MENS WEARHOUSE INC - 10-Q Quarterly Report

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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 August 3, 2002 or
-----------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
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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 [ ].

The number of shares of common stock of the Registrant, par value $.01 per
share, outstanding at September 13, 2002 was 40,844,689, excluding 1,697,664
shares classified as Treasury Stock.

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REPORT INDEX

PART AND ITEM NO. PAGE NO.
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PART I - Financial Information

Item 1 - Financial Statements

General Information...................................................................... 1

Consolidated Balance Sheets as of August 4, 2001 (unaudited), August 3, 2002
(unaudited) and February 2, 2002....................................................... 2

Consolidated Statements of Earnings for the Three and Six Months Ended August 4,
2001 (unaudited) and August 3, 2002 (unaudited)........................................ 3

Consolidated Statements of Cash Flows for the Six Months Ended August 4, 2001
(unaudited) and August 3, 2002 (unaudited)............................................. 4

Notes to the Consolidated Financial Statements........................................... 5

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................................... 9

Item 3 - Qualitative and Quantitative Disclosures about Market Risk...................... 13

PART II - Other Information

Item 1 - Legal Proceedings............................................................... 14

Item 4 - Submission of Matters to a Vote of Security Holders............................. 14

Item 6 - Exhibits and Reports on Form 8-K................................................ 16

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 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 and six months ended August 4, 2001 and August 3, 2002.

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 February 2, 2002 and the related notes thereto included in the
Company's 2001 Annual Report on Form 10-K for the year then ended filed with the
SEC.

1

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

See Notes to Consolidated Financial Statements.

2

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See Notes to Consolidated Financial Statements.

3

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

See Notes to Consolidated Financial Statements.

4

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES--

Basis of Presentation - The consolidated financial statements include the
accounts of The Men's Wearhouse, Inc. and its subsidiaries (the "Company").
Except for those discussed below, there have been no significant changes in the
accounting policies of the Company during the periods presented. For a
description of these policies, see Note 1 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year ended
February 2, 2002.

Accounting Change -- We adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), as amended, on February 4, 2001. In accordance with the transition
provisions of SFAS 133, we recorded a cumulative loss adjustment of $0.5 million
($0.3 million, net of tax) in accumulated other comprehensive loss related
primarily to the unrealized losses on foreign currency exchange contracts, which
were designated as cash-flow hedging instruments. The disclosures required by
SFAS 133 are included in Note 3.

We adopted Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141"), on July 1, 2001, and No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"), on February 3, 2002. SFAS 141 requires all
business combinations completed after June 30, 2001 to be accounted for using
the purchase method and eliminates the pooling of interests method. SFAS 142
eliminated the amortization of goodwill and also subjects goodwill to fair-value
based impairment tests performed, at a minimum, on an annual basis, or more
frequently if circumstances dictate. The overall effect of the adoption of SFAS
142 did not have a material impact on our financial position or results of
operations and we recorded no impairment charge. The disclosures required by
SFAS 142 are included in Note 5.

We adopted Statement of Financial Accounting Standards No. 144, "Impairment
or Disposal of Long-lived Assets" ("SFAS 144"), on February 3, 2002. SFAS 144
provides a single accounting model for the impairment or disposal of long-lived
assets. The adoption of this statement did not have a material impact on our
financial position or results of operations.

New Accounting Pronouncements -- In June 2001, the FASB issued Statement No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). SFAS 143
addresses the accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated retirement costs and
is effective for fiscal years beginning after June 15, 2002. The adoption of
this statement is not expected to have a material impact on our financial
position or results of operations.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS 145"). SFAS 145 rescinds FASB Statement No. 4, "Reporting
Gains and Losses from Extinguishment of Debt," FASB Statement No. 44,
"Accounting for Intangible Assets of Motor Carriers" and FASB Statement No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". In
addition, SFAS 145 amends FASB Statement No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. This
statement also makes non-substantive technical corrections to existing
pronouncements. SFAS 145 is effective for fiscal years beginning after May 15,
2002. The adoption of this statement is not expected to have a material impact
on our financial position or results of operations.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 replaces
EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS 146 requires, among other things, that a liability for
costs associated with an exit or disposal activity be recognized when the
liability is incurred rather than when a company commits to such an activity and
also establishes fair value as the objective for initial measurement of the
liability. SFAS 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. We are currently evaluating the impact of the
adoption of SFAS 146 on our consolidated financial statements.

5

Reclassifications -- Certain prior years' balances have been reclassified to
conform with classifications used in the current year.

2. EARNINGS PER SHARE--

Basic earnings per share ("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. Diluted EPS also gives effect to the potential dilution of put
options outstanding, computed using the reverse treasury stock method.

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 SFAS 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 the
anticipated payment terms for the merchandise inventories. Any ineffective
portion of a hedge is reported in earnings immediately. At August 3, 2002, the
Company had 11 contracts maturing in varying increments to purchase an aggregate
notional amount of $9.1 million in foreign currency, maturing at various dates
through February 2003. We recognized a gain of $103,000 resulting from hedge
ineffectiveness during the first two quarters of 2002.

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 first quarter
2003 approximately $500,000, net of tax, of existing net gains presently
deferred in the accumulated other comprehensive loss portion of shareholders'
equity.

4. COMPREHENSIVE INCOME AND SUPPLEMENTAL CASH FLOWS

Our comprehensive income is as follows (in thousands):

We paid cash during the first two quarters of 2001 of $1.4 million for
interest and $26.6 million for income taxes, compared with $1.0 million for
interest and $17.4 million for income taxes during the first two quarters of
2002. We had non-cash investing and financing activities resulting from the
issuance of treasury stock to the employee stock ownership plan of $2.5 million
for the first two quarters of 2001 and from the tax benefit recognized upon
exercise of stock options of $0.2 million and $0.6 million for the first two
quarters of 2001 and 2002, respectively. No issuance of treasury stock to the
employee stock ownership plan occurred during the first two quarters of 2002.

6

5. GOODWILL AND OTHER INTANGIBLE ASSETS

We adopted SFAS 142, "Goodwill and Other Intangible Assets," in the first
quarter of fiscal year 2002, as noted in Note 1. In accordance with SFAS 142, we
discontinued the amortization of goodwill effective February 3, 2002. A
reconciliation of previously reported net earnings and earnings per share to the
amounts adjusted for the exclusion of goodwill amortization, net of the related
tax effect, follows (in thousands, except per share amounts):

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
---------------------------- -----------------------------
AUGUST 4, AUGUST 3, AUGUST 4, AUGUST 3,
2001 2002 2001 2002
------------- ------------ ------------- ------------

Reported net earnings $ 10,250 $ 7,797 $ 22,992 $ 18,255

Add back:

Goodwill amortization 711 -- 1,417 --

Less income taxes (277) -- (552) --
------------- ------------ ------------- ------------
Goodwill amortization, net of tax
434 -- 865 --
------------- ------------ ------------- ------------

Adjusted net earnings $ 10,684 $ 7,797 $ 23,857 $ 18,255
============= ============ ============= ============

Earnings per share:
Basic EPS

Reported net earnings 0.25 0.19 0.56 0.44

Goodwill amortization, net of tax 0.01 -- 0.02 --
------------- ------------ ------------- ------------
Adjusted net earnings
$ 0.26 $ 0.19 $ 0.58 0.44
============= ============ ============= ============

Diluted EPS

Reported net earnings $ 0.25 $ 0.19 $ 0.55 0.44

Goodwill amortization, net of tax 0.01 -- 0.02 --
------------- ------------ ------------- ------------
Adjusted net earnings $ 0.26 $ 0.19 $ 0.57 0.44
============= ============ ============= ============

Goodwill and other intangibles are included in other assets in the
accompanying balance sheet. Changes in the net carrying amount of goodwill for
the year ended February 2, 2002 and for the six months ended August 3, 2002 are
as follows (in thousands):

Balance, February 3, 2001 $ 38,447
Goodwill of acquired business 1,069
Amortization (2,800)
Translation and other adjustment (1,155)
------------
Balance, February 2, 2002 35,561
Goodwill of acquired business 12
Translation and other adjustment 80
------------
Balance, August 3, 2002 $ 35,653
============

7

The gross carrying amounts and accumulated amortization of our other
intangibles are as follows (in thousands):

FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED
------------------------------- ---------------
AUGUST 4, AUGUST 3, FEBRUARY 2,
2001 2002 2002
------------- -------------- ---------------

Trademarks, tradenames and other
intangibles $ 5,438 $ 5,466 $ 5,465
Accumulated amortization (1,151) (1,527) (1,350)
------------- -------------- ---------------
Net total $ 4,287 $ 3,939 $ 4,115
============= ============== ===============

The pretax amortization expense associated with intangible assets totaled
approximately $169,000 and $181,000 for the six months ended August 4, 2001 and
August 3, 2002, respectively, and approximately $346,000 for year ended February
2, 2002. Pretax amortization associated with intangible assets at August 3, 2002
is estimated to be $175,000 for the remainder of fiscal year 2002 and to be
$342,000 for each of the fiscal years 2003 through 2006.

8

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 the Company's Annual
Report on Form 10-K for the year ended February 2, 2002. References herein to
years are to the Company's 52-week or 53-week fiscal year which ends on the
Saturday nearest January 31 in the following calendar year. For example,
references to "2002" mean the 52-week fiscal year ending February 1, 2003.

In large part, changes in net sales and operating results are impacted by
the number of stores operating during the fiscal period. The following table
presents information with respect to stores in operation during each of the
respective fiscal periods.

RESULTS OF OPERATIONS

Three Months Ended August 4, 2001 and August 3, 2002
----------------------------------------------------

Our net sales were $308.6 million for the quarter ended August 3, 2002, an
$11.4 million or 3.8% increase from the same prior year period. This increase
was due primarily to increased sales from stores opened in 2001 and 2002, offset
partially by decreased sales in stores open prior to fiscal year 2001.
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) decreased 1.5% for the U.S.
stores from the same prior year quarter, while comparable store sales for the
Canadian stores increased 2.2% from the same prior year quarter. The decrease in
comparable sales for the US stores was due mainly to continued weakness in the
US economy. Sales of men's apparel is particularly affected since buying
patterns for men are considered to be more discretionary than those in other
apparel areas.

Gross margin decreased $1.2 million or 1.1% from the same prior year quarter
to $107.1 million in the second quarter of 2002. As a percentage of sales, gross
margin decreased from 36.4% in the second quarter of 2001 to 34.7% in the second
quarter of 2002. This decrease in gross margin predominantly resulted from an
increase in occupancy cost (which is relatively constant on a per store basis)
as a percentage of sales and higher markdowns at the Men's Wearhouse brand
associated with a shift to merchandise with lower opening price points.

Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 30.6% for the second quarter of 2002, compared to 30.5% for the
second quarter of 2001, with SG&A expenditures increasing by $3.6 million or
4.0% to $94.3 million. On an absolute dollar basis, advertising decreased by
$0.4 million, store salaries increased by $3.9 million and other SG&A increased

9

by $0.1 million. As a percentage of sales, advertising expense decreased from
5.1% to 4.8% of net sales, store salaries increased from 11.8% to 12.6% of net
sales and other SG&A expenses decreased from 13.6% to 13.2% of net sales. The
decrease in advertising was due to planned reductions in media spending. The
increase in store salaries was the result of higher sales commission rates in
2002 for promotional and other sales categories. These commission rates were put
in place to help drive the shift to lower opening price points for merchandise
offerings at the Men's Wearhouse brand. Other SG&A expenses decreased as a
percentage of sales due to our focus on reducing corporate overhead.

Interest expense, net of interest income, decreased from $0.8 million in the
second quarter of 2001 to $0.2 million in the second quarter of 2002. Weighted
average borrowings outstanding decreased from $64.5 million in the second
quarter of 2001 to $40.1 million in the second quarter of 2002, and the weighted
average interest rate on outstanding indebtedness decreased from 5.8% to 4.6%.
The decrease in the weighted average borrowings was due primarily to decreased
borrowings under the Company's credit facilities. The decrease in the weighted
average interest rate was due primarily to decreases in the LIBOR rate. See
"Liquidity and Capital Resources" discussion in the following section herein.

Our effective income tax rate decreased from 39.0% for the second quarter of
2001 to 37.8% for the second quarter of 2002. The effective tax rate was higher
than the statutory U.S. federal rate of 35% primarily due to the effect of state
income taxes.

Six Months Ended August 4, 2001 and August 3, 2002
--------------------------------------------------

The Company's net sales were $612.4 million for the six months ended August
3, 2002, a $10.6 million or 1.8% increase from the same prior year period. This
increase was due primarily to sales resulting from the increased number of
stores in 2001 and 2002, offset by decreased sales in stores open prior to
fiscal year 2001. Comparable store sales decreased 3.8% for the U.S. stores and
0.3% for the Canadian stores from the same prior year period. The decrease in
comparable sales for the US and Canadian stores was due mainly to continued
weakness in the US economy and its effects on the related Canadian economy.
Sales of men's apparel is particularly affected since buying patterns for men
are considered to be more discretionary than those in other apparel areas.

Gross margin decreased 4.0% over the same prior year period to $211.2
million for the first six months of 2002. As a percentage of sales, gross margin
decreased from 36.6% for the first two quarters of 2001 to 34.5% in the first
two quarters of 2002. This decrease in gross margin percentage predominantly
resulted from an increase in occupancy cost (which is relatively constant on a
per store basis) as a percentage of sales and higher markdowns at the Men's
Wearhouse brand associated with a shift to merchandise with lower opening price
points.

SG&A expenses, as a percentage of sales, were 30.1% for the first six months
of 2001, compared to 29.6% for the first six months of 2002, with SG&A
expenditures increasing by $0.2 million or 0.1% to $181.4 million. On an
absolute dollar basis, advertising decreased $1.7 million, store salaries
increased $4.8 million and other SG&A decreased $2.9 million. As a percentage of
sales, advertising expense decreased from 4.9% to 4.5% of net sales, store
salaries increased from 11.7% to 12.3% of net sales and other SG&A expenses
decreased from 13.6% to 12.8% of net sales. The decrease in advertising was due
to planned reductions in media spending. The increase in store salaries was the
result of higher sales commission rates in 2002 for promotional and other sales.
These commission rates were put in place to help drive the shift to lower
opening price points for merchandise offerings at the Men's Wearhouse brand.
Other SG&A expenses decreased due to our focus on reducing corporate overhead.

Interest expense, net of interest income, decreased from $1.0 million for
the first six months of 2001 to $0.5 million in the first six months of 2002.
Weighted average borrowings outstanding decreased from $54.1 million in the
prior year to $40.2 million in the first two quarters of 2002, and the weighted
average interest rate on outstanding indebtedness decreased from 6.3% to 4.4%.
The decrease in the weighted average borrowings was due primarily to decreased
borrowings under the Company's credit facilities. The decrease in the weighted
average interest rate was due primarily to decreases in the LIBOR rate.

Our effective income tax rate decreased from 39.0% for the six months ended
August 4, 2001 to 37.8% for the six months ended August 3, 2002. The effective
tax rate was higher than the statutory U.S. federal rate of 35% primarily due to
the effect of state income taxes.

10

LIQUIDITY AND CAPITAL RESOURCES

Working capital was $320.8 million at August 3, 2002, which is up from
$301.9 million at February 2, 2002 but down from $335.3 million at August 4,
2001. 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 long-term borrowings in preparation for the fourth quarter selling
season. Working capital at the end of the second quarter was lower in 2002 than
in 2001 due mainly to our reduced inventory levels.

Our operating activities used net cash of $45.8 million in the first six
months of 2001 as cash provided by net earnings, adjusted for non-cash charges,
was more than offset by an increase in inventories and decreases in payables.
Inventories increased $59.9 million for the six months ended August 4, 2001 due
to seasonal inventory buildup, the addition of inventory for new stores and
stores expected to be opened in the following quarter and the purchase of fabric
used in the direct sourcing of inventory. During the first two quarters of 2002,
operating activities provided net cash of $25.5 million due mainly to net
earnings, adjusted for non-cash charges, and a decrease in inventories, offset
partially by decreases in payables. Our 4.5% decrease in net sales in fiscal
2001, combined with our inventory levels at the end of fiscal 2001 and our
forecasted net sales for fiscal 2002, have resulted in lower planned inventory
purchases. As a result, the inventory buildup typically experienced during the
first two quarters of prior years has not occurred in 2002.

Our investing activities used net cash of $41.3 million and $15.2 million
for the first two quarters of 2001 and 2002, 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 and infrastructure technology investments. However, during
the first two quarters of 2002, cash used for capital expenditures was partially
offset by net proceeds received from the sale of substantially all the assets of
Chelsea Market Systems, L.L.C. ("Chelsea") to an unrelated company regularly
engaged in the development and licensing of software to the retail industry.
As a result of the sale by Chelsea, and after giving effect to the settlement of
a related lawsuit, the Company received net proceeds of $6.8 million.
Approximately $4.4 million of this amount will be recognized as a pretax gain by
the Company pending the resolution of certain indemnification provisions related
to the assets sold.

Our financing activities provided net cash of $18.3 million for the first
two quarters of 2001, due mainly to borrowings on the revolving credit
agreement, offset by purchases of treasury stock. Net cash used in financing
activities was $4.9 million for the first two quarters of 2002, due mainly to
the purchases of treasury stock offset by proceeds from the issuance of our
common stock for options exercised. In January 2000, the Board of Directors
authorized a stock repurchase program for up to 1,000,000 shares of our common
stock. Under this authorization, we may purchase shares from time to time in the
open market or in private transactions, depending on market price and other
considerations. On January 31, 2001, the Board of Directors authorized an
expansion of the stock repurchase program for up to an additional 2,000,000
shares of the Company's common stock. During the first two quarters of 2001 and
2002, the Company repurchased 1,185,000 and 332,300 shares of its common stock
under this program at a cost of $30.4 million and $6.9 million, respectively. A
total of 1,852,300 shares have been repurchased under this program.

During the second quarter of 2002, in connection with the share repurchase
program, we issued an option contract under which the contract counterparty has
the option to require us to purchase 500,000 shares of our common stock at a
specific strike price of $22.76 per share on December 17, 2002. We received a
premium of $0.6 million for issuing this contract. As of August 3, 2002, the
market value of our common stock did not exceed the strike price under the open
contract.

We have a revolving credit agreement with a group of banks (the "Credit
Agreement") that provides for borrowing of up to $125 million through February
5, 2004. Advances under the Credit Agreement bear interest at a rate per annum
equal to, at the Company's option, the agent's prime rate or the reserve
adjusted LIBOR rate plus a varying interest rate margin. The Credit Agreement
also provides for fees applicable to unused commitments. In addition, we have
two Canadian credit facilities which include a revolving credit agreement which
provides for borrowings up to Can$30 million (US$18.9 million) through February
5, 2004 and a term credit agreement under which the Company borrowed Can$75
million (US$47.3 million) in February 1999. The term credit borrowing is payable
in quarterly installments of Can$0.9 million (US$0.6 million), with the
remaining unpaid principal payable on February 5, 2004. Covenants and interest
rates are substantially similar to those contained in the Company's Credit
Agreement. As of August 3, 2002, there was US$39.0 million outstanding under
these credit agreements.

11

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.

We anticipate that our existing cash and cash flow from operations,
supplemented by borrowings under our credit agreements, will be sufficient to
fund our planned store openings, other capital expenditures and operating cash
requirements for at least the next 12 months.

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. The majority of the forward exchange
contracts are with four financial institutions. Therefore, we are exposed to
credit risk in the event of nonperformance by these parties. However, due to the
creditworthiness of these major financial institutions, 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.

12

ITEM 3 -QUALITATIVE AND QUANTITATIVE 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 August 3, 2002, we had
11 contracts maturing at various dates through February 2003. Unrealized pretax
gains on these forward contracts totaled approximately $0.8 million at August 3,
2002. A hypothetical 10% change in applicable August 3, 2002 forward rates could
increase or decrease this pretax gain by $0.9 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 and the value of our Canadian net assets in U.S. dollars may
decline.

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 involve 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 men's clothing, market trends in the retail men's 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 the
Company's 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, the Company's 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 the ability of the Company to continue to identify and complete
successful expansions and penetrations into existing and new markets and its
ability to integrate such expansions with the Company's existing operations.

13

PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On May 11, 2001, a lawsuit was filed against the Company in the Superior
Court of California for the County of San Diego, Cause No. GIC 767223 (the
"Suit"). The Suit, which was brought as a purported class action, alleges
several causes of action, each based on the factual allegation that we
advertised and sold men's slacks at a marked price that was exclusive of a
hemming fee for the pants. The Suit seeks: (i) permanent and preliminary
injunctions against advertising slacks at prices which do not include hemming;
(ii) 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 unfair
competition under certain California statutes, (iii) prejudgment interest; (iv)
compensatory and punitive damages; (v) attorney's fees; and (vi) costs of suit.
We believe that the Suit is without merit and the allegations are contrary to
customary and well recognized and accepted practices in the sale of men's
tailored clothing. The complaint in the Suit was subsequently amended to add
similar causes of action and requests for relief based upon allegations that our
alleged "claims that [it] sell[s] the same garments as department stores at 20%
to 30% less" are false and misleading. We believe that such added causes of
action are also without merit. The court ruled against the plaintiff's motion
for class certification, declining to certify a class. The court advised the
parties that it intended to issue its tentative ruling on the Company's motion
for summary judgment on September 13, 2002. However, on that date the court
extended the time for its ruling until September 27, 2002. Once announced either
party may request oral argument before the court on its tentative ruling. The
Company intends to vigorously defend the Suit.

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 cashflows.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 25, 2002, the Company held its Annual Meeting of Shareholders. At
the meeting, the shareholders voted on the following matters:

1. The election of the six directors of the Company to hold office until
the next Annual Meeting of Shareholders or until their respective
successors are duly elected and qualified.

2. To consider and act upon a proposal regarding a code of conduct based
on the United Nation's International Labor Organization's Standards for
Workers Rights.

3. The ratification of the appointment by the Board of Directors of the
firm Deloitte & Touche LLP as independent auditors for the Company for
2002.

The six nominees of the Board of Directors of the Company were elected at
the meeting, and proposal three received the affirmative vote required for
approval. Proposal two did not receive the requisite vote required for approval
and therefore did not pass. The number of votes cast for, against and withheld,
as well as the number of abstentions, as to each matter were as follows:

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

Exhibit
Number Exhibit Index
------- -------------
99.1 -- Certification of Periodic Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by
the Chief Executive Officer (filed herewith).

99.2 -- 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 May 31, 2002, the Company filed a current report on Form 8-K
pursuant to item 5 reporting the Company's findings and resolution of
certain allegations with respect to an investigation into payments
received by an officer of the Company from one of its vendors.

On June 30, 2002, the Company filed a current report on Form 8-K
pursuant to item 5 reporting the approval by the Company's Board of
Directors of an amendment and restatement of the Company's Employee
Stock Discount Plan.

On September 16, 2002, the Company filed a current report on Form 8-K
pursuant to item 9 reporting the filing of sworn statements pursuant to
Section 21(a)(1) of the Securities Exchange Act of 1934.

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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: September 17, 2002 THE MEN'S WEARHOUSE, INC.

By /s/ NEILL P. DAVIS
---------------------------------------
Neill P. Davis
Executive Vice President, Chief Financial
Officer, Treasurer and Principal
Financial Officer

I, Neill P. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Men's Wearhouse,
Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

Dated: September 17, 2002
By /s/ NEILL P. DAVIS
---------------------------------------
Neill P. Davis
Executive Vice President, Chief Financial
Officer, Treasurer and Principal
Financial Officer

I, George Zimmer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Men's Wearhouse,
Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

Dated: September 17, 2002
By /s/ GEORGE ZIMMER
--------------------------------------
George Zimmer
Chairman of the Board, Chief Executive
Officer and Director

17

INDEX TO EXHIBITS

Exhibit
Number Exhibit Index
------- -------------
99.1 -- Certification of Periodic Report Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 by the Chief
Executive Officer (filed herewith).

99.2 -- Certification of Periodic Report Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 by the Chief
Financial Officer (filed herewith).