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 2, 2003 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 [ ].

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 September 12, 2003 was 39,430,751, excluding 3,310,623
shares classified as Treasury Stock.

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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 six months ended August 3, 2002 and August 2, 2003.

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 1, 2003 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 subsidiaries.

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)
(UNAUDITED)

See Notes to Consolidated Financial Statements.

3

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

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 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 1, 2003.

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." We have adopted the disclosure-only provisions of
SFAS No. 123 and continue to apply APB Opinion 25 and related interpretations in
accounting for the stock option plans and the employee stock purchase plan. Had
we elected to apply the accounting standards of SFAS No. 123, our net earnings
and net earnings per share would have approximated the pro forma amounts
indicated below (in thousands, except per share data):

Accounting Change -- We adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), on February 2, 2003. SFAS 143
addresses the accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated retirement costs.
The adoption of this statement did not have a material impact on our financial
position or results of operations.

We adopted Statement of Financial Accounting Standards No. 145, "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS 145"), on February 2, 2003. SFAS 145 rescinds FASB
Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and
an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements". SFAS 145 also rescinds FASB
Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". 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. The adoption of this statement did not have a material impact on
our financial position or results of operations.

We adopted Statement of Financial Accounting Standards No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), on November
3, 2002. SFAS 146 replaces Emerging Issues Task Force ("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)."

5

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. The adoption of
this statement did not have a material impact on our financial position or
results of operations.

We adopted Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"), as of
February 1, 2003. SFAS 148 amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. Additionally, SFAS 148 amends the
disclosure requirements of SFAS 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 SFAS 148 did not have a
material effect on the Company's financial position or results of operations.
The disclosures required by SFAS 148 are included as part of this note under the
caption "Stock Based Compensation."

We adopted Statement of Financial Accounting Standards No. 149, "Amendment
of Statement No. 133 on Derivative Instruments and Hedging Activities" ("SFAS
149"), as of June 30, 2003. SFAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), and is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. The adoption of this statement did not have a material impact on our
financial position or results of operations.

In November 2002, the FASB issued Financial Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that
upon issuance of a guarantee, the guarantor must disclose and recognize a
liability for the fair value of the obligation it assumes under that guarantee.
The initial recognition and measurement requirement of FIN 45 is effective for
guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN 45 are effective for interim and annual periods ending after
December 15, 2002 and are applicable to guarantees issued before December 31,
2002. The adoption of FIN 45 did not have a material impact on our financial
position or results of operations.

In November 2002, the EITF issued Issue 02-16, "Accounting by a Customer
(Including a Reseller) for Cash Consideration Received from a Vendor." This EITF
addresses the accounting treatment for cash vendor allowances received. The
adoption of EITF Issue 02-16 in 2003 did not have an impact on the Company's
financial position or results of operations as we do not receive any material
vendor allowances.

New Accounting Pronouncements -- In January 2003, the Financial Accounting
Standards Board issued Financial Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 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 46 requires
that its provisions are effective immediately for all arrangements entered into
after January 31, 2003. We do not have any variable interest entities created
after January 31, 2003. For any arrangements entered into prior to January 31,
2003, the FIN 46 provisions are required to be adopted at the beginning of the
first interim or annual period beginning after June 15, 2003. The adoption of
FIN 46 is not expected to have a material impact on our financial position or
results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments, many of which were
previously classified as equity. This statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of this statement is not expected to have a material impact
on our financial position or results of operations.

6

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 any 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
practices include entering 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 payment
terms for the merchandise inventories. Any ineffective portion of a hedge is
reported in earnings immediately. At August 2, 2003, the Company had 14
contracts maturing in varying increments to purchase an aggregate notional
amount of $11.7 million in foreign currency, maturing at various dates through
April 2004. We recognized a gain of $4,000 resulting from hedge ineffectiveness
during the first six months of 2003.

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 May 1, 2004
approximately $0.3 million, net of tax, of existing net gains presently deferred
in the accumulated other comprehensive income.

4. COMPREHENSIVE INCOME AND SUPPLEMENTAL CASH FLOWS

Our comprehensive income is as follows (in thousands):

We paid cash during the first six months of 2002 of $1.0 million for
interest and $17.4 million for income taxes, compared with $1.1 million for
interest and $3.7 million for income taxes during the first six months of 2003.
We had non-cash investing and financing activities resulting from the tax
benefit recognized upon exercise of stock options of $0.6 million and $0.1
million for the first six months of 2002 and 2003, respectively, and from the
issuance of treasury stock to the employee stock ownership plan of $0.5 million
for the first six months of 2003. No issuance of treasury stock to the employee
stock ownership plan occurred during 2002.

7

5. GOODWILL AND OTHER INTANGIBLE ASSETS

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 1, 2003 and for the six months ended August 2, 2003 are
as follows (in thousands):

Balance, February 2, 2002 ................................................ $35,561
Goodwill of acquired business ....................................... 233
Translation adjustment .............................................. 813
-------
Balance, February 1, 2003 ................................................ $36,607
Translation adjustment .............................................. 1,597
-------
Balance, August 2, 2003 .................................................. $38,204
=======

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 $181,000 and $307,000 for the six months ended August 3, 2002 and
August 2, 2003, respectively, and approximately $428,000 for the year ended
February 1, 2003. Pretax amortization associated with intangible assets at
August 2, 2003 is estimated to be $380,000 for the remainder of fiscal year
2003, $760,000 for each of the fiscal years 2004 and 2005, $722,000 for fiscal
year 2006 and $600,000 for fiscal year 2007.

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 our Annual Report on Form
10-K for the year ended February 1, 2003. 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 "2003" mean the 52-week
fiscal year ending January 31, 2004.

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 3, 2002 and August 2, 2003

Our net sales were $334.3 million for the quarter ended August 2, 2003, a
$25.7 million or 8.3% increase from the same prior year period. This increase
was due primarily to an 8.1% increase in 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).
The increase in comparable sales for the U.S. stores was due mainly to increased
unit sales of tailored apparel, particularly suits, and continued growth in our
tuxedo rental business, which increased from 3.5% of total revenues in the
second quarter of 2002 to 5.3% of total revenues in the second quarter of 2003.
A decrease of 3.8% in comparable sales for the Canadian stores, due mainly to a
shorter summer sale during the second quarter versus the prior year and softer
demand overall in the Canadian men's apparel market, was more than offset by the
foreign currency exchange rate translation effect from the strengthening of the
Canadian dollar.

Gross margin increased $15.9 million or 14.8% from the same prior year
quarter to $122.9 million in the second quarter of 2003. As a percentage of
sales, gross margin increased from 34.7% in the second quarter of 2002 to 36.8%
in the second quarter of 2003. 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 traditional
businesses, and improved initial markups and product margins realized from the
shift started in the second quarter of 2002 to merchandise with lower opening
price points at our Men's Wearhouse brand.

Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 31.2% for the second quarter of 2003, compared to 30.6% for the
second quarter of 2002, with SG&A expenditures increasing by $9.9 million or
10.5% to

9

$104.3 million. On an absolute dollar basis, the principal components of SG&A
expenses increased primarily due to continued growth in our tuxedo rental
business, increased salaries associated with increased sales and higher
insurance costs. As a percentage of sales, advertising expense decreased from
4.8% to 4.4% of net sales, store salaries decreased from 12.6% to 12.0% of net
sales and other SG&A expenses increased from 13.2% to 14.8% of net sales.

Interest expense, net of interest income, increased from $0.2 million in the
second quarter of 2002 to $0.4 million in the second quarter of 2003. Weighted
average borrowings outstanding increased from $40.1 million in the second
quarter of 2002 to $44.7 million for the second quarter of 2003, and the
weighted average interest rate on outstanding indebtedness increased from 4.6%
to 6.1%. The increase in the weighted average borrowings was due primarily to
increases in the Canadian dollar exchange rate for our Canadian term loan. The
increase in the weighted average interest rate was due primarily to increases in
the LIBOR rate, as well as an increase in the rate payable for our Canadian term
loan. The effect of these increases from the prior year on interest expense was
partly offset by an increase in interest income due to higher cash balances. See
"Liquidity and Capital Resources" discussion in the following section herein.

Our effective income tax rate decreased from 37.8% for the second quarter of
2002 to 37.3% for the second quarter of 2003. 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 $11.4 million or 3.4% of net sales
for the second quarter of 2003, compared with net earnings of $7.8 million or
2.5% of net sales for the second quarter of 2002.

Six Months Ended August 3, 2002 and August 2, 2003

Our net sales were $647.4 million for the six months ended August 2, 2003, a
$35.0 million or 5.7% increase from the same prior year period. This increase
was due primarily to a 4.5% increase in U.S. comparable store sales, resulting
from increased unit sales of tailored apparel, particularly suits, and continued
growth in our tuxedo rental business, which increased from 2.9% of total
revenues in the first six months of 2002 to 4.7% of total revenues in the first
six months of 2003. A decrease of 5.8% in comparable sales for the Canadian
stores was due mainly to unusually severe and extended winter weather conditions
during the first quarter as well as a shorter summer sale and softer demand
overall in the Canadian men's apparel market during the second quarter of 2003.
However, this decrease was more than offset by the foreign currency exchange
rate translation effect from the strengthening of the Canadian dollar.

Gross margin increased $22.9 million or 10.9% over the same prior year
period to $234.2 million for the first six months of 2003. As a percentage of
sales, gross margin increased from 34.5% for the first six months of 2002 to
36.2% for the first six months of 2003. 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
traditional businesses. In addition, our shift starting in the second quarter of
2002 to merchandise with lower opening price points at our Men's Wearhouse brand
resulted in improved initial markups and product margins in 2003.

SG&A expenses, as a percentage of sales, were 29.6% for the first six months
of 2002, compared to 30.5% for the first six months of 2003, with SG&A
expenditures increasing by $16.1 million or 8.9% to $197.6 million. On an
absolute dollar basis, the principal components of SG&A expenses increased
primarily due to continued growth in our tuxedo rental business, increased
salaries associated with increased sales and higher insurance costs. SG&A
expenses were reduced by the recognition of a $4.4 million deferred pretax gain
from the sale, in March 2002, of substantially all of 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. However, most
of the gain recognized was offset by $3.7 million in costs related to store
closures and the write-off of certain technology assets during the first quarter
of 2003. As a percentage of sales, advertising expense decreased from 4.5% to
4.4% of net sales, store salaries decreased from 12.3% to 12.0% of net sales and
other SG&A expenses increased from 12.8% to 14.1% of net sales.

Interest expense, net of interest income, increased from $0.5 million for
the first six months of 2002 to $0.8 million in the first six months of 2003.
Weighted average borrowings outstanding increased from $40.2 million in the
prior year to $43.3 million for the first six months of 2003, and the weighted
average interest rate on outstanding indebtedness increased from 4.4% to 6.0%.
The increase in the weighted average borrowings was due primarily to increases
in the Canadian dollar

10

exchange rate for our Canadian term loan. The increase in the weighted average
interest rate was due primarily to increases in the LIBOR rate, as well as an
increase in the rate payable for our Canadian term loan. The effect of these
increases on interest expense was partly offset by an increase in interest
income due to higher cash balances. See "Liquidity and Capital Resources"
discussion in the following section herein.

Our effective income tax rate decreased from 37.8% for the six months ended
August 3, 2002 to 37.3% for the six months ended August 2, 2003. 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 $22.5 million or 3.5% of net sales
for the first six months of 2003, compared with net earnings of $18.3 million or
3.0% of net sales for the first six months of 2002.

LIQUIDITY AND CAPITAL RESOURCES

Working capital was $341.1 million at August 2, 2003, which is up from
$325.3 million at February 1, 2003 and $320.8 million at August 3, 2002.
Historically, our working capital has been at its lowest level in January and
February and has increased through November as inventory levels are increased in
preparation for the fourth quarter selling season.

Our operating activities provided net cash of $25.5 million in the first six
months of 2002, due mainly to net earnings, adjusted for non-cash charges and a
decrease in inventories, offset by an increase in other assets and decreases in
accounts payable, accrued expenses and income taxes payable. During the first
six months of 2003, our operating activities provided net cash of $12.9 million,
due to net earnings, adjusted for non-cash charges (including recognition of a
deferred gain on a sale of assets) and an increase in income taxes payable,
offset by increases in inventories and other assets and a decrease in accounts
payable and accrued expenses. Inventories increased during the first six months
of 2003 due to seasonal inventory buildup and the purchase of fabric used in the
direct sourcing of inventory. However, we did not experience this typical
inventory buildup in the first six months of 2002 as a result of a decrease in
net sales of 4.5% in fiscal 2001 and lower planned inventory purchases based
upon our forecasted net sales for fiscal 2002.

Our investing activities used net cash of $15.2 million and $20.5 million
for the first six months of 2002 and 2003, 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. During the first
six months of 2002, cash used for capital expenditures was partially offset by
net proceeds of $6.8 million received from the sale of assets.

Our financing activities used net cash of $4.9 million for the first six
months of 2002, due mainly to purchases of treasury stock and principal payments
made on long-term debt offset by proceeds from the issuance of our common stock
for options exercised. Net cash used in financing activities was $9.7 million
for the first six months of 2003, due mainly to purchases of treasury stock and
principal payments made on long-term debt 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 one million shares of
our common stock, 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 two million shares of our common stock. During the first six months
of 2002, 332,300 shares were repurchased under this program at a cost of $6.9
million, and we completed the repurchase of the authorized three million shares
under this program during the third quarter of 2002. In November 2002, the Board
of Directors authorized a new program for the repurchase of up to $25.0 million
of Company stock in the open market or in private transactions. A total of
507,100 shares at a cost of $9.2 million were repurchased in open market
transactions under this new program during the first six months of 2003.

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). 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. The Credit Agreement also provides for fees applicable to unused
commitments. In addition, in January 2003, we entered into a new Canadian credit
facility which is a term credit

11

agreement under which we borrowed Can$62.0 million (US$44.3 million). The term
credit borrowing is payable in quarterly installments of Can$0.8 million (US$0.6
million) beginning May 2003, with the remaining unpaid principal payable on
February 4, 2008. Borrowings under the new term credit agreement were used to
repay approximately Can$60.9 million (US$43.5 million) in outstanding
indebtedness of Moores under the previous term credit agreement. Covenants and
interest rates for the term credit agreement are substantially similar to those
contained in the Company's Credit Agreement. As of August 2, 2003, there was
US$43.2 million outstanding under the term credit agreement; there were no
borrowings outstanding under the revolving credit agreement.

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. As these forward exchange contracts
are with two financial institutions, 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.

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, the 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, 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 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.

12

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 August 2, 2003, we had
14 contracts maturing at various dates through April 2004. Unrealized pretax
gains on these forward contracts totaled approximately $0.4 million at August 2,
2003. A hypothetical 10% change in applicable August 2, 2003 forward rates could
increase or decrease this pretax gain by $1.2 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 historically. 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
August 2, 2003. 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 August 2, 2003 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 August 2, 2003 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

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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. Both 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. We believe that our
managers and assistant managers were properly classified as exempt under such
statutes and, therefore, properly compensated. The Company believes that the
Suits are without merit and intends to vigorously defend them.

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. We believe that the tailors were properly classified as
independent contractors and properly compensated pursuant to the terms of their
respective Independent Contractor Agreements. The Company believes that the
Tailor's Suit is without merit and intends to vigorously defend the lawsuit.

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 or results of operations.

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

On July 1, 2003, 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. The 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 fiscal 2003.

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.

(b) REPORTS ON FORM 8-K.

On May 22, 2003, the Company filed a current report on Form 8-K pursuant to
Item 12 reporting the issuance of a press release that reported earnings results
for the first fiscal quarter of 2003.

On August 20, 2003, the Company filed a current report on Form 8-K pursuant
to Item 12 reporting the issuance of a press release that reported earnings
results for the three and six months ended August 2, 2003.

SIGNATURES

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

Dated: September 16, 2003 THE MEN'S WEARHOUSE, INC.

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

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INDEX TO EXHIBITS