailer and direct marketer (through stores, catalog and Internet) of men’s tailored and casual clothing and accessories and is a retailer of tuxedo rental products. The condensed consolidated financial statements include the accounts of Jos. A. Bank Clothiers, Inc. and its wholly-owned subsidiaries (collectively referred to as “we”, “our” or “us”). All intercompany balances and transactions have been eliminated in consolidation.

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

We operate on a 52-53 week fiscal year ending on the Saturday closest to January 31. The following fiscal years ended or will end on the dates indicated and will be referred to herein by their fiscal year designations:
Fiscal year 2007
February 2, 2008
Fiscal year 2008
January 31, 2009
Fiscal year 2009
January 30, 2010
Fiscal year 2010
January 29, 2011
Fiscal year 2011
January 28, 2012
Fiscal year 2012
February 2, 2013
Each fiscal year noted above consists of 52 weeks except fiscal year 2012, which consists of 53 weeks.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and therefore do not include all of the information and footnotes required by GAAP for comparable annual financial statements. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for fiscal year 2011.
2.
SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - Cash and cash equivalents include bank deposit accounts, money market accounts and other highly liquid investments with original maturities of 90 days or less. At April 28, 2012, substantially all of the cash and cash equivalents were invested in U.S. Treasury bills with original maturities of 90 days or less and overnight federally-sponsored agency notes.

Short-term Investments - Short-term investments consist of investments in securities with remaining maturities of less than one year, excluding investments with original maturities of 90 days or less. At April 28, 2012, short-term investments consisted solely of U.S. Treasury bills with remaining maturities ranging from less than one month to six months. These investments are classified as held-to-maturity and their market values approximate their carrying values.

Inventories - We record inventory at the lower of cost or market (“LCM”). Cost is determined using the first-in, first-out method. We capitalize into inventory certain warehousing and freight delivery costs associated with shipping our merchandise to the point of sale. We periodically review quantities of inventories on hand and compare these amounts to the expected sales of each product. We record a charge to cost of goods sold for the amount required to reduce the carrying value of inventory to estimated net realizable value.


7



Landlord Contributions - We typically receive reimbursement from landlords for a portion of the cost of leasehold improvements for new stores and, occasionally, for renovations and relocations. These landlord contributions are initially accounted for as an increase to deferred rent and as an increase to prepaid expenses and other current assets when the related store is opened. When collected, we record cash and reduce the prepaid expenses and other current assets account. The collection of landlord contributions is presented in the Condensed Consolidated Statements of Cash Flows as an operating activity. The deferred rent is amortized over the lease term in a manner that is consistent with our policy to straight-line rent expense over the term of the lease. The amortization is recorded as a reduction to sales and marketing expense, which is consistent with the classification of lease expense.

Gift Cards and Certificates - We sell gift cards and gift certificates to individuals and companies. Our incentive gift certificates are used by various companies as a reward for achievement for their employees. We also redeem proprietary gift cards and gift certificates marketed by third-party premium/incentive companies. We record a liability when a gift card/certificate is purchased. As the gift card/certificate is redeemed, we reduce the liability and record revenue. Substantially all of our gift cards/certificates do not have expiration dates and they are all subject to state escheatment laws. Based on historical experience, gift cards/certificates redemptions after the escheatment due date are remote and we recognize any income (also referred to as “breakage”) on these unredeemed gift cards/certificates on a specific identification basis on the escheatment due date.

Tuxedo Rental Products - Revenues from tuxedo rental products are recognized on a gross basis upon delivery of rental products to customers. When a customer orders a tuxedo rental from us, an order is placed with a national distributor who delivers the product to our stores, typically within several days of intended use. The national distributor owns the rental product and charges the Company a rental cost for each rental and delivery which is recorded to "Costs of goods sold".

Equity Compensation -We account for our equity awards in accordance with FASB ASC 718, “Share-Based Payment” (“ASC 718”), which requires the compensation cost resulting from all share-based awards to be recognized in the financial statements. The amount of compensation is measured based on the grant-date fair value of the awards and is recognized over the vesting period of the awards. The vesting of awards to both the officers and directors is subject to service conditions being met, currently ranging from one to three years. Additionally, the vesting of awards to officers is subject to performance conditions being met in the fiscal year that the awards are granted such as, among other things, the attainment of certain annual earnings and performance goals. For these officer awards, we estimate the probability that such goals will be attained based on results-to-date at each interim quarter-end and record compensation cost to "General and administrative expense" for these awards based on the awards projected to vest. Share-based compensation expense recognized for the first quarter of fiscal years 2011 and 2012 related to equity awards issued under the Jos. A. Bank Clothiers, Inc. 2010 Equity Incentive Plan (“Equity Incentive Plan”) was $0.5 million and $0.6 million, respectively. For the first quarter of fiscal years 2011 and 2012 the tax benefit recognized related to this compensation was $0.2 million for each period.

Recently Issued Accounting Standards - In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement” (“ASU 2011-04”). ASU 2011-04 is intended to create consistency between GAAP and International Financial Reporting Standards (“IFRS”) on the definition of fair value and on the guidance on how to measure fair value and on what to disclose about fair value measurements. ASU 2011-04 was effective for financial statements issued for fiscal periods beginning after December 15, 2011, with early adoption prohibited for public entities. The adoption of ASU 2011-04 for fiscal year 2011 did not have a material impact on our consolidated financial statements.
Recently Proposed Amendments to Accounting Standards - In August 2010, the FASB issued an exposure draft, “Leases” (the “Exposure Draft”), which would replace the existing guidance in ASC 840, “Leases.” Under the Exposure Draft, a lessee's rights and obligations under all leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. In July 2011, the FASB made the decision to issue a revised exposure draft; however, deliberations are still ongoing and the timing of the issuance of the revised exposure draft and the issuance of a final standard are uncertain at this time. If this lease guidance becomes effective on the terms currently proposed by FASB, it will likely have a significant impact on our consolidated financial statements. However, as the standard-setting process is still ongoing, we are unable to determine at this time the impact this proposed change in accounting may have on our consolidated financial statements.

8



3.
SUPPLEMENTAL CASH FLOW DISCLOSURE
The net changes in operating working capital and other components consist of the following:
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands)
(Increase) in accounts receivable
$
(4,924
)
 
$
(3,403
)
(Increase) in inventories
(28,568
)
 
(46,237
)
(Increase) in prepaids and other assets
(4,146
)
 
(4,648
)
Increase (decrease) in accounts payable
15,250

 
(14,606
)
(Decrease) in accrued expenses
(16,131
)
 
(8,844
)
Increase (decrease) in deferred rent and other noncurrent liabilities
541

 
(1,152
)
Net (increase) in operating working capital and other components
$
(37,978
)
 
$
(78,890
)
Interest and income taxes paid were as follows:
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands)
Interest paid
$
2

 
$
12

Income taxes paid
$
23,460

 
$
18,817

As of April 30, 2011 and April 28, 2012, included in “Property, plant and equipment, net” and “Accrued expenses” in the Condensed Consolidated Balance Sheets are $6.1 million and $5.9 million, respectively, of accrued property, plant and equipment additions that have been incurred but not invoiced by vendors, and therefore, not paid by the respective period-ends. The net increase of $4.4 million for the first quarter of fiscal year 2011 and the net decrease of $0.8 million for the first quarter of fiscal year 2012 are excluded from payments for capital expenditures and changes in accrued expenses in the Condensed Consolidated Statements of Cash Flows, as these changes are non-cash items.
4.
EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income by the diluted weighted average common shares, which reflects the potential dilution of common stock equivalents. The weighted average shares used to calculate basic and diluted EPS are as follows:
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands)
Weighted average shares outstanding for basic EPS
27,622

 
27,831

Dilutive effect of common stock equivalents
306

 
164

Weighted average shares outstanding for diluted EPS
27,928

 
27,995


We use the treasury method for calculating the dilutive effect of common stock equivalents. For the first quarter of fiscal years 2011 and 2012, there were no anti-dilutive common stock equivalents.

9



5.
INCOME TAXES

Income taxes are accounted for under the asset and liability method in accordance with FASB ASC 740, “Income Taxes,” (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Condensed Consolidated Statements of Income in the period that includes the enactment date.

We account for uncertainties in income taxes pursuant to ASC 740, which clarifies the accounting for uncertainty in income taxes recognized in financial statements. We recognize tax liabilities for uncertain income tax positions (“unrecognized tax benefits”) where an evaluation has indicated that it is more likely than not that the tax positions will not be sustained in an audit. We estimate the unrecognized tax benefits as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We re-evaluate these uncertain tax positions on a quarterly basis or when new information becomes available to management. The re-evaluations are based on many factors, including, but not limited to, changes in facts or circumstances, changes in tax law, settled issues as a result of audits, expirations due to statutes of limitations, and new federal or state audit activity. We also recognize accrued interest and penalties related to these unrecognized tax benefits. Changes in these accrued items are included in the provision for income taxes in the Condensed Consolidated Statements of Income.

The effective income tax rate for the first quarter of fiscal year 2012 was 39.4% as compared with 38.9% for the first quarter of fiscal year 2011. The rate increase for the first quarter of fiscal year 2012 was primarily driven by an increase in the liability for unrecognized benefits, partially offset by lower state income taxes.

Significant changes to U.S. federal or state income tax rules could occur as part of future legislation. Such changes could influence our future income tax expense and/or the timing of income tax deductions. The impact of such changes on our business operations and financial statements remains uncertain. However, as the possibility of any enactment progresses, we will continue to monitor current developments and assess the potential implications of these tax law changes on our business and consolidated financial statements.

We file a federal income tax return and state and local income tax returns in various jurisdictions. The Internal Revenue Service (“IRS”) has audited tax returns through fiscal year 2008, including its examination of the tax returns for fiscal years 2007 and 2008, which was finalized in October 2010. No material adjustments were required to these tax returns as a result of the examination by the IRS. For the years before fiscal year 2008, the majority of our state and local income tax returns are no longer subject to examinations by taxing authorities.

6.
SEGMENT REPORTING
We have two reportable segments: Stores and Direct Marketing. The Stores segment includes all Company-owned stores excluding Outlet and Factory stores (“Full-line Stores”). The Direct Marketing segment includes our catalog call center and Internet operations. While each segment offers a similar mix of men’s clothing to the retail customer, the Stores segment also provides complete alterations, while the Direct Marketing segment provides certain limited alterations.
The accounting policies of the segments are the same as those described in the summary of significant policies. We evaluate performance of the segments based on “four wall” contribution, which excludes any allocation of overhead from the corporate office and the distribution centers (except order fulfillment costs, which are allocated to Direct Marketing), interest and income taxes.
Our segments are strategic business units that offer similar products to the retail customer by two distinctively different methods. In the Stores segment, a typical customer travels to the store and purchases our merchandise and/or alterations and takes their purchases with them. The Direct Marketing customer receives a catalog in his or her home and/or office and/or visits our Internet web sites and places an order by phone, mail, fax or online. The merchandise is then shipped to the customer.

10



Segment data is presented in the following tables:
Three months ended April 28, 2012

 
Stores
 
Direct Marketing
 
Corporate and
Other
 
Total
 
(In thousands)
Net sales (a)
$
174,763

 
$
18,545

 
$
8,046

 
$
201,354

Depreciation and amortization
5,535

 
174

 
1,111

 
6,820

Operating income (loss) (b)
36,137

 
6,187

 
(17,916
)
 
24,408

Capital expenditures (c)
4,639

 
57

 
1,241

 
5,937

Three months ended April 30, 2011
 
Stores
 
Direct Marketing
 
Corporate and
Other
 
Total
 
(In thousands)
Net sales (a)
$
169,855

 
$
18,724

 
$
4,691

 
$
193,270

Depreciation and amortization
5,212

 
177

 
857

 
6,246

Operating income (loss) (b)
38,769

 
7,541

 
(17,273
)
 
29,037

Capital expenditures (c)
4,931

 
8

 
653

 
5,592

_________________________________________
(a)
Stores net sales represent all Full-line Store sales. Direct Marketing net sales represent catalog call center and Internet sales. Net sales from operating segments below the GAAP quantitative thresholds are attributable primarily to our two other operating segments -- Outlet and Factory stores and Franchise stores. These operating segments have never met any of the quantitative thresholds for determining reportable segments and are included in “Corporate and Other.”
(b)
Operating income (loss) for the Stores and Direct Marketing segments represents profit before allocations of overhead from the corporate office and the distribution centers, interest and income taxes (“four wall” contribution). Total Company shipping costs to customers of approximately $2.9 million and $2.8 million for the first quarter of fiscal years 2011 and 2012, respectively, were recorded to “Sales and marketing, including occupancy costs” in the Condensed Consolidated Statements of Income. Operating income (loss) for “Corporate and Other” consists primarily of costs included in general and administrative costs and operating income or loss related to the Outlet and Factory stores and the Franchise stores operating segments. Total operating income represents profit before interest and income taxes.
(c)
Capital expenditures include payments for property, plant and equipment made for the reportable segment.

7.
LEGAL MATTERS

On March 16, 2012, Neil Holmes, a former employee of the Company, individually and on behalf of all those similarly situated, filed a Complaint against the Company in the Superior Court of California, County of Santa Clara, Case No. 112CV220780, alleging various violations of California wage and labor laws. The Complaint seeks, among other relief, certification of the case as a class action, injunctive relief, monetary damages, penalties, restitution, other equitable relief, interest, attorney's fees and costs. We intend to defend this lawsuit vigorously.
On April 5, 2012, James Waldron and Matthew Villani, on their own behalf and on behalf of all others similarly situated, filed a Class Action Complaint against the Company in the United States District Court for the District of New Jersey (Case 2:33-av-00001) alleging, among other things, that the Company’s merchandise is perpetually on sale and the sale price is actually the price at which the merchandise is regularly offered. As a result, the Complaint alleges, the Company’s advertising practices violate the New Jersey Consumer Fraud Act and constitute unjust enrichment. The Complaint seeks, among other relief, certification of the case as a national (or New Jersey only) class action, injunctive relief, declaratory relief, disgorgement of profits, monetary damages (including treble damages), restitution, costs and attorneys’ fees, statutory pre-judgment interest and other legal and equitable relief. We intend to defend this lawsuit vigorously.

11



In addition to the litigation discussed above, we are a party to routine litigation matters that are incidental to our business. From time to time, additional legal matters in which we may be named as a defendant are expected to arise in the normal course of our business activities.
The resolution of our litigation matters cannot be accurately predicted and we have not estimated the costs or potential losses, if any, associated with these matters. Accordingly, we cannot determine whether our insurance coverage, if any, would be sufficient to cover such costs or potential losses, if any, and we have not recorded any provision for cost or loss associated with these actions. It is possible that our consolidated financial statements could be materially impacted in a particular fiscal quarter or year by an unfavorable outcome or settlement of any of these actions.

12



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

The information that follows should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for fiscal year 2011.

Overview - For the first quarter of fiscal year 2012, our net income was $14.8 million, a decrease of 16.7% as compared with $17.8 million for the first quarter of fiscal year 2011. We earned $0.53 per diluted share in the first quarter of fiscal year 2012 as compared with $0.64 per diluted share in the first quarter of fiscal year 2011. As such, diluted earnings per share decreased 17.2% as compared with the prior year period. The results of the first quarter of fiscal year 2012, as compared to the first quarter of fiscal year 2011, were primarily driven by:

4.2% increase in net sales, driven by a 2.9% increase in the Stores segment sales, which includes the impact of new stores opened, a 1.0% decrease in the Direct Marketing segment sales and a 71.5% increase in the Corporate and Other segment sales, due primarily to the impact of new Factory stores;

1.0% decrease in comparable store sales;

130 basis point decrease in gross profit margins as a result of higher mark-downs and lower initial mark-ups due primarily to higher sourcing costs;

180 basis point increase in sales and marketing costs as a percentage of sales driven primarily by higher advertising and marketing, Stores and Direct Marketing payroll and occupancy costs as a percentage of sales, partially offset by lower other variable selling costs as a percentage of sales; and

30 basis point decrease in general and administrative costs as a percentage of sales driven primarily by lower corporate compensation (which includes total company performance-based incentive compensation other than commissions) and other corporate overhead costs as a percentage of sales, partially offset by higher distribution center costs as a percentage of sales.

As of the end of the first quarter of fiscal year 2012, we had 559 stores, consisting of 518 Company-owned Full-line Stores, 26 Company-owned Outlet and Factory stores and 15 stores owned and operated by franchisees. We opened 3 stores in the first quarter of fiscal year 2012, including 1 new Factory store. In the past five years, we have opened 191 stores. Specifically, there were 48 new stores opened in fiscal year 2007, 40 new stores opened in fiscal year 2008, 14 new stores opened in fiscal year 2009, 36 new stores opened in fiscal year 2010 and 53 new stores opened in fiscal year 2011. The lower number of store openings in fiscal year 2009 compared to the other years was due primarily to the impact of the national economic crisis that occurred during late 2008 and into 2009, which included, but was not limited to, slowed development of malls and retail centers which restricted our ability to find suitable locations for new stores.

We expect to open approximately 45 to 50 stores in fiscal year 2012, including the 3 stores opened in the first quarter of fiscal year 2012. This range also includes approximately 10 Factory stores. Currently, we believe that the chain can be grown to approximately 600 Full-line Stores and 50 to 75 Factory stores in the United States, depending on our performance over the next several years and the development of the Factory store concept, among other factors. Based on the results of the stores opened in the past several years and our analysis of the U.S. real estate market, among other factors, we expect to update the estimate of future store opening opportunities sometime in 2012.

Capital expenditures in fiscal year 2012 are expected to be approximately $35 million to $38 million, primarily to fund the opening of approximately 45 to 50 new stores, the renovation and/or relocation of several stores, the expansion and maintenance of our distribution space and the implementation of various systems and infrastructure projects. The capital expenditures include the cost of the construction of leasehold improvements for new stores and several stores to be renovated or relocated, of which approximately $6.0 million to $7.0 million is expected to be reimbursed through landlord contributions.


13



From the end of the first quarter of fiscal year 2011 to the end of the first quarter of fiscal year 2012, inventory increased $89.0 million or 34.0% due primarily to new store openings, higher inventory sourcing costs, carryover of cold weather inventory from fiscal year 2011 due to lower than planned sales as a result of the effects of the warmer winter weather and a buildup of core product inventory levels (which we started in the second half of fiscal year 2011). We are adjusting our future purchases of cold weather inventory for the third and fourth quarters of fiscal year 2012. As a result, through at least the second quarter of fiscal year 2012, we expect total inventories to increase at a similar rate to the first quarter. We expect the rate of inventory growth by the end of fiscal year 2012 to be approximately 15% to 20%, depending on sales and other factors in fiscal year 2012.
Critical Accounting Policies and Estimates - In preparing the consolidated financial statements, a number of assumptions and estimates are made that, in the judgment of management, are proper in light of existing general economic and company-specific circumstances. For a detailed discussion of the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal year 2011.

While we have taken reasonable care in preparing these estimates and making these judgments, actual results could and probably will differ from these estimates. Management believes any difference in the actual results from the estimates will not have a material effect upon our financial position or results of operations. These estimates, among other things, were discussed by management with our Audit Committee.

Inventory. We record inventory at the lower of cost or market (“LCM”). Cost is determined using the first-in, first-out method. The estimated market value is based on assumptions for future demand and related pricing. We reduce the carrying value of inventory to net realizable value where cost exceeds estimated selling price less costs of disposal.

Management’s sales assumptions regarding sales below cost are based on our experience that most of our inventory is sold through our primary sales channels, with virtually no inventory being liquidated through bulk sales to third parties. Our LCM estimates for inventory that have been made in the past have been very reliable as a significant portion of our sales (approximately two-thirds in fiscal year 2011) are of classic, traditional products that are part of on-going programs and that bear low risk of write-down below cost. These products include items such as navy and gray suits, navy blazers, white and blue dress shirts, etc. To limit the need to sell significant amounts of product below cost, all product categories are closely monitored in an attempt to identify and correct situations in which aging goals have not been, or are not reasonably likely to be, achieved. In addition, our strong gross profit margins enable us to sell substantially all of our products above cost.

To calculate the estimated market value of our inventory, we periodically perform a detailed review of all of our major inventory classes and stock-keeping units and perform an analytical evaluation of aged inventory on a quarterly basis. Semi-annually, we compare the on-hand units and season-to-date unit sales (including actual selling prices) to the sales trend and estimated prices required to sell the units in the future, which enables us to estimate the amount which may have to be sold below cost. Substantially all of the units sold below cost are sold in our Outlet and Factory stores, through the Internet websites and catalog call center or on clearance at the Full-line Stores, typically within 24 months of purchase. Our costs in excess of selling price for units sold below cost totaled $1.8 million and $1.6 million in fiscal year 2010 and fiscal year 2011, respectively. We reduce the carrying amount of our current inventory value for products in inventory that may be sold below cost. If the amount of inventory which is sold below cost differs from the estimate, our inventory valuation adjustment could change.

Asset Valuation. Long-lived assets, such as property, plant and equipment subject to depreciation, are reviewed for impairment to determine whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds our estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. The asset valuation estimate is principally dependent on our ability to generate profits at both the Company and store levels. These levels are principally driven by the sales and gross profit trends that we closely monitor. While we perform a quarterly review of our long-lived assets to determine if impairment exists, the fourth quarter is typically the most significant quarter to make such a determination since it provides the best indication of performance trends in the individual stores. There were no asset valuation charges in either the first quarter of fiscal year 2012 or the first quarter of fiscal year 2011.


14



Lease Accounting. We use a consistent lease period (generally, the initial non-cancelable lease term plus renewal option periods provided for in the lease that can be reasonably assured) when calculating amortization of leasehold improvements and in determining straight-line rent expense and classification of a lease as either an operating lease or a capital lease. The lease term and straight-line rent expense commence on the date when we take possession and have the right to control the use of the leased premises. Funds received from the lessor intended to reimburse us for the costs of leasehold improvements are recorded as a deferred rent resulting from a lease incentive and are amortized over the lease term as a reduction to rent expense.

Recently Issued Accounting Standards. In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement” (“ASU 2011-04”). ASU 2011-04 is intended to create consistency between GAAP and International Financial Reporting Standards (“IFRS”) on the definition of fair value and on the guidance on how to measure fair value and on what to disclose about fair value measurements. ASU 2011-04 was effective for financial statements issued for fiscal periods beginning after December 15, 2011, with early adoption prohibited for public entities. The adoption of ASU 2011-04 for fiscal year 2011 did not have a material impact on our consolidated financial statements.
Recently Proposed Amendments to Accounting Standards. In August 2010, the FASB issued an exposure draft, “Leases” (the “Exposure Draft”), which would replace the existing guidance in ASC 840, “Leases.” Under the Exposure Draft, a lessee's rights and obligations under all leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. In July 2011, the FASB made the decision to issue a revised exposure draft; however, deliberations are still ongoing and the timing of the issuance of the revised exposure draft and the issuance of a final standard are uncertain at this time. If this lease guidance becomes effective on the terms currently proposed by FASB, it will likely have a significant impact on our consolidated financial statements. However, as the standard-setting process is still ongoing, we are unable to determine at this time the impact this proposed change in accounting may have on our consolidated financial statements.
Results of Operations
The following table is derived from our Condensed Consolidated Statements of Income and sets forth, for the periods indicated, the items included in the Condensed Consolidated Statements of Income expressed as a percentage of net sales.
 
Percentage of Net Sales
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
Net sales
100.0
%
 
100.0
%
Cost of goods sold
35.2

 
36.5

Gross profit
64.8

 
63.5

Sales and marketing expenses
40.8

 
42.6

General and administrative expenses
9.0

 
8.7

Total operating expenses
49.8

 
51.3

Operating income
15.0

 
12.1

Total other income
0.1

 

Income before provision for income taxes
15.1

 
12.1

Provision for income taxes
5.9

 
4.8

Net income
9.2
%
 
7.4
%
Net Sales — Net sales increased 4.2% to $201.4 million in the first quarter of fiscal year 2012 as compared with $193.3 million in the first quarter of fiscal year 2011. The total sales increase includes an increase in the Stores segment sales of 2.9% for the first quarter of fiscal year 2012, driven primarily by sales from new stores, partially offset by a decrease in comparable store sales. Comparable store sales decreased 1.0% for the first quarter of fiscal year 2012. This decrease in comparable store sales for the first quarter of fiscal year 2012 was primarily due to lower traffic (as measured by number of transactions). The decline was also partially due to the warmer winter weather which resulted in lower sales of outerwear and cold weather merchandise during the first quarter of fiscal year 2012. Comparable store sales include merchandise and tuxedo rental sales generated in all Company-owned stores that have been open for at least 13 full months.

15



Direct Marketing segment sales decreased 1.0% for the first quarter of fiscal year 2012 as compared to the first quarter of fiscal year 2011, driven primarily by a decrease in catalog call center sales, partially offset by a slight increase in the Internet channel, which represents the primary portion of this reportable segment. The increase in the Internet channel for the first quarter of fiscal year 2012 was primarily the result of higher website traffic, partially offset by lower average order values and conversion rates.
Of the major product categories, dress shirts generated strong unit sales growth and suits and sportswear generated slight unit sales growth, while other tailored clothing (which includes sportcoats, blazers and dress pants) unit sales declined during the first quarter of fiscal year 2012.
The following table summarizes store opening and closing activity during the respective periods.
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
Stores
 
Square
Feet*
 
Stores
 
Square
Feet*
Stores open at the beginning of the period
506

 
2,282

 
556

 
2,474

Stores opened
9

 
43

 
3

 
12

Stores closed

 

 

 

Stores open at the end of the period
515

 
2,325

 
559

 
2,486


*Square feet are presented in thousands and exclude the square footage of our franchise stores.

Gross profit - Our gross profit represents net sales less cost of goods sold. Cost of goods sold primarily includes the cost of merchandise, tailoring and freight from vendors to the distribution center and from the distribution center to the stores. This gross profit classification may not be comparable to the classification used by certain other entities. Some entities include distribution (including depreciation), store occupancy, buying and other costs in cost of goods sold. Other entities (including us) exclude such costs from gross profit, including them instead in general and administrative and/or sales and marketing expenses.

Gross profit totaled $127.8 million or 63.5% of net sales in the first quarter of fiscal year 2012, as compared with $125.3 million or 64.8% of net sales in the first quarter of fiscal year 2011, an increase in gross profit dollars of approximately $2.5 million and a decrease in the gross profit margin (gross profit as a percent of net sales) of 130 basis points. The decrease in gross profit margin for the first quarter was due to higher mark-downs as compared to the prior year period as a result of increased promotional activity and lower initial mark-ups due primarily to higher sourcing costs.

As stated in our Annual Report on Form 10-K for fiscal year 2011, we are subject to certain risks that may affect our gross profit, including risks of doing business on an international basis, increased costs of raw materials and other resources and changes in economic conditions. We expect to continue to be subject to these gross profit risks in the future. Specifically, with respect to the costs of raw materials, our products are manufactured using several key raw materials, most notably wool and cotton. The prices on these commodities, as well as other costs in the supply chain, remain volatile and have a significant impact on our product costs which could potentially have a negative impact on our gross profit in fiscal year 2012. Additionally, our gross profit margin may be negatively impacted during the development phase of some of our new business initiatives such as the tuxedo rental business and the Factory store concept.

Sales and Marketing Expenses - Sales and marketing expenses consist primarily of a) Full-line Store, Outlet and Factory store and Direct Marketing occupancy, payroll, selling and other variable selling costs (which include such costs as shipping costs to customers and credit card processing fees) and b) total Company advertising and marketing expenses. Sales and marketing expenses increased to $85.8 million or 42.6% of sales in the first quarter of fiscal year 2012 from $78.9 million or 40.8% of sales in the first quarter of fiscal year 2011. The increase as a percentage of sales for the first quarter of fiscal year 2012 was driven largely by advertising and marketing costs increasing at a higher growth rate than sales due primarily to increased promotional activity and online advertising as compared to last year. In addition, Stores and Direct Marketing payroll and benefits and occupancy costs increased as a percentage of sales due primarily to the additional costs of the new stores and the lower sales growth. These increases were partially offset by lower other variable selling costs as a percentage of sales due primarily to lower credit card processing fees.


16



The increase in sales and marketing expenses relates primarily to the opening of 47 new stores and the closing of three stores since the end of the first quarter of fiscal year 2011 and sales growth. For the first quarter of fiscal year 2012, the net increase of approximately $6.9 million compared with the first quarter of fiscal year 2011 consists of a) $2.6 million related to additional Stores and Direct Marketing payroll and benefits costs, b) $2.4 million related to additional occupancy costs, and c) $2.1 million related to advertising and marketing expenses, partially offset by lower other variable selling costs of $0.2 million. We expect sales and marketing expenses to increase for the remainder of fiscal year 2012 as compared to fiscal year 2011 primarily as a result of our anticipated opening of 45 to 50 new stores in fiscal year 2012, the full year operation of stores that were opened during fiscal year 2011, an increase in advertising expenditures, driven both by volume and price increases, and costs related to new business initiatives.
General and Administrative Expenses - General and administrative expenses (“G&A”), which consist primarily of corporate and distribution center costs, were $17.6 million and $17.4 million for the first quarter of fiscal years 2012 and 2011, respectively. As a percent of net sales, G&A expenses were 8.7% and 9.0% for the first quarter of fiscal years 2012 and 2011, respectively. The lower level of expenses as a percentage of sales for the first quarter of fiscal year 2012 was driven primarily by lower corporate compensation (which includes total company performance-based incentive compensation other than commissions) and other corporate overhead costs as a percentage of sales, partially offset by higher distribution center costs as a percentage of sales.

For the first quarter of fiscal year 2012, the increase of approximately $0.2 million compared with the first quarter of fiscal year 2011 was due to a) $0.6 million of higher distribution center costs, and b) $0.1 million of higher professional fees (including outsourced services), partially offset by lower corporate compensation (which includes total company performance-based incentive compensation other than commissions) and group medical costs of $0.5 million. We expect G&A expenses to increase for the remainder of fiscal year 2012 as compared to fiscal year 2011 primarily as a result of growth in the business.

Other Income (Expense) - Other income (expense) for the first quarter of fiscal year 2012 was less than $0.1 million of income compared to $0.1 million of income for the first quarter of fiscal year 2011. The decrease in the first quarter of fiscal year 2012 compared to the same period of fiscal year 2011 was due primarily to lower market interest rates in fiscal year 2012 on cash and short-term investments, partially offset by higher average cash and cash equivalents and short-term investment balances during the fiscal year 2012 period.
    
Income Taxes - The effective income tax rate for the first quarter of fiscal year 2012 was 39.4% as compared with 38.9% for the first quarter of fiscal year 2011. The rate increase for the first quarter of fiscal year 2012 was primarily driven by an increase in the liability for unrecognized benefits, partially offset by lower state income taxes.

Significant changes to U.S. federal or state income tax rules could occur as part of future legislation. Such changes could influence our future income tax expense and/or the timing of income tax deductions. The impact of such changes on our business operations and financial statements remains uncertain. However, as the possibility of any enactment progresses, we will continue to monitor current developments and assess the potential implications of these tax law changes on our business and consolidated financial statements.

We file a federal income tax return and state and local income tax returns in various jurisdictions. The Internal Revenue Service (“IRS”) has audited tax returns through fiscal year 2008, including its examination of the tax returns for fiscal years 2007 and 2008, which was finalized in October 2010. No material adjustments were required to these tax returns as a result of the examination by the IRS. For the years before fiscal year 2008, the majority of our state and local income tax returns are no longer subject to examinations by taxing authorities.

Seasonality - Our net sales, net income and inventory levels fluctuate on a seasonal basis and therefore the results for one quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. The increased customer traffic during the holiday season and our increased marketing efforts during this peak selling season have resulted in sales and profits generated during the fourth quarter being the largest quarter of annual sales and profits as compared to the other three quarters. Seasonality is also impacted by growth as more new stores have historically been opened in the second half of the year. During the fourth quarters of fiscal years 2009, 2010 and 2011, we generated approximately 36%, 37% and 35%, respectively, of our annual net sales and approximately 50%, 48% and 45%, respectively, of our annual net income.

17



Liquidity and Capital Resources - Our principal sources of liquidity are our cash from operations, cash and cash equivalents and short-term investments. These sources of liquidity are used for our ongoing cash requirements.

The following table summarizes our sources and uses of funds as reflected in the Condensed Consolidated Statements of Cash Flows:
 
Three Months Ended
 
April 30, 2011
 
April 28, 2012
 
(In thousands)
Cash provided by (used in):
 
 
 
Operating activities
$
(12,885
)
 
$
(57,252
)
Investing activities
15,243

 
751

Financing activities
128

 
(358
)
Net increase (decrease) in cash and cash equivalents
$
2,486

 
$
(56,859
)

Our cash and cash equivalents consist primarily of U.S. Treasury bills with original maturities of 90 days or less and overnight federally-sponsored agency notes. Our short-term investments consist of U.S. Treasury bills with remaining maturities of less than one year, excluding investments with original maturities of 90 days or less. The following table summarizes our cash and cash equivalents and short-term investments and debt balances balances as of the respective period ends:
 
April 30, 2011
 
January 28, 2012
 
April 28, 2012
 
(In thousands)
Cash and cash equivalents
$
83,465

 
$
87,230

 
$
30,371

Short-term investments
168,954

 
240,252

 
233,564

Total
$
252,419

 
$
327,482

 
$
263,935

 
 
 
 
 
 
Long-term debt
$

 
$

 
$

 
The significant changes in sources and uses of funds through April 28, 2012 are discussed below.

Cash used in our operating activities of $57.3 million in the first quarter of fiscal year 2012 was primarily the result of an increase in operating working capital and other components of $78.9 million, partially offset by net income of $14.8 million and depreciation and amortization and other non-cash items of $6.8 million. The increase in operating working capital and other components included the following:
an increase in inventory of $46.2 million primarily as a result of the replenishment of units sold in fiscal 2011, higher inventory sourcing costs, a buildup of core product inventory levels (which we started in the second half of fiscal year 2011) and unsold cold weather inventory;
an decrease in accounts payable of $14.6 million due primarily to the timing of payments to vendors;
a reduction in accrued expenses totaling $8.8 million (excluding accrued property, plant and equipment) related primarily to the payment of incentive compensation and income taxes that had been accrued at the end of fiscal year 2011;
an increase in accounts receivable of $3.4 million due primarily to higher credit card receivables from transactions through American Express, MasterCard and Visa as a result of increased sales near the end of the first quarter of fiscal year 2012 as compared with the end of fiscal year 2011; and
an increase in prepaid and other assets of $4.6 million due primarily to an increase in prepaid income taxes.

18



Accounts payable represent all short-term liabilities for which we have received a vendor invoice prior to the end of the reporting period. Accrued expenses represent all other short-term liabilities related to, among other things, vendors from whom invoices have not been received, employee compensation, federal and state income taxes and unearned gift cards and gift certificates.
From the end of the first quarter of fiscal year 2011 to the end of the first quarter of fiscal year 2012, inventory increased $89.0 million or 34.0% due primarily to new store openings, higher inventory sourcing costs, carryover of cold weather inventory from fiscal year 2011 due to lower than planned sales as a result of the effects of the warmer winter weather and a buildup of core product inventory levels (which we started in the second half of fiscal year 2011). We are adjusting our future purchases of cold weather inventory for the third and fourth quarters of fiscal year 2012. As a result, through at least the second quarter of fiscal year 2012, we expect total inventories to increase at a similar rate to the first quarter. We expect the rate of inventory growth by the end of fiscal year 2012 to be approximately 15% to 20%, depending on sales and other factors in fiscal year 2012.
Cash provided by investing activities of $0.8 million for the first quarter of fiscal year 2012 relates to $6.7 million of net maturities of short-term investments, partially offset by $5.9 million of payments for capital expenditures, as described below.

For fiscal year 2012, we expect to spend approximately $35 million to $38 million on capital expenditures, primarily to fund the anticipated opening of approximately 45 to 50 new stores, the renovation and/or relocation of several stores, the expansion and maintenance of our distribution space and the implementation of various systems and infrastructure projects.

The capital expenditures include the cost of the construction of leasehold improvements for new stores and several stores to be renovated or relocated, of which approximately $6.0 million to $7.0 million is expected to be reimbursed through landlord contributions. These amounts are typically paid by the landlords after we complete construction and receive the appropriate lien waivers from contractors.

We spent approximately $5.9 million on capital expenditures in the first quarter of fiscal year 2012 primarily related to payments for the stores opened or being constructed during the first quarter of the fiscal year. In addition, capital expenditures for the period include payments for property, plant and equipment additions accrued at fiscal year-end 2011 related to stores opened and the expansion of our distribution capacity in fiscal year 2011. For the stores opened, renovated and relocated in the first quarter of fiscal year 2012, we negotiated approximately $0.4 million of landlord contributions. The table below summarizes the landlord contributions that were negotiated and collected related to the stores opened, renovated and relocated in fiscal years 2012 and 2011.
 
Negotiated
Amounts
 
Amounts
Collected in
Fiscal Year
2011
 
Amounts
Collected in
 Fiscal Year
2012
 
Amounts
Outstanding
April 28,
2012
 
(In thousands )
Full Fiscal Year 2011 Store Openings, Renovations and Relocations (47 Stores)
$
6,758

 
$
3,901

 
$
1,982

 
$
875

First Three Months of Fiscal Year 2012 Store Openings, Renovations and Relocations (3 Stores)
365

 

 
63

 
302

 
$
7,123

 
$
3,901

 
$
2,045

 
$
1,177


The outstanding amounts of the landlord contributions for the stores opened, renovated and relocated in fiscal year 2011 and fiscal year 2012 are primarily expected to be received within the next 12 months.

Management believes that our cash from operations, existing cash and cash equivalents and short-term investments will be sufficient to fund our planned capital expenditures and operating expenses through at least the next 12 months.

Off-Balance Sheet Arrangements - We have no off-balance sheet arrangements other than our operating lease agreements.


19



Effects of Inflation and Changing Prices

Inflation and changing prices could have a material adverse impact on our operations, financial condition and results of operations, especially with respect to our product costs which are largely driven by cotton and wool prices and other production inputs such as labor costs which are largely tied to the labor markets and economies of the various countries in which our vendors are located. In general, we will attempt, over time, to increase prices to largely counteract the increasing costs due to inflation. However there is no assurance that our customers will accept such higher prices, especially over a short-term period.

Disclosures about Contractual Obligations and Commercial Commitments

Our principal commitments are non-cancellable operating leases in connection with our retail stores, certain tailoring facilities and equipment and inventory purchase commitments. Under the terms of certain of the retail store leases, we are required to pay a base annual rent, plus a contingent amount based on sales (“contingent rent”). In addition, many of these leases include scheduled rent increases. Base annual rent and scheduled rent increases are included in the contractual obligations table below for operating leases, as these are the only rent-related commitments that are determinable at this time.

The following table reflects a summary of our contractual cash obligations and other commercial commitments for the periods indicated, including amounts paid in the first three months of fiscal year 2012 unless otherwise indicated.
Contractual Obligations and Commercial Commitments
Payments Due by Fiscal Year
 
(In thousands)
 
2012
 
2013-2015
 
2016-2017
 
Beyond 2017
 
Total(f)
Operating lease obligations (a) (b)
$
68,904

 
$
172,559

 
$
72,697

 
$
70,039

 
$
384,199

Inventory purchase commitments (c)
258,021

 
5,289

 

 

 
263,310

Related party agreement (d)
825

 
825

 

 

 
1,650

License agreement (e)
165

 
495

 

 

 
660

Total
327,915

 
179,168

 
72,697

 
70,039

 
649,819

___________________________
(a)
Includes various lease agreements signed prior to April 28, 2012 for stores to be opened and equipment placed in service subsequent to April 28, 2012.
(b)
Excludes contingent rent and other lease costs.
(c)
Represents the value of expected future inventory purchases for receipts through fiscal year 2013 for which purchase orders have been issued or other commitments have been made to vendors as of April 28, 2012.
(d)
Relates to a consulting agreement with our current Chairman of the Board to consult on matters of strategic planning and initiatives.
(e)
Relates to an agreement with David Leadbetter, a golf professional, which allows us to produce golf and other apparel under his name.
(f)
The total does not include obligations for unrecognized tax benefits and related penalties and interest of $0.8 million which have been excluded from the above table as the amount to be settled in cash and the specific payment dates are not known.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

At April 28, 2012, we were not a party to any derivative financial instruments. We do business with all of our product vendors in U.S. currency and do not have direct foreign currency risk. However, a devaluation of the U.S. dollar against the foreign currencies of our suppliers could have a material adverse effect on our product costs and resulting gross profit. We currently invest substantially all of our excess cash in short-term investments, primarily in U.S. Treasury bills with original maturities of less than one year, overnight federally-sponsored agency notes and money market accounts, where returns effectively reflect current interest rates. As a result, market interest rate changes may impact our net interest income or expense. The impact will depend on variables such as the magnitude of rate changes and the level of excess cash balances. A 100 basis point change in interest rates would have changed net interest income by approximately $2.8 million in fiscal year 2011.

20



Item 4.
Controls and Procedures

Limitations on Control Systems. Because of their inherent limitations, disclosure controls and procedures and internal control over financial reporting (collectively, “Control Systems”) may not prevent or detect all failures or misstatements of the type sought to be avoided by Control Systems. Also, projections of any evaluation of the effectiveness of our Control Systems to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), does not expect that our Control Systems will prevent all errors or all fraud. A Control System, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the Control System are met. Further, the design of a Control System must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all Control Systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Reports by management, including the CEO and CFO, on the effectiveness of our Control Systems express only reasonable assurance of the conclusions reached.
Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of the CEO and CFO, has evaluated the effectiveness, as of April 28, 2012, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective as of April 28, 2012.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Section 240.13a-15 of the Exchange Act that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


21



PART II. OTHER INFORMATION

Item 1.
Legal Proceedings

On March 16, 2012, Neil Holmes, a former employee of the Company, individually and on behalf of all those similarly situated, filed a Complaint against the Company in the Superior Court of California, County of Santa Clara, Case No. 112CV220780, alleging various violations of California wage and labor laws. The Complaint seeks, among other relief, certification of the case as a class action, injunctive relief, monetary damages, penalties, restitution, other equitable relief, interest, attorney's fees and costs. We intend to defend this lawsuit vigorously.
On April 5, 2012, James Waldron and Matthew Villani, on their own behalf and on behalf of all others similarly situated, filed a Class Action Complaint against the Company in the United States District Court for the District of New Jersey (Case 2:33-av-00001) alleging, among other things, that the Company’s merchandise is perpetually on sale and the sale price is actually the price at which the merchandise is regularly offered. As a result, the Complaint alleges, the Company’s advertising practices violate the New Jersey Consumer Fraud Act and constitute unjust enrichment. The Complaint seeks, among other relief, certification of the case as a national (or New Jersey only) class action, injunctive relief, declaratory relief, disgorgement of profits, monetary damages (including treble damages), restitution, costs and attorneys’ fees, statutory pre-judgment interest and other legal and equitable relief. We intend to defend this lawsuit vigorously.
In addition to the litigation discussed above, we are a party to routine litigation matters that are incidental to our business. From time to time, additional legal matters in which we may be named as a defendant are expected to arise in the normal course of our business activities.
The resolution of our litigation matters cannot be accurately predicted and we have not estimated the costs or potential losses, if any, associated with these matters. Accordingly, we cannot determine whether our insurance coverage, if any, would be sufficient to cover such costs or potential losses, if any, and we have not recorded any provision for cost or loss associated with these actions. It is possible that our consolidated financial statements could be materially impacted in a particular fiscal quarter or year by an unfavorable outcome or settlement of any of these actions.

Item 1A.
Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for fiscal year 2011, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties, including those not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business, financial condition and/or operating results. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for fiscal year 2011.
Item 6.
Exhibits
Exhibits
31.1
 
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2
 
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1
 
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
32.2
 
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
101.INS
 
XBRL Instance Document. **
101.SCH
 
XBRL Taxonomy Extension Schema Document. **
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document. **
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. **
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document. **
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document. **

**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


22



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

 
 
Jos. A. Bank Clothiers, Inc.
(Registrant)
 
Dated:
May 30, 2012
/s/ DAVID E. ULLMAN  
 
 
David E. Ullman 
 
 
Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer) 


23



Exhibit Index
Exhibits
31.1
 
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2
 
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1
 
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
32.2
 
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
101.INS
 
XBRL Instance Document. **
101.SCH
 
XBRL Taxonomy Extension Schema Document. **
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document. **
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. **
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document. **
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document. **

**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


24

XNAS:JOSB Quarterly Report 10-Q Filling

XNAS:JOSB Stock - Get Quarterly Report SEC Filing of XNAS:JOSB stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XNAS:JOSB Quarterly Report 10-Q Filing - 4/28/2012
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