Jos. A. Bank Plans Stock Sale

March 12, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Jos. A. Bank Clothiers Inc. said yesterday that the company and some major shareholders will sell nearly 50 percent of the company to the public, capping a tumultuous leveraged buyout that brought the Hampstead retailer to the brink of bankruptcy before a 1991 rescue.

The company will sell 2 million shares at a price estimated to be between $13 and $15 a share, and shareholders will sell 1 million shares, according to a prospectus filed with the U.S. Securities and Exchange Commission. After the offering, the company will have 6.8 million shares.

At $14 a share, the company would raise $25 million after underwriting costs. About $7.5 million from the company-offered shares will repay bank debt, and the rest will be used for working capital and expansion.

The 54-store chain plans to add 58 stores in the next four years, the offering said, and plans not to pay a dividend so that it can keep the money to finance growth.

"You don't bring it public unless you have good results," said Donald Ashley, a retailing analyst at Cleary Gull Reiland & McDevitt in Milwaukee. "I know it's gone through quite a bit of change."

Officials at Bank declined comment on its plans yesterday. SEC rules prohibit most public statements by company officials when their firms have stock or bond offerings in registration.

But the prospectus itself spoke loudly about where the company has been. Little or no information about the company's finances has been public knowledge since a group of investors, including former Orioles owner Eli S. Jacobs and former Jos. A. Bank managers, bought the company from Quaker Oats Co. in 1986 for $110 million. But the SEC filing showed just how bad things became.

"Current management believes that after the leveraged acquisition, the company began to lose its focus as a value retailer of tailored clothing by placing increased emphasis on sportswear and nonapparel items," the registration statement said. "In addition, [the company] raised price points and added expensive fixturing to its stores which created an atmosphere inconsistent with [the company's] value concept. As a result, the company's franchise among its customer base began to erode and comparable store sales declined."

The biggest surprise in the filing was the degree to which Bank's problems went beyond the debt load from the buyout, even after the current chairman, Timothy F. Finley, was brought in to lead a 1991 restructuring.

The company's sales, after factoring out boosts from new stores, fell every year from 1989 to 1992 before rising 7.4 percent last year. The company lost $48 million in fiscal 1989, including a $40 million write-off reflecting the old management's view that it had paid too much for the company.

Bank lost $7.4 million in 1990 and posted a $2.5 million operating loss in 1991 before earning almost $2 million on operations in 1992 and $1.7 million last year.

Net income was $3 million in 1992 and $3.8 million in 1993, however, because of a 1993 accounting change and a tax loss carry-forward in 1992. The company's sales were about $147 million last year, slightly below the $150 million Mr. Finley projected in a September interview.

Mr. Finley began to fix things by arranging a 1991 swap of $50 million of the company's debt for stock. He moved the company's headquarters from Class A office space in Owings Mills to a distribution center in Hampstead to cut costs, instituted a private-label credit card program to help marketing and upgraded information systems, among other reforms.

In addition, as the business stabilized, he began expanding the chain, which had 40 stores in early 1992.

Bank has four stores in Maryland and manufacturing facilities in Baltimore.

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