MENS WEARHOUSE INC - 10-Q Quarterly Report

Back to GetFilings.com

================================================================================

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 November 2, 2002 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 December 13, 2002 was 39,711,707, excluding 2,845,364
shares classified as Treasury Stock.

================================================================================

REPORT INDEX

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 nine months ended November 3, 2001 and November 2,
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 forward 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. The adoption of this statement is not
expected to have a material impact on our financial position or results of
operations.

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

5

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 November 2, 2002, we
had 7 contracts maturing in varying increments to purchase an aggregate notional
amount of $5.4 million in foreign currency, maturing at various dates through
February 2003. We recognized a gain of $114,000 resulting from hedge
ineffectiveness during the first three 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 $340,000, 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 three quarters of 2001 of $2.7 million for
interest and $30.5 million for taxes, compared with $1.4 million for interest
and $19.6 million for taxes during the first three 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 three 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 three quarters
of 2001 and 2002, respectively. No issuance of treasury stock to the employee
stock ownership plan occurred during the first three 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):

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 nine months ended November 2, 2002
are as follows (in thousands):

Balance, February 3, 2001 $ 38,447
Goodwill of acquired business 1,069
Amortization (2,800)
Translation adjustment (1,155)
----------
Balance, February 2, 2002 35,561
Goodwill of acquired business 12
Translation adjustment 391
----------
Balance, November 2, 2002 $ 35,964
==========

7

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

The pretax amortization expense associated with intangible assets totaled
approximately $250,000 and $270,000 for the nine months ended November 3, 2001
and November 2, 2002, respectively, and approximately $346,000 for year ended
February 2, 2002. Pretax amortization associated with intangible assets at
November 2, 2002 is estimated to be $87,000 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 November 3, 2001 and November 2, 2002

Our net sales were $292.5 million for the quarter ended November 2, 2002, a
$6.9 million or 2.4% 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 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 1.9% for the U.S. stores and 1.1% for the
Canadian stores from the same prior year quarter. The decrease in comparable
sales for the U.S. and Canadian stores was due mainly to continued weakness in
the US and Canadian economies. 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 increased $0.9 million or 0.9% from the same prior year
quarter to $97.9 million in the third quarter of 2002. As a percentage of sales,
gross margin decreased from 34.0% in the third quarter of 2001 to 33.5% in the
third quarter 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.

Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 31.0% for the third quarter of 2002, compared to 31.3% for the third
quarter of 2001, with SG&A expenditures increasing by $1.3 million or 1.4% to
$90.7 million. On an absolute dollar basis, advertising decreased by $1.4
million, store salaries increased by $2.6 million and other SG&A was unchanged
from the third quarter of 2001. As a percentage of net sales, advertising
expense decreased from 5.3% to 4.7%, store salaries increased from 12.0% to
12.6% and other SG&A expenses decreased from 14.1% to 13.8%. The decrease in

9

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 a 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 of $0.1 million and $0.2 million,
respectively, decreased from $1.1 million in the third quarter of 2001 to $0.4
million in the third quarter of 2002. Weighted average borrowings outstanding
decreased from $88.1 million in the third quarter of 2001 to $39.5 million in
the third quarter of 2002, and the weighted average interest rate on outstanding
indebtedness decreased from 5.6% to 5.3%. The decrease in the weighted average
borrowings was due primarily to decreased borrowings under our 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 third quarter of
2001 to 37.8% for the third 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.

Nine Months Ended November 3, 2001 and November 2, 2002

Our net sales were $904.9 million for the nine months ended November 2,
2002, a $17.5 million or 2.0% increase over 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 decreased 3.2% for the U.S. stores and 0.6% for the
Canadian stores from the same prior year period. The decrease in comparable
sales for the U.S. and Canadian stores was due mainly to continued weakness in
the US and Canadian economies. 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 2.5% over the same prior year period to $309.1
million for the first nine months of 2002. As a percentage of sales, gross
margin decreased from 35.7% for the first three quarters of 2001 to 34.2% in the
first three 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 30.5% for the first nine
months of 2001, compared to 30.1% for the first nine months of 2002, with SG&A
expenditures increasing by $1.5 million or 0.5% to $272.1 million. On an
absolute dollar basis, advertising decreased by $3.1 million, store salaries
increased by $7.4 million and other SG&A decreased by $2.8 million. As a
percentage of net sales, advertising expense decreased from 5.0% to 4.6%, store
salaries increased from 11.8% to 12.4% and other SG&A expenses decreased from
13.7% to 13.2%. 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 due to our focus on reducing corporate overhead.

Interest expense, net of interest income of $0.8 million and $0.7 million,
respectively, decreased from $2.2 million for the first nine months of 2001 to
$0.8 million in the first nine months of 2002. Weighted average borrowings
outstanding decreased from $65.4 million in the prior year to $39.9 million in
the first three quarters of 2002, and the weighted average interest rate on
outstanding indebtedness decreased from 6.0% to 4.7%. The decrease in the
weighted average borrowings was due primarily to decreased borrowings under our
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 nine months
ended November 3, 2001 to 37.8% for the nine months ended November 2, 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 $305.2 million at November 2, 2002, which is up from
$301.9 million at February 2, 2002 but down from $340.8 million at November 3,
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 third quarter was lower in 2002 than
in 2001 due mainly to our reduced inventory levels.

Our operating activities used net cash of $43.7 million in the first nine
months of 2001 as cash provided by net earnings, adjusted for non-cash charges
and increases in payables, was more than offset by increases in inventories and
other assets and a decrease in income taxes payable. Inventories increased $84.4
million for the nine months ended November 3, 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 three quarters of 2002, operating
activities provided net cash of $34.3 million due mainly to net earnings,
adjusted for non-cash charges and increases in payables, offset partially by
increases in inventories and other assets and a decrease in income taxes
payable. 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 through the third quarter of 2002 has not been as
significant as that typically experienced during the first three quarters of
prior years.

Our investing activities used net cash of $54.8 million and $28.5 million
for the first three 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 three 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 $24.6 million for the first
three 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 $26.5 million for the first three 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 three quarters of 2001
and 2002, the Company repurchased 1,185,000 and 1,480,000 shares of its common
stock under this program at a cost of $30.4 million and $28.1 million,
respectively. A total of 3,000,000 shares were repurchased under this program.

On November 19, 2002, the Board of Directors authorized a stock repurchase
program for up to $25 million in shares of the Company's common stock. Under
this authorization, the Company may purchase shares from time to time in the
open market, depending on market price and other considerations. No shares have
yet 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 had
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. The provisions of this
contract also required contract completion at the first instance in which the
market price of our common stock fell below a trigger price of $12.64 per share.
During the third quarter of 2002, the market price of our common stock fell
below the trigger price causing the contract to be exercised.

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

11

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$19.3
million) through February 5, 2004 and a term credit agreement under which the
Company borrowed Can$75 million (US$48.2 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 November 2, 2002, there was US$39.1 million
outstanding under these credit agreements.

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 three 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 November 2, 2002, we
had 7 contracts maturing at various dates through February 2003. Unrealized
pretax gains on these forward contracts totaled approximately $0.6 million at
November 2, 2002. A hypothetical 10% change in applicable November 2, 2002
forward rates could increase or decrease this pretax gain by $0.5 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.

ITEM 4 - CONTROLS AND PROCEDURES

EVALUATION OF CONTROLS AND PROCEDURES

Within 90 days prior to the filing of this report, under the supervision
and with the participation of the Company's management, including the Company's
Chief Executive Officer (CEO) and Chief Financial Officer (CFO), an evaluation
of the effectiveness of the Company's disclosure controls and procedures was
performed. Based on this evaluation, the CEO and CFO have concluded that the
Company's disclosure controls and procedures are effective to ensure that
material information is recorded, processed, summarized and reported by
management of the Company on a timely basis in order to comply with the
Company's disclosure obligations under the Securities Exchange Act of 1934 and
the SEC rules thereunder.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation.

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. On October 17, 2002, the
court granted summary adjudication in favor of the Company on the plaintiff's
false advertising claim on behalf of the general public relating to hemming
fees, and also reaffirmed its earlier ruling denying class certification. The
court found there were triable issues of fact, and therefore denied summary
adjudication on the remaining claims. The court has set a trial date of February
24, 2003. 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.

14

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

(b) REPORTS ON FORM 8-K.

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.

On December 5, 2002, the Company filed a current report on Form 8-K
related to certain changes made to the Company's 401(k) Savings Plan.

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: December 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

15

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;

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;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

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

16

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;

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;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

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

17

INDEX TO EXHIBITS