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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] 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
[ ] 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 1-16097
THE MEN'S WEARHOUSE, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 74-1790172
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081-1701
(Address of Principal Executive Offices) (Zip Code)
(713) 592-7200
(Registrant's telephone number, including area code)
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 [X]. No [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X]. No [ ].
The number of shares of common stock of the Registrant, par value $.01 per
share, outstanding at June 4, 2004 was 36,156,478 excluding 6,935,679 shares
classified as Treasury Stock.
REPORT INDEX
PART AND ITEM NO. PAGE NO.
- ----------------- --------
PART I - Financial Information
Item 1 - Financial Statements
General Information ...................................................... 1
Consolidated Balance Sheets as of May 3, 2003 (unaudited), May 1, 2004
(unaudited) and January 31, 2004 ....................................... 2
Consolidated Statements of Earnings for the Quarters Ended May 3, 2003
(unaudited) and May 1, 2004 (unaudited) ................................ 3
Consolidated Statements of Cash Flows for the Quarters Ended May 3, 2003
(unaudited) and May 1, 2004 (unaudited) ................................ 4
Notes to Consolidated Financial Statements ............................... 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................. 11
Item 3 - Quantitative and Qualitative Disclosures about Market Risk ...... 16
Item 4 - Controls and Procedures ......................................... 16
PART II - Other Information
Item 1 - Legal Proceedings ............................................... 17
Item 6 - Exhibits and Reports on Form 8-K ................................ 18
SIGNATURES .................................................................. 18
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GENERAL INFORMATION
The consolidated financial statements herein include the accounts of The
Men's Wearhouse, Inc. and its wholly owned or controlled subsidiaries (the
"Company") and have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures have been
condensed or omitted. We believe that the presentation and disclosures herein
are adequate to make the information not misleading, and the financial
statements reflect all elimination entries and normal adjustments which are
necessary for a fair statement of the results for the three months ended May 3,
2003 and May 1, 2004.
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements for
the year ended January 31, 2004 and the related notes thereto included in the
Company's Annual Report on Form 10-K for the year then ended filed with the SEC.
Unless the context otherwise requires, "Company", "we", "us" and "our"
refer to The Men's Wearhouse, Inc. and its wholly owned or controlled
subsidiaries.
1
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MAY 3, MAY 1, JANUARY 31,
ASSETS 2003 2004 2004
--------- --------- ---------
(UNAUDITED) (UNAUDITED)
CURRENT ASSETS:
Cash .................................... $ 77,995 $ 125,927 $ 132,146
Accounts receivable, net ................ 22,598 18,855 17,919
Inventories ............................. 391,062 390,011 388,956
Other current assets .................... 26,198 33,067 30,858
--------- --------- ---------
Total current assets ................. 517,853 567,860 569,879
PROPERTY AND EQUIPMENT, net ............... 207,775 210,512 215,064
GOODWILL, net ............................. 37,926 43,162 43,867
OTHER ASSETS, net ......................... 31,489 44,190 40,388
--------- --------- ---------
TOTAL ........................... $ 795,043 $ 865,724 $ 869,198
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................ $ 111,226 $ 104,289 $ 115,828
Accrued expenses ........................ 49,535 65,079 71,132
Current portion of long-term debt ....... 2,185 -- --
Income taxes payable .................... 17,997 27,883 26,096
--------- --------- ---------
Total current liabilities ............ 180,943 197,251 213,056
LONG-TERM DEBT ............................ 40,961 131,000 131,000
DEFERRED TAXES AND OTHER LIABILITIES ...... 27,935 31,193 31,682
--------- --------- ---------
Total liabilities .................... 249,839 359,444 375,738
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Preferred stock ......................... -- -- --
Common stock ............................ 426 431 431
Capital in excess of par ................ 195,928 206,238 205,636
Retained earnings ....................... 408,552 462,662 447,566
Accumulated other comprehensive income .. 4,880 6,585 10,533
--------- --------- ---------
Total ................................ 609,786 675,916 664,166
Treasury stock, at cost ................. (64,582) (169,636) (170,706)
--------- --------- ---------
Total shareholders' equity ........... 545,204 506,280 493,460
--------- --------- ---------
TOTAL ........................... $ 795,043 $ 865,724 $ 869,198
========= ========= =========
See Notes to Consolidated Financial Statements.
2
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE QUARTER ENDED
---------------------
MAY 3, MAY 1,
2003 2004
---- ----
Net sales $313,122 $360,729
Cost of goods sold, including buying and
occupancy costs 201,903 222,857
-------- --------
Gross margin 111,219 137,872
Selling, general and administrative expenses 93,292 112,738
-------- --------
Operating income 17,927 25,134
Interest expense, net 379 1,077
-------- --------
Earnings before income taxes 17,548 24,057
Provision for income taxes 6,536 8,961
-------- --------
Net earnings $ 11,012 $ 15,096
======== ========
Net earnings per share:
Basic $ 0.28 $ 0.42
======== ========
Diluted $ 0.28 $ 0.41
======== ========
Weighted average shares outstanding:
Basic 39,632 36,131
======== ========
Diluted 39,709 36,812
======== ========
See Notes to Consolidated Financial Statements.
3
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE QUARTER ENDED
---------------------
MAY 3, MAY 1,
2003 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ............................................ $ 11,012 $ 15,096
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ......................... 12,604 12,575
Gain on sale of assets ................................ (4,381) --
Deferred tax provision ................................ 435 (1,782)
Increase in accounts receivable ......................... (2,083) (980)
Increase in inventories ................................. (27,149) (3,008)
Increase in other assets ................................ (2,019) (5,950)
Increase (decrease) in accounts payable and
accrued expenses ...................................... 10,454 (15,623)
Increase in income taxes payable ........................ 4,745 2,012
(Decrease) in other liabilities ......................... (53) (174)
--------- ---------
Net cash provided by operating activities ............. 3,565 2,166
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................... (8,798) (8,571)
Investment in trademarks, tradenames and other assets ... (84) (23)
--------- ---------
Net cash used in investing activities ................. (8,882) (8,594)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock .................. 179 624
Deferred financing costs ................................ (14) (1)
Principal payments on bank debt ......................... (524) --
Purchase of treasury stock .............................. (3,062) --
--------- ---------
Net cash provided by (used in) financing activities .. (3,421) 623
--------- ---------
Effect of exchange rate changes on cash ................... 1,809 (414)
--------- ---------
DECREASE IN CASH .......................................... (6,929) (6,219)
CASH:
Beginning of period ..................................... 84,924 132,146
--------- ---------
End of period ........................................... $ 77,995 $ 125,927
========= =========
See Notes to Consolidated Financial Statements.
4
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements herein
include the accounts of The Men's Wearhouse, Inc. and its wholly owned or
controlled subsidiaries (the "Company") and have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). As applicable under such regulations, certain information and
footnote disclosures have been condensed or omitted. We believe that the
presentation and disclosures herein are adequate to make the information not
misleading, and the financial statements reflect all elimination entries and
normal adjustments which are necessary for a fair presentation of the financial
position, results of operations and cash flows at the dates and for the periods
presented. These financial statements should be read in conjunction with the
financial statements and accompanying notes included in our Annual Report on
Form 10-K for the year ended January 31, 2004.
The preparation of the financial statements in conformity with accounting
principals generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts and related
disclosures. Actual amounts could differ from those estimates.
Stock Based Compensation -- As permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), we account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"). We have adopted the disclosure-only
provisions of SFAS No. 123 and continue to apply APB No. 25 and related
interpretations in accounting for the stock option plans and the employee stock
purchase plan.
In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS No. 148"). This statement
amends SFAS No. 123 to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The adoption
of the disclosure requirements of this statement, on February 1, 2003, did not
have a material effect on the Company's financial position, results of
operations or cash flows. The disclosures required by SFAS No. 148 are included
below.
Had we elected to apply the accounting standards of SFAS No. 123, as
amended by SFAS No. 148, our net earnings and net earnings per share would have
been approximately the pro forma amounts indicated below (in thousands, except
per share data):
FOR THE QUARTER ENDED
---------------------
MAY 3, MAY 1,
2003 2004
---- ----
Net earnings, as reported ............................ $ 11,012 $ 15,096
Deduct: Additional compensation expense, net of tax .. (533) (605)
---------- ----------
Pro forma net earnings ............................... $ 10,479 $ 14,491
========== ==========
Net earnings per share:
As reported:
Basic .............................................. $ 0.28 $ 0.42
Diluted ............................................ $ 0.28 $ 0.41
Pro forma:
Basic .............................................. $ 0.26 $ 0.40
Diluted ............................................ $ 0.26 $ 0.39
5
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Consolidation of Variable Interest Entities -- In December 2003, the FASB
issued a revised interpretation of FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (revised December
2003)" ("FIN 46R"). FIN 46R requires that if an entity has a controlling
financial interest in a variable interest entity, the assets, liabilities and
results of activities of the variable interest entity should be included in the
consolidated financial statements of the entity. FIN 46R is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46R must be applied no later than December 31, 2003 for
entities meeting the definition of special - purpose entities, and no later than
fiscal periods ending after March 15, 2004 for all other entities under
construction. As we do not have any variable interest entities, the adoption of
FIN 46R had no effect on our financial position, results of operations or cash
flows.
2. EARNINGS PER SHARE
Basic EPS is computed using the weighted average number of common shares
outstanding during the period and net earnings. Diluted EPS gives effect to the
potential dilution which would have occurred if additional shares were issued
for stock options exercised under the treasury stock method, as well as the
potential dilution that could occur if our contingent convertible debt were
converted. No dilution from the contingent convertible debt has occurred.
3. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
In connection with our direct sourcing program, we may enter into purchase
commitments that are denominated in a foreign currency (primarily the Euro). Our
policy is to enter into foreign currency forward exchange contracts to minimize
foreign currency exposure related to forecasted purchases of certain
inventories. Under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
such contracts have been designated as and accounted for as cash flow hedges.
The settlement terms of the forward contracts, including amount, currency and
maturity, correspond with payment terms for the merchandise inventories. Any
ineffective portion of a hedge is reported in earnings immediately. At May 1,
2004 we had 39 contracts maturing in varying increments to purchase an aggregate
notional amount of $23.2 million in foreign currency, maturing at various dates
through December 2005. During the first three months of 2004, we recognized an
immaterial amount of hedge ineffectiveness.
The changes in the fair value of the foreign currency forward exchange
contracts are matched to inventory purchases by period and are recognized in
earnings as such inventory is sold. The fair value of the forward exchange
contracts is estimated by comparing the cost of the foreign currency to be
purchased under the contracts using the exchange rates obtained under the
contracts (adjusted for forward points) to the hypothetical cost using the spot
rate at quarter end. We expect to recognize in earnings through April 30, 2005
approximately $0.2 million, net of tax, of existing net gains presently deferred
in accumulated other comprehensive income.
4. COMPREHENSIVE INCOME AND SUPPLEMENTAL CASH FLOWS
Our comprehensive income is as follows (in thousands):
FOR THE QUARTER ENDED
---------------------
MAY 3, MAY 1,
2003 2004
---- ----
Net earnings................................... $ 11,012 $ 15,096
Change in derivative fair value, net of tax.... 173 (577)
Currency translation adjustments, net of tax... 4,641 (3,371)
-------- --------
Comprehensive income........................... $ 15,826 $ 11,148
======== ========
6
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
We paid cash during the first quarter of 2003 of $0.5 million for interest
and $1.6 million for income taxes, compared with $2.0 million for interest and
$8.8 million for income taxes during the first quarter of 2004. We had non-cash
investing and financing activities resulting from the tax benefit recognized
upon exercise of stock options of $43 thousand for the first quarter of 2004 and
none during the first quarter of 2003. We had non-cash investing and financing
activities resulting from the issuance of treasury stock to the employee stock
ownership plan of $0.5 million and $1.0 million for the first quarters of 2003
and 2004, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the net carrying amount of goodwill for the year ended January
31, 2004 and for the three months ended May 1, 2004 are as follows (in
thousands):
Balance, February 1, 2003 .............................. $ 36,607
Goodwill of acquired business...................... 4,550
Translation adjustment ............................ 2,710
--------
Balance, January 31, 2004 .............................. $ 43,867
Goodwill of acquired business...................... 17
Translation adjustment ............................ (722)
--------
Balance, May 1, 2004 ................................... $ 43,162
========
The gross carrying amount and accumulated amortization of our other
intangibles, which are included in other assets in the accompanying balance
sheet, are as follows (in thousands):
MAY 3, MAY 1, JANUARY 31,
2003 2004 2004
-------- -------- --------
Trademarks, tradenames and other intangibles.. $ 7,908 $ 9,475 $ 9,475
Accumulated amortization ..................... (1,874) (2,662) (2,450)
-------- -------- --------
Net total ................................. $ 6,034 $ 6,813 $ 7,025
======== ======== ========
The pretax amortization expense associated with intangible assets totaled
approximately $154,000 and $212,000 for the quarters ended May 3, 2003 and May
1, 2004, respectively, and approximately $737,000 for the year ended January 31,
2004. Pretax amortization associated with intangible assets at May 1, 2004 is
estimated to be $627,000 for the remainder of fiscal year 2004, $836,000 for
fiscal year 2005, $781,000 for fiscal year 2006, and $623,000 for each of the
fiscal years 2007 and 2008.
6. LONG-TERM DEBT
In January 2003, we replaced our existing $125.0 million revolving credit
facility which was scheduled to mature in February 2004 with a new revolving
credit agreement with a group of banks (the "Credit Agreement") that provides
for borrowing of up to $100.0 million through February 4, 2006 (with extensions
for up to two years under certain conditions). The Credit Agreement is secured
by substantially all of the stock of the subsidiaries of The Men's Wearhouse,
Inc. Advances under the Credit Agreement bear interest at a rate per annum equal
to, at our option, the agent's prime rate or the reserve adjusted LIBOR rate
plus a varying interest rate margin up to 2.25%. The Credit Agreement also
provides for fees applicable to unused commitments ranging from 0.275% to
0.500%. The terms and conditions of the new Credit Agreement are substantially
the same as those of the replaced facility. As of May 1, 2004, there were no
borrowings outstanding under the Credit Agreement.
7
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The Credit Agreement contains certain restrictive and financial covenants,
including the requirement to maintain a minimum level of net worth and certain
financial ratios. The Credit Agreement also prohibits payment of cash dividends
on our common stock. We are in compliance with the covenants in the Credit
Agreement as of May 1, 2004.
In January 2003, we entered into a new Canadian term credit agreement
under which we borrowed Can $62.0 million (US $40.7 million) which was used to
repay approximately Can $60.9 million (US $40.0 million) in outstanding
indebtedness of Moores under the previous term credit agreement. Advances under
the Canadian term credit agreement incurred interest at a rate per annum equal
to, at our option, the agent's prime rate or the Canadian Prime rate plus a
varying interest rate margin up to 1.75%. On October 31, 2003, we repaid all the
outstanding Canadian term credit agreement indebtedness of Can $60.5 million (US
$45.9 million).
On October 21, 2003, we issued $130.0 million of 3.125% Convertible Senior
Notes due 2023 ("Notes") in a private placement. A portion of the net proceeds
from the Notes was used to repay the outstanding indebtedness under our Canadian
term credit agreement and to repurchase shares of our common stock under the
program authorized by the Board in September 2003; the balance is reserved for
general corporate purposes, which may include additional purchases of our common
stock under our share repurchase program. Interest on the Notes is payable
semi-annually on April 15 and October 15 of each year, beginning on April 15,
2004. The Notes will mature on October 15, 2023. However, holders may require us
to purchase all or part of the Notes, for cash, at a purchase price of 100% of
the principal amount per Note plus accrued and unpaid interest on October 15,
2008, October 15, 2013 and October 15, 2018 or upon a designated event.
Beginning on October 15, 2008, we will pay additional contingent interest on the
Notes if the average trading price of the Notes is above a specified level
during a specified period. In addition, we may redeem all or a portion of the
Notes on or after October 20, 2008, at 100% of the principal amount of the Notes
plus any accrued and unpaid interest, contingent interest and additional
amounts, if any. We also have the right to redeem the Notes between October 20,
2006 and October 19, 2008 if the price of our common stock reaches certain
levels.
During certain periods, the Notes are convertible by holders into shares
of our common stock initially at a conversion rate of 23.3187 shares of common
stock per $1,000 principal amount of Notes, which is equivalent to an initial
conversion price of $42.88 per share of common stock (subject to adjustment in
certain events), under the following circumstances: (1) if the closing sale
price of our common stock issuable upon conversion exceeds 120% of the
conversion price under specified conditions; (2) if we call the Notes for
redemption; or (3) upon the occurrence of specified corporate transactions. Upon
conversion of the Notes, in lieu of delivering common stock we may, at our
election, deliver cash or a combination of cash and common stock. The Notes are
general senior unsecured obligations, ranking on parity in right of payment with
all our existing and future unsecured senior indebtedness and our other general
unsecured obligations, and senior in right of payment with all our future
subordinated indebtedness. The Notes are effectively subordinated to all of our
senior secured indebtedness and all indebtedness and liabilities of our
subsidiaries.
In December 2003, we acquired the assets and operating leases for 13
retail dry cleaning and laundry facilities and issued a note payable for $1.0
million as partial consideration. The unsecured note payable is due in full in
2008 and interest compounds annually at 4.0%.
We utilize letters of credit primarily for inventory purchases. At May 1,
2004, letters of credit totaling approximately $16.6 million were issued and
outstanding.
7. STOCK REPURCHASE PROGRAM
In November 2002, the Board of Directors authorized a program for the
repurchase of up to $25.0 million of Company stock in the open market or in
private transactions. A total of 210,500 shares at a cost of $3.1 million were
repurchased in open market transactions under this program during the first
quarter of 2003 at an average price per share of $14.55.
8
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
In September 2003, the Board of Directors authorized a program for the
repurchase of up to $100.0 million of Company common stock in the open market or
in private transactions. This authorization superceded the approximately $1
million we had remaining under the November 2002 authorization. As of May 1,
2004, we had repurchased under this program 1,405,400 shares at a cost of $42.4
million in private transactions and 1,713,400 shares at a cost of $42.6 million
in open market transactions, for a total of 3,118,800 shares at an average price
per share of $27.28. No shares were repurchased under this program during the
first quarter of 2004.
8. LEGAL MATTERS
On April 18, 2003, a lawsuit was filed against the Company in the Superior
Court of California for the County of Orange, Case No. 03CC00132 (the "Orange
County Suit"). On April 21, 2003, a lawsuit was filed against K&G Men's Center,
Inc. and K&G Men's Company Inc. (collectively, "K&G"), wholly owned subsidiaries
of the Company, in the Los Angeles Superior Court of California, Case No.
BC294361 (the "Los Angeles County Suit"; the Los Angeles County Suit and the
Orange County Suit shall be referred to jointly as the "Suits").
The Orange County Suit was brought as a purported class action. The Los
Angeles County Suit was brought as a multi-party action. The Suits allege
several causes of action, each based on the factual allegation that in the State
of California the Company and K&G misclassified its managers and assistant
managers as exempt from the application of certain California labor statutes.
Because of this alleged misclassification, the Suits allege that the Company and
K&G failed to pay overtime compensation and provide the required rest periods to
such employees. The Suits seek, among other things, declaratory and injunctive
relief along with an accounting as to alleged wages, premium pay, penalties,
interest and restitution allegedly due the class defendants.
On April 23, 2003, a lawsuit was filed against K&G in the Los Angeles
Superior Court of California, Case No. BC294497 (the "Tailor's Suit"). The
Tailor's Suit was brought as a multi-party action. The Tailor's Suit alleges
several causes of action, each based on the factual allegation that in the State
of California K&G misclassified the tailors working in their stores as
"independent contractors" and refused to classify them as non-exempt employees
subject to the application of certain California labor statutes. Because of this
alleged misclassification, the Tailor's Suit alleges that K&G failed to pay
hourly and overtime compensation and provide the required rest periods required
by such labor statutes. The Tailor's Suit further alleges that K&G violated
several other labor statutes and regulations as well as the California Unfair
Competition Law. It seeks, among other things, restitution, disgorgement due to
failure to comply with California labor laws, penalties, declaratory and
injunctive relief.
The Los Angeles County Suit and the Tailor's Suit have been settled on
terms which did not have a material adverse effect on our financial position,
results of operations or cash flows. We believe that the Orange County Suit will
be resolved in 2004; however, no assurance can be given that the anticipated
resolution will be realized. We do not believe the ultimate resolution of the
Orange County Suit will have a material adverse effect on our financial
position, results of operations or cash flows.
On April 1, 2004, a lawsuit was filed against the Company in the Superior
Court of California for the County of Los Angeles, Case No. BC313038 (the "PII
Suit"). The PII Suit, which was brought as a purported class action, alleges two
causes of action, each based on the factual allegation that the Company requests
or requires, in conjunction with a customer's use of his or her credit card, the
customer to provide personal identification information which is recorded upon
the credit card transaction form. The PII Suit seeks: (i) civil penalties
pursuant to the California Civil Code; (ii) an order enjoining the Company from
requesting or requiring that a customer provide personal identification
information which is then recorded on the transaction form; (iii) permanent and
preliminary injunctions against the Company requesting or requiring that a
customer provide personal identification information which is then recorded on
the transaction form; (iv) restitution of all funds allegedly acquired by means
of any act or practice declared by the Court to be unlawful or fraudulent or to
constitute a
9
violation of the California Business and Professions Code; (v) attorney's fees;
and (vi) costs of suit. The court has not yet decided whether the action may
proceed as a class action. The Company intends to vigorously defend the PII
Suit. We do not believe the ultimate resolution of the PII Suit will have a
material adverse effect on our financial position, results of operations or cash
flows.
In addition, we are involved in various routine legal proceedings,
including ongoing litigation, incidental to the conduct of our business.
Management believes that none of these matters will have a material adverse
effect on our financial condition, results of operations or cash flows.
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
For supplemental information, it is suggested that "Management's
Discussion and Analysis of Financial Condition and Results of Operations" be
read in conjunction with the corresponding section included in our Annual Report
on Form 10-K for the year ended January 31, 2004. References herein to years are
to our 52-week or 53-week fiscal year which ends on the Saturday nearest January
31 in the following calendar year. For example, references to "2004" mean the
52-week fiscal year ending January 29, 2005.
The following table presents information with respect to retail apparel
stores in operation during each of the respective fiscal periods.
FOR THE QUARTER ENDED YEAR ENDED
MAY 3, MAY 1, JANUARY 31,
2003 2004 2004
-------- -------- --------
Stores open at beginning of period .. 689 693 689
Opened ............................ -- 5 13
Closed ............................ (5) (3) (9)
-------- -------- --------
Stores open at end of period ........ 684 695 693
======== ======== ========
Stores open at end of period:
U.S --
Men's Wearhouse ................. 505 508 506
K&G ............................. 65 73 73
-------- -------- --------
570 581 579
Canada -- Moores .................. 114 114 114
-------- -------- --------
684 695 693
======== ======== ========
In connection with our strategy of testing opportunities to market
complementary products and services, in December 2003 we acquired the assets and
operating leases for 13 retail dry cleaning and laundry facilities operating in
the metropolitan Houston, Texas area. We may open or acquire additional
facilities on a limited basis during 2004 as we test market and evaluate the
feasibility of developing a national retail dry cleaning and laundry line of
business. We also plan to open six new casual clothing/sportswear concept stores
in 2004 in order to test an expanded, more fashion-oriented merchandise concept
for men and women. These stores will be 3,000 to 3,500 square feet and will be
located in high-end regional malls. They will target the 25 to 35 year old
customer with Latin-inspired store designs and offerings. As of May 1, 2004, we
had opened three of these new concept stores.
RESULTS OF OPERATIONS
Quarter Ended May 1, 2004 Compared with Quarter Ended May 3, 2003
Our net sales were $360.7 million for the quarter ended May 1, 2004, a
$47.6 million or 15.2% increase from the same prior year period due mainly to a
$40.3 million increase in clothing and alteration sales and an $5.3 million
increase in tuxedo rental revenues. Our U.S. comparable store sales (which are
calculated primarily by excluding the net sales of a store for any month of one
period if the store was not open throughout the same month of the prior period)
increased 12.1% as improvement was experienced in nearly all product categories.
At our core Men's Wearhouse brand, a 15.2% increase in unit suit sales helped
drive increases in other product categories, as well an increase in alteration
sales. In addition, our tuxedo rental business continued to grow with a 42%
increase in unit tuxedo rentals, resulting in an increase in revenue from 4.1%
of total revenues in the first quarter of 2003 to 5.0% of total revenues in the
first quarter of 2004. In Canada, comparable store
11
sales increased 4.8% as result of improved unit suit sales as well as the
rollout of the tuxedo rental business to all Moores stores.
Gross margin increased 24.0% from the same prior year quarter to $137.9
million in the first quarter of 2004. As a percentage of sales, gross margin
increased from 35.5% in the first quarter of 2003 to 38.2% in the first quarter
of 2004. This increase in gross margin percentage resulted mainly from continued
growth in our tuxedo rental business, which carries a significantly higher
incremental gross margin impact than our clothing sales, and from higher
cumulative mark-ups and lower markdowns that produced higher clothing product
margins. The gross margin percentage was also increased as occupancy cost, which
is relatively constant on a per store basis and includes store related rent,
common area maintenance, utilities, repairs and maintenance, security, property
taxes and depreciation, decreased modestly as a percentage of sales from the
first quarter of 2003 to the first quarter of 2004. However, on an absolute
dollar basis, occupancy costs increased by 4.8% from the first quarter of 2003
to the first quarter of 2004 due mainly to higher rent expense from our
increased store count and renewals of existing leases at higher rates.
Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 29.8% for the first quarter of 2003, compared to 31.3% for the first
quarter of 2004, with SG&A expenditures increasing by $19.4 million or 20.8% to
$112.7 million. As a percentage of sales, advertising expense decreased from
4.5% to 3.9% of net sales, store salaries increased from 12.1% to 12.6% of net
sales and other SG&A expenses increased from 13.2% to 14.8% of net sales. On an
absolute dollar basis, the principal components of SG&A expenses increased
primarily due to (i) increased commissions due to higher sales, (ii) increased
store salaries, benefits and other costs associated with store personnel
additions for tuxedo rental operations and (iii) increased travel and training
expenses related to incremental training for new and existing store personnel.
SG&A expenses were reduced in the first quarter of 2003 by the recognition of a
$4.4 million deferred pretax gain from the sale, in March 2002, of certain
technology assets to an unrelated company regularly engaged in the development
and licensing of software to the retail industry. However, the gain recognized
was more than offset by $3.7 million in costs related to store closures and the
write-off of certain technology assets.
Interest expense, net of interest income, was $0.4 million for the first
quarter of 2003, compared with $1.1 million in the first quarter of 2004.
Weighted average borrowings outstanding increased from $41.9 million in the
first quarter of 2003 to $131.0 million in the first quarter of 2004, and the
weighted average interest rate on outstanding indebtedness decreased from 5.8%
to 3.3%. The increase in the weighted average borrowings was due primarily to
the issuance of $130.0 million of 3.125% Notes (the "Notes") in a private
placement on October 21, 2003. A portion of the proceeds from the Notes was used
to repay the balance outstanding on our Canadian credit facility. The decrease
in the weighted average interest rate was due primarily to the lower interest
rate on the Notes. See further discussion of the Notes in Note 6 of Notes to
Consolidated Financial Statements and "Liquidity and Capital Resources" herein.
Our effective income tax rate was 37.3% for the first quarter of 2003 and
for the first quarter of 2004. The effective tax rate was higher than the
statutory U.S. federal rate of 35% primarily due to the effect of state income
taxes.
These factors resulted in net earnings of $15.1 million or 4.2% of net
sales for the first quarter of 2004, compared with net earnings of $11.0 million
or 3.5% of net sales for the first quarter of 2003.
LIQUIDITY AND CAPITAL RESOURCES
In January 2003, we replaced our existing $125.0 million revolving credit
facility which was scheduled to mature in February 2004 with a new revolving
credit agreement with a group of banks (the "Credit Agreement") that provides
for borrowing of up to $100.0 million through February 4, 2006 (with extensions
for up to two years under certain conditions). The Credit Agreement is secured
by substantially all of the stock of the subsidiaries of The Men's Wearhouse,
Inc. Advances under the new Credit Agreement bear interest at a rate per annum
equal to, at our option, the agent's prime rate or the reserve adjusted LIBOR
rate plus a varying interest rate margin up to 2.25%. The Credit Agreement also
provides for fees applicable to unused commitments ranging from 0.275% to
0.500%. The terms and conditions of the new Credit Agreement are substantially
the same as those of the replaced facility. As of May 1, 2004, there were no
borrowings outstanding under the Credit Agreement.
12
The Credit Agreement contains certain restrictive and financial covenants,
including the requirement to maintain a minimum level of net worth and certain
financial ratios. The Credit Agreement also prohibits payment of cash dividends
on our common stock. We are in compliance with the covenants in the Credit
Agreement as of May 1, 2004.
In January 2003, we entered into a new Canadian term credit agreement
under which we borrowed Can $62.0 million (US $40.7 million) which was used to
repay approximately Can $60.9 million (US $40.0 million) in outstanding
indebtedness of Moores under the previous term credit agreement. Advances under
the Canadian term credit agreement incurred interest at a rate per annum equal
to, at our option, the agent's prime rate or the Canadian Prime rate plus a
varying interest rate margin up to 1.75%. On October 31, 2003, we repaid all the
outstanding Canadian term credit agreement indebtedness of Can $60.5 million (US
$45.9 million).
On October 21, 2003, we issued $130.0 million of 3.125% Notes in a private
placement. A portion of the net proceeds from the Notes was used to repay the
outstanding indebtedness under our Canadian term credit agreement and to
repurchase shares of our common stock under the program authorized by the Board
in September 2003 (see below); the balance is reserved for general corporate
purposes, which may include additional purchases of our common stock under our
share repurchase program. Interest on the Notes is payable semi-annually on
April 15 and October 15 of each year, beginning on April 15, 2004. The Notes
will mature on October 15, 2023. However, holders may require us to purchase all
or part of the Notes, for cash, at a purchase price of 100% of the principal
amount per Note plus accrued and unpaid interest on October 15, 2008, October
15, 2013 and October 15, 2018 or upon a designated event. Beginning on October
15, 2008, we will pay additional contingent interest on the Notes if the average
trading price of the Notes is above a specified level during a specified period.
In addition, we may redeem all or a portion of the Notes on or after October 20,
2008, at 100% of the principal amount of the Notes plus any accrued and unpaid
interest, contingent interest and additional amounts, if any. We also have the
right to redeem the Notes between October 20, 2006 and October 19, 2008 if the
price of our common stock reaches certain levels.
During certain periods, the Notes are convertible by holders into shares
of our common stock initially at a conversion rate of 23.3187 shares of common
stock per $1,000 principal amount of Notes, which is equivalent to an initial
conversion price of $42.88 per share of common stock (subject to adjustment in
certain events), under the following circumstances: (1) if the closing sale
price of our common stock issuable upon conversion exceeds 120% of the
conversion price under specified conditions; (2) if we call the Notes for
redemption; or (3) upon the occurrence of specified corporate transactions. Upon
conversion of the Notes, in lieu of delivering common stock we may, at our
election, deliver cash or a combination of cash and common stock. The Notes are
general senior unsecured obligations, ranking on parity in right of payment with
all our existing and future unsecured senior indebtedness and our other general
unsecured obligations, and senior in right of payment with all our future
subordinated indebtedness. The Notes are effectively subordinated to all of our
senior secured indebtedness, and all indebtedness and liabilities of our
subsidiaries.
In December 2003, we acquired the assets and operating leases for 13
retail dry cleaning and laundry facilities and issued a note payable for $1.0
million as partial consideration. The unsecured note payable is due in full in
2008 and interest compounds annually at 4.0%.
We utilize letters of credit primarily for inventory purchases. At May 1,
2004, letters of credit totaling approximately $16.6 million were issued and
outstanding.
Working capital was $370.6 million at May 1, 2004, which is up from $356.8
million at January 31, 2004 and $336.9 million at May 3, 2003. Historically, our
working capital has been at its lowest level in January and February and has
increased through November as inventory buildup is financed with both vendor
payables and credit facility borrowings in preparation for the fourth quarter
selling season. Working capital at the end of the first quarter of 2004 is
higher than the first quarter of 2003 due mainly to our increased cash balances.
Our operating activities provided net cash of $3.6 million in the first
quarter of 2003, due mainly to net earnings, adjusted for non-cash charges
(including recognition of a deferred gain on the sale of certain assets), and
increases in accounts payable, accrued expenses and income taxes payable, offset
by increases in inventories, accounts receivable and other assets. Inventories
and accounts payable increased during the first quarter of 2003 mainly due to
seasonal inventory buildup and the purchase of fabric used in the direct
sourcing of inventory. During the first quarter of 2004, our operating
activities provided net cash of $2.2 million, due mainly to net earnings,
adjusted for non-cash charges, and an increase in income taxes payable,
13
offset by decreases in accounts payable and accrued expenses and increases in
inventories and other assets. The decrease in accounts payable and accrued
expenses was due primarily to the payment of bonuses accrued at the end of 2003
and payment for treasury stock purchased as of the end of 2003. Inventories
increased due to seasonal inventory buildup, which was moderated by inventory
increases during 2003. Other assets increased in the first quarter of 2003 and
2004 due mainly to purchases of tuxedo rental product.
Our investing activities used net cash of $8.9 million and $8.6 million
for the first quarter of 2003 and 2004, respectively. Cash used in investing
activities was primarily comprised of capital expenditures relating to stores
opened, remodeled or relocated during the period or under construction at the
end of the period, distribution facility additions and infrastructure technology
investments.
Our financing activities used net cash of $3.4 million for the first
quarter of 2003, due mainly to purchases of treasury stock. In November 2002,
the Board of Directors authorized a program for the repurchase of up to $25.0
million of company stock in the open market or in private transactions. A total
of 210,500 shares at a cost of $3.1 million were repurchased in open market
transactions under this program during the first quarter of 2003 at an average
price per share of $14.55. During the first quarter of 2004, our financing
activities provided net cash of $0.6 million due mainly to proceeds from the
issuance of our common stock in connection with the exercise of stock options.
In September 2003, the Board of Directors authorized a program for the
repurchase of up to $100.0 million of Company common stock in the open market or
in private transactions. This authorization superceded the approximately $1
million we had remaining under the November 2002 authorization. As of May 1,
2004, we had repurchased under this program 1,405,400 shares at a cost of $42.4
million in private transactions and 1,713,400 shares at a cost of $42.6 million
in open market transactions, for a total of 3,118,800 shares at an average price
per share of $27.28. No shares were repurchased under this program during the
first quarter of 2004.
We anticipate that our existing cash and cash flow from operations,
supplemented by borrowings under our Credit Agreement, will be sufficient to
fund planned store openings, other capital expenditures and operating cash
requirements for at least the next 12 months.
As substantially all of our cash is held by five financial institutions,
we are exposed to risk of loss in the event of failure of any of these parties.
However, due to the creditworthiness of these five financial institutions, we
anticipate full performance and access to our deposits and liquid investments.
In connection with our direct sourcing program, we may enter into purchase
commitments that are denominated in a foreign currency (primarily the Euro). We
generally enter into forward exchange contracts to reduce the risk of currency
fluctuations related to such commitments. As these forward exchange contracts
are with one financial institution, we are exposed to credit risk in the event
of nonperformance by this party. However, due to the creditworthiness of this
major financial institution, full performance is anticipated. We may also be
exposed to market risk as a result of changes in foreign exchange rates. This
market risk should be substantially offset by changes in the valuation of the
underlying transactions.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involves risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
capital expenditures, acquisitions (including the amount and nature thereof),
future sales, earnings, margins, costs, number and costs of store openings,
demand for clothing, market trends in the retail clothing business, currency
fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including, but not limited to, this Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of our
filings with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, domestic and international
economic activity and inflation, our successful execution of internal operating
plans and new store and new market expansion plans, performance issues with key
suppliers, severe weather, foreign currency fluctuations, government export and
import policies and legal proceedings. Future results will also be dependent
upon our ability to
14
continue to identify and complete successful expansions and penetrations into
existing and new markets and our ability to integrate such expansions with our
existing operations.
Expansion into more fashion-oriented merchandise categories or into
complementary products and services may present greater risks. We are
continuously assessing opportunities to expand complementary products and
services related to our traditional business, such as corporate apparel sales
and retail dry cleaning establishments, as well as concepts that include more
fashion-oriented merchandise. We may expend both capital and personnel resources
on such business opportunities which may or may not be successful.
Our business is particularly sensitive to economic conditions and consumer
confidence. Consumer confidence is often adversely impacted by many factors
including local, regional or national economic conditions, continued threats of
terrorism, acts of war and other uncertainties. We believe that a decrease in
consumer spending will affect us more than other retailers because men's
discretionary spending for items like tailored apparel tends to slow faster than
other retail purchases.
According to industry sources, sales in the men's tailored clothing market
generally have declined over the past several years. We believe that this
decline is attributable primarily to: (1) men allocating less of their income to
tailored clothing and (2) certain employers relaxing their dress codes. We
believe that this decrease in sales has contributed, and will continue to
contribute, to a consolidation among retailers of men's tailored clothing.
Despite this overall decline, we have been able to increase our share of the
men's tailored clothing market; however, we may not be able to continue to
expand our sales volume or maintain our profitability within our segment of the
retailing industry.
15
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to exposure from fluctuations in U.S. dollar/Euro exchange
rates and the Canadian dollar/Euro exchange rates. As further described in Note
3 of Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Information and Results of Operations - Liquidity and
Capital Resources", we utilize foreign currency forward exchange contracts to
limit exposure to changes in currency exchange rates. At May 1, 2004, we had 39
contracts maturing in varying increments to purchase an aggregate notional
amount of $23.2 million in foreign currency, maturing at various dates through
December 2005. At May 3, 2003, we had 18 contracts maturing in varying
increments to purchase an aggregate notional amount of $17.2 million in foreign
currency, maturing at various dates through January 2004. Unrealized pretax
gains on these forward contracts totaled approximately $0.4 million at May 3,
2003 and $0.1 million at May 1, 2004. A hypothetical 10% change in applicable
May 1, 2004 forward rates could increase or decrease the May 1, 2004 unrealized
pretax gain by approximately $2.3 million related to these positions. However,
it should be noted that any change in the value of these contracts, whether real
or hypothetical, would be significantly offset by an inverse change in the value
of the underlying hedged item.
Moores conducts its business in Canadian dollars. The exchange rate
between Canadian dollars and U.S. dollars has fluctuated over the last ten
years. If the value of the Canadian dollar against the U.S. dollar weakens, then
the revenues and earnings of our Canadian operations will be reduced when they
are translated to U.S. dollars. Also, the value of our Canadian net assets in
U.S. dollars may decline.
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's
principal executive officer ("CEO") and principal financial officer ("CFO"),
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
fiscal quarter ended May 1, 2004. Based on this evaluation, the CEO and CFO have
concluded that the Company's disclosure controls and procedures were effective
as of the end of the fiscal quarter ended May 1, 2004 to ensure that information
that is required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in the Company's internal control over financial
reporting that occurred during the fiscal quarter ended May 1, 2004 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
16
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On April 18, 2003, a lawsuit was filed against the Company in the Superior
Court of California for the County of Orange, Case No. 03CC00132 (the "Orange
County Suit"). On April 21, 2003, a lawsuit was filed against K&G Men's Center,
Inc. and K&G Men's Company Inc. (collectively, "K&G"), wholly owned subsidiaries
of the Company, in the Los Angeles Superior Court of California, Case No.
BC294361 (the "Los Angeles County Suit"; the Los Angeles County Suit and the
Orange County Suit shall be referred to jointly as the "Suits").
The Orange County Suit was brought as a purported class action. The Los
Angeles County Suit was brought as a multi-party action. The Suits allege
several causes of action, each based on the factual allegation that in the State
of California the Company and K&G misclassified its managers and assistant
managers as exempt from the application of certain California labor statutes.
Because of this alleged misclassification, the Suits allege that the Company and
K&G failed to pay overtime compensation and provide the required rest periods to
such employees. The Suits seek, among other things, declaratory and injunctive
relief along with an accounting as to alleged wages, premium pay, penalties,
interest and restitution allegedly due the class defendants.
On April 23, 2003, a lawsuit was filed against K&G in the Los Angeles
Superior Court of California, Case No. BC294497 (the "Tailor's Suit"). The
Tailor's Suit was brought as a multi-party action. The Tailor's Suit alleges
several causes of action, each based on the factual allegation that in the State
of California K&G misclassified the tailors working in their stores as
"independent contractors" and refused to classify them as non-exempt employees
subject to the application of certain California labor statutes. Because of this
alleged misclassification, the Tailor's Suit alleges that K&G failed to pay
hourly and overtime compensation and provide the required rest periods required
by such labor statutes. The Tailor's Suit further alleges that K&G violated
several other labor statutes and regulations as well as the California Unfair
Competition Law. It seeks, among other things, restitution, disgorgement due to
failure to comply with California labor laws, penalties, declaratory and
injunctive relief.
The Los Angeles County Suit and the Tailor's Suit have been settled on
terms which did not have a material adverse effect on our financial position,
results of operations or cash flows. We believe that the Orange County Suit will
be resolved in 2004; however, no assurance can be given that the anticipated
resolution will be realized. We do not believe the ultimate resolution of the
Orange County Suit will have a material adverse effect on our financial
position, results of operations or cash flows.
On April 1, 2004, a lawsuit was filed against the Company in the Superior
Court of California for the County of Los Angeles, Case No. BC313038 (the "PII
Suit"). The PII Suit, which was brought as a purported class action, alleges two
causes of action, each based on the factual allegation that the Company requests
or requires, in conjunction with a customer's use of his or her credit card, the
customer to provide personal identification information which is recorded upon
the credit card transaction form. The PII Suit seeks: (i) civil penalties
pursuant to the California Civil Code; (ii) an order enjoining the Company from
requesting or requiring that a customer provide personal identification
information which is then recorded on the transaction form; (iii) permanent and
preliminary injunctions against the Company requesting or requiring that a
customer provide personal identification information which is then recorded on
the transaction form; (iv) restitution of all funds allegedly acquired by means
of any act or practice declared by the Court to be unlawful or fraudulent or to
constitute a violation of the California Business and Professions Code; (v)
attorney's fees; and (vi) costs of suit. The court has not yet decided whether
the action may proceed as a class action. The Company intends to vigorously
defend the PII Suit. We do not believe the ultimate resolution of the PII Suit
will have a material adverse effect on our financial position, results of
operations or cash flows.
In addition, we are involved in various routine legal proceedings,
including ongoing litigation, incidental to the conduct of our business.
Management believes that none of these matters will have a material adverse
effect on our financial condition, results of operations or cash flows.
17
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
Exhibit
Number Exhibit Index
------ -------------
31.1 -- Certification of Periodic Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 by the Chief
Executive Officer (filed herewith).
31.2 -- Certification of Periodic Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 by the Chief
Financial Officer (filed herewith).
32.1 -- Certification of Periodic Report Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by the Chief
Executive Officer (filed herewith).
32.2 -- Certification of Periodic Report Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by the Chief
Financial Officer (filed herewith).
(B) REPORTS ON FORM 8-K.
On February 17, 2004, the Company filed a current report on Form 8-K
pursuant to item 5 reporting the approval by the Board of Directors of the
Company's 401(k) Savings Plan Trust and the amendment and restatement of the
Company's 401(k) Savings Plan.
On February 25, 2004, the Company furnished a current report on Form 8-K
pursuant to item 12 reporting the issuance of a press release that reported
results for the fiscal fourth quarter and year ended January 31, 2004.
On February 26, 2004, the Company furnished a current report on Form 8-K
pursuant to item 12 reporting the issuance of a press release which corrected an
error in the SG&A margin guidance included in the press release issued on
February 25, 2004.
On March 26, 2004, the Company furnished a current report on Form 8-K
pursuant to item 12 reporting the issuance of a press release to announce that
as a result of recent mediations, the Company had determined a reasonable
estimate of the cost it expects to incur in connection with the wage and hour
litigation in California, which had been previously disclosed in the Company's
SEC filings. Therefore, as required by generally accepted accounting principals,
the Company reduced its earnings for the fiscal fourth quarter and year ended
January 31, 2004 that were included in the press release issued on February 25,
2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, The Men's Wearhouse, Inc., has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: June 10, 2004 THE MEN'S WEARHOUSE, INC.
By /s/ NEILL P. DAVIS
----------------------------------------
Neill P. Davis
Executive Vice President, Chief Financial
Officer and Principal Financial Officer
18
INDEX TO EXHIBITS
Exhibit
Number Exhibit Index
------ -------------
31.1 -- Certification of Periodic Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 by the Chief
Executive Officer (filed herewith).
31.2 -- Certification of Periodic Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 by the Chief
Financial Officer (filed herewith).
32.1 -- Certification of Periodic Report Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by the Chief
Executive Officer (filed herewith).
32.2 -- Certification of Periodic Report Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by the Chief
Financial Officer (filed herewith).