e10vq
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2010 or
     
o   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)
     
6380 Rogerdale    
Houston, Texas   77072-1624
(Address of Principal Executive Offices)   (Zip Code)
(281) 776-7000
(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 þ. No o.
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ. No o.
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o  Non-accelerated filer o  Smaller reporting company o
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o. No þ.
     The number of shares of common stock of the Registrant, par value $.01 per share, outstanding at September 3, 2010 was 52,683,462 excluding 18,118,736 shares classified as Treasury Stock.
 
 

 


 

REPORT INDEX
         
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 EX-4.1
 EX-4.2
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT

 


Table of Contents

Forward-Looking and Cautionary Statements
     Certain statements made in this Quarterly Report on Form 10-Q and in other public filings and press releases by the Company contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risk and uncertainty. These forward-looking statements may include, but are not limited to, references to future capital expenditures, acquisitions, sales, earnings, margins, costs, number and costs of store openings, demand for clothing, market trends in the retail clothing business, currency fluctuations, inflation and various economic and business trends. Forward-looking statements may be made by management orally or in writing, including, but not limited to, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q and other sections of our filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and the Securities Act of 1933.
     Forward-looking statements are not guarantees of future performance and a variety of factors could cause actual results to differ materially from the anticipated or expected results expressed in or suggested by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, actions by governmental entities, domestic and international economic activity and inflation, our successful execution of internal operating plans and new store and new market expansion plans, including successful integration of acquisitions, performance issues with key suppliers, disruption in buying trends due to homeland security concerns, severe weather, foreign currency fluctuations, government export and import policies, aggressive advertising or marketing activities of competitors 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. Refer to “Risk Factors” in our Annual Report on Form 10-K for the year ended January 30, 2010 and Item 1A contained in Part II of this Quarterly Report on Form 10-Q for a more complete discussion of these and other factors that might affect our performance and financial results. These forward-looking statements are intended to relay the Company’s expectations about the future, and speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
PART I. FINANCIAL INFORMATION
ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL INFORMATION
     The condensed consolidated financial statements herein include the accounts of The Men’s Wearhouse, Inc. and its subsidiaries and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. 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 condensed consolidated 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 July 31, 2010 and August 1, 2009.
     Our business historically has been seasonal in nature, and the operating results of the interim periods presented are not necessarily indicative of the results that may be achieved for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended January 30, 2010 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.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                         
    July 31,     August 1,     January 30,  
    2010     2009     2010  
    (Unaudited)     (Unaudited)          
ASSETS
                       
 
                       
CURRENT ASSETS:
                       
Cash and cash equivalents
  $ 281,500     $ 144,449     $ 186,018  
Short-term investments
          19,490        
Accounts receivable, net
    19,066       17,129       16,745  
Inventories
    416,377       430,777       431,492  
Other current assets
    61,762       51,876       74,075  
 
                 
 
                       
Total current assets
    778,705       663,721       708,330  
 
                       
PROPERTY AND EQUIPMENT, net
    333,133       375,595       344,746  
 
                       
TUXEDO RENTAL PRODUCT, net
    91,690       107,848       102,479  
GOODWILL
    60,449       59,266       59,414  
OTHER ASSETS, net
    22,850       16,466       17,137  
 
                 
 
                       
TOTAL
  $ 1,286,827     $ 1,222,896     $ 1,232,106  
 
                 
 
                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
 
                       
CURRENT LIABILITIES:
                       
Accounts payable
  $ 82,163     $ 78,918     $ 83,052  
Accrued expenses and other current liabilities
    129,971       115,488       117,047  
Income taxes payable
    7,589       19,276       23,936  
Current maturities of long-term debt
    45,226              
 
                 
 
                       
Total current liabilities
    264,949       213,682       224,035  
 
                       
LONG-TERM DEBT
          43,161       43,491  
 
                       
DEFERRED TAXES AND OTHER LIABILITIES
    64,402       63,289       62,236  
 
                 
 
                       
Total liabilities
    329,351       320,132       329,762  
 
                 
 
                       
COMMITMENTS AND CONTINGENCIES (Note 3 and Note 11)
                       
 
                       
SHAREHOLDERS’ EQUITY:
                       
Preferred stock
                 
Common stock
    708       703       705  
Capital in excess of par
    332,677       319,029       327,742  
Retained earnings
    1,000,553       961,670       953,986  
Accumulated other comprehensive income
    36,308       33,988       32,537  
Treasury stock, at cost
    (412,770 )     (412,626 )     (412,626 )
 
                 
 
                       
Total shareholders’ equity
    957,476       902,764       902,344  
 
                 
 
                       
TOTAL
  $ 1,286,827     $ 1,222,896     $ 1,232,106  
 
                 
See Notes to Condensed Consolidated Financial Statements.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
                                 
    For the Three Months Ended     For the Six Months Ended  
    July 31,     August 1,     July 31,     August 1,  
    2010     2009     2010     2009  
Net sales:
                               
Clothing product
  $ 362,228     $ 364,302     $ 730,599     $ 723,364  
Tuxedo rental services
    142,462       129,567       214,616       200,986  
Alteration and other services
    32,299       32,339       65,240       65,992  
 
                       
Total net sales
    536,989       526,208       1,010,455       990,342  
 
                               
Cost of sales:
                               
Clothing product, including buying and distribution costs
    161,121       170,187       328,434       337,644  
Tuxedo rental services
    22,036       21,475       33,362       33,507  
Alteration and other services
    24,446       23,690       48,510       47,780  
Occupancy costs
    69,803       73,068       139,494       145,634  
 
                       
Total cost of sales
    277,406       288,420       549,800       564,565  
 
                               
Gross margin
    259,583       237,788       460,655       425,777  
 
                               
Selling, general and administrative expenses
    191,168       173,896       370,818       353,109  
 
                       
 
                               
Operating income
    68,415       63,892       89,837       72,668  
 
                               
Interest income
    46       231       80       489  
Interest expense
    (321 )     (231 )     (580 )     (649 )
 
                       
 
                               
Earnings before income taxes
    68,140       63,892       89,337       72,508  
 
                               
Provision for income taxes
    25,620       24,407       33,209       27,767  
 
                       
 
                               
Net earnings
  $ 42,520     $ 39,485     $ 56,128     $ 44,741  
 
                       
 
                               
Net earnings per common share (Note 2):
                               
Basic
  $ 0.80     $ 0.75     $ 1.06     $ 0.85  
 
                       
 
                               
Diluted
  $ 0.80     $ 0.75     $ 1.05     $ 0.85  
 
                       
 
                               
Weighted average common shares outstanding (Note 2):
                               
Basic
    52,648       52,112       52,533       52,004  
 
                       
 
                               
Diluted
    52,806       52,255       52,717       52,105  
 
                       
 
                               
Cash dividends declared per common share
  $ 0.09     $ 0.07     $ 0.18     $ 0.14  
 
                       
See Notes to Condensed Consolidated Financial Statements.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                 
    For the Six Months Ended  
    July 31,     August 1,  
    2010     2009  
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net earnings
  $ 56,128     $ 44,741  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
    36,885       43,881  
Tuxedo rental product amortization
    20,812       22,089  
Loss on disposition of assets
    209       1,750  
Asset impairment charges
    162        
Deferred rent expense
    1,681       892  
Share-based compensation
    5,723       5,159  
Excess tax benefits from share-based plans
    (780 )     (42 )
Deferred tax provision (benefit)
    3,958       (8,135 )
Increase in accounts receivable
    (2,263 )     (631 )
Decrease in inventories
    17,165       15,460  
Increase in tuxedo rental product
    (9,276 )     (30,816 )
Decrease in other assets
    1,971       24,755  
Increase (decrease) in accounts payable, accrued expenses and other current liabilities
    13,485       (27,682 )
Increase (decrease) in income taxes payable
    (15,402 )     19,984  
Decrease in other liabilities
    (170 )     (1,276 )
 
           
 
               
Net cash provided by operating activities
    130,288       110,129  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Capital expenditures
    (25,865 )     (28,757 )
Other investing activities
    23        
 
           
 
               
Net cash used in investing activities
    (25,842 )     (28,757 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from issuance of common stock
    1,321       1,051  
Payments on revolving credit facility
          (25,000 )
Cash dividends paid
    (9,535 )     (7,344 )
Tax payments related to vested deferred stock units
    (2,656 )     (1,630 )
Excess tax benefits from share-based plans
    780       42  
Purchase of treasury stock
    (144 )     (90 )
 
           
 
               
Net cash used in financing activities
    (10,234 )     (32,971 )
 
           
 
               
Effect of exchange rate changes
    1,270       8,636  
 
           
 
               
INCREASE IN CASH AND CASH EQUIVALENTS
    95,482       57,037  
Balance at beginning of period
    186,018       87,412  
 
           
 
               
Balance at end of period
  $ 281,500     $ 144,449  
 
           
See Notes to Condensed Consolidated Financial Statements.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
     Basis of Presentation — The condensed 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 condensed consolidated financial statements reflect all elimination entries and normal adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended January 30, 2010.
     The preparation of the condensed consolidated financial statements in conformity with accounting principals generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual amounts could differ from those estimates.
     Recent Accounting Guidance — In January 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that expands the required disclosures about fair value measurements. This guidance provides for new disclosures requiring the Company to (a) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (b) present separately information about purchases, sales, issuances and settlements in the reconciliation of Level 3 fair value measurements. This guidance also provides clarification of existing disclosures requiring the Company to (i) determine each class of assets and liabilities based on the nature and risks of the investments rather than by major security type and (ii) for each class of assets and liabilities, disclose the valuation techniques and inputs used to measure fair value for both Level 2 and Level 3 fair value measurements. We adopted this guidance effective January 31, 2010, except for the presentation of purchases, sales, issuances and settlements in the reconciliation of Level 3 fair value measurements, which will be effective for fiscal years beginning after December 15, 2010. The adoption of the first phase of this guidance did not have a material impact to our financial position, results of operations or cash flows.
2. Earnings per Share
     We calculate earnings per common share using the two-class method in accordance with the guidance for determination of whether instruments granted in share-based payment transactions are participating securities. Our unvested restricted stock and deferred stock units contain rights to receive nonforfeitable dividends or dividend equivalents, respectively, and thus are participating securities requiring the two-class method of computing earnings per common share. The two-class method is an earnings allocation formula that determines earnings per common share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings.
     Basic earnings per common share is determined using the two-class method and is computed by dividing net earnings attributable to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share reflects the more dilutive earnings per common share amount calculated using the treasury stock method or the two-class method.
     The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share amounts). Basic and diluted earnings per common share are computed using the actual net earnings available to common shareholders and the actual weighted-average common shares outstanding rather than the rounded numbers presented within our condensed consolidated statement of earnings and the accompanying notes. As a result, it may not be possible to recalculate earnings per common share in our condensed consolidated statement of earnings and the accompanying notes.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
                                 
    For the Three Months     For the Six Months  
    Ended     Ended  
    July 31,     August 1,     July 31,     August 1,  
    2010     2009     2010     2009  
Numerator
                               
Net earnings
  $ 42,520     $ 39,485     $ 56,128     $ 44,741  
Net earnings allocated to participating securities
(restricted stock and deferred stock units)
    (397 )     (388 )     (518 )     (442 )
 
                       
Net earnings available to common shareholders
  $ 42,123     $ 39,097     $ 55,610     $ 44,299  
 
                       
Denominator
                               
Basic weighted average common shares outstanding
    52,648       52,112       52,533       52,004  
Effect of dilutive securities:
                               
Stock options and equity-based compensation
    158       143       184       101  
 
                       
Diluted weighted average common shares outstanding
    52,806       52,255       52,717       52,105  
 
                       
 
                               
Net earnings per common share:
                               
Basic
  $ 0.80     $ 0.75     $ 1.06     $ 0.85  
 
                       
Diluted
  $ 0.80     $ 0.75     $ 1.05     $ 0.85  
 
                       
     For the three and six months ended July 31, 2010, 1.0 million and 0.9 million anti-dilutive stock options were excluded from the calculation of diluted earnings per common share, respectively. For the three and six months ended August 1, 2009, 1.0 million and 1.2 million anti-dilutive stock options were excluded from the calculation of diluted earnings per common share, respectively.
3. Debt
     Our Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks, which was last amended on February 2, 2007, provides for a total senior secured revolving credit facility of $200.0 million, which can be expanded to $250.0 million upon additional lender commitments, that matures on February 11, 2012. The Credit Agreement also provided our Canadian subsidiaries with a secured term loan used to fund the repatriation of US$74.7 million of Canadian earnings in January 2006 under the American Jobs Creation Act of 2004. The Canadian term loan matures on February 10, 2011. The Credit Agreement is secured by the stock of certain of the Company’s subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) an alternate base rate (equal to the greater of the prime rate or the federal funds rate plus 0.5%) or (ii) LIBO rate or (iii) CDO rate. Advances under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin up to 1.125%. The Credit Agreement also provides for fees applicable to unused commitments ranging from 0.100% to 0.175%. As of July 31, 2010, there was US$45.2 million outstanding under the Canadian term loan with an effective interest rate of 1.6%, and no borrowings outstanding under the revolving credit facility.
     The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement reflect an overall covenant structure that is generally representative of a commercial loan made to an investment-grade company. Our debt, however, is not rated, and we have not sought, and are not seeking, a rating of our debt. We were in compliance with the covenants in the Credit Agreement as of July 31, 2010.
     Conditions in the U.S. and global credit markets have made it difficult for many businesses to obtain financing on acceptable terms. If these market conditions continue or worsen, it may be more difficult for us to renew or increase our credit facility.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     We utilize letters of credit primarily to secure inventory purchases and as collateral for workers compensation claims. At July 31, 2010, letters of credit totaling approximately $11.6 million were issued and outstanding. Borrowings available under our Credit Agreement at July 31, 2010 were $188.4 million.
4. Comprehensive Income and Supplemental Cash Flows
     Our comprehensive income is as follows (in thousands):
                                 
    For the Three Months     For the Six Months  
    Ended     Ended  
    July 31,     August 1,     July 31,     August 1,  
    2010     2009     2010     2009  
Net earnings
  $ 42,520     $ 39,485     $ 56,128     $ 44,741  
Change in derivative fair value, net of tax
    94             94        
Currency translation adjustments, net of tax
    (1,090 )     14,933       3,677       19,696  
 
                       
Comprehensive income
  $ 41,524     $ 54,418     $ 59,899     $ 64,437  
 
                       
     Supplemental disclosure of cash flow information is as follows (in thousands):
                 
    For the Six Months
    Ended
    July 31,   August 1,
    2010   2009
Cash paid (received) during the six months for:
               
Interest
  $ 480     $ 566  
Income taxes, net
    44,081       (3,558 )
 
               
Schedule of noncash investing and financing activities:
               
Tax benefit (deficiency) related to share-based plans
    550       (952 )
Cash dividends declared
    4,779       3,680  
     We had unpaid capital expenditure purchases accrued in accounts payable, accrued expenses and other current liabilities of approximately $3.1 million and $3.9 million at July 31, 2010 and August 1, 2009, respectively. Capital expenditure purchases are recorded as cash outflows from investing activities in the condensed consolidated statement of cash flows in the period they are paid.
5. Goodwill and Other Intangible Assets
     Changes in the net carrying amount of goodwill for the year ended January 30, 2010 and for the six months ended July 31, 2010 are as follows (in thousands):
         
Balance, January 31, 2009
  $ 57,561  
Translation adjustment
    3,330  
Adjustment for excess of tax deductible goodwill
    (1,477 )
 
     
Balance, January 30, 2010
  $ 59,414  
Translation adjustment
    1,035  
 
     
Balance, July 31, 2010
  $ 60,449  
 
     

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     Goodwill is evaluated for impairment annually as of our fiscal year end. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, new significant negative industry or economic trends, unanticipated changes in the competitive environment, decisions to significantly modify or dispose of operations and a significant sustained decline in the market price of our stock. No additional impairment evaluation was considered necessary during the first six months of 2010.
     The gross carrying amount and accumulated amortization of our other intangibles, which are included in other assets in the accompanying condensed consolidated balance sheet, are as follows (in thousands):
                         
    July 31,     August 1,     January 30,  
    2010     2009     2010  
Trademarks, tradenames, favorable leases and other intangibles
  $ 13,932     $ 16,991     $ 15,305  
Accumulated amortization
    (11,428 )     (10,576 )     (11,018 )
 
                 
Net total
  $ 2,504     $ 6,415     $ 4,287  
 
                 
     The pretax amortization expense associated with intangible assets totaled approximately $0.6 million and $1.3 million for the six months ended July 31, 2010 and August 1, 2009, respectively and approximately $2.2 million for the year ended January 30, 2010. Pretax amortization associated with intangible assets at July 31, 2010 is estimated to be $0.5 million for the remainder of fiscal year 2010, $0.5 million for fiscal year 2011, $0.4 million for fiscal year 2012, $0.3 million for fiscal year 2013 and $0.2 million for fiscal year 2014.
6. Other Assets, Accrued Expenses and Other Current Liabilities and Deferred Taxes and Other Liabilities
Other current assets consist of the following (in thousands):
                         
    July 31,     August 1,     January 30,  
    2010     2009     2010  
Prepaid expenses
  $ 29,695     $ 25,691     $ 30,896  
Current deferred tax asset
    26,945       16,549       37,751  
Income taxes receivable
    174       5,339       1,309  
Other
    4,948       4,297       4,119  
 
                 
 
                       
Total other current assets
  $ 61,762     $ 51,876     $ 74,075  
 
                 
 
                       
Accrued expenses and other current liabilities consist of the following (in thousands):
 
                       
Accrued salary, bonus, sabbatical and vacation
  $ 32,125     $ 31,152     $ 40,032  
Sales, payroll and property taxes payable
    19,251       14,385       12,524  
Unredeemed gift certificates
    12,590       13,025       14,980  
Accrued workers compensation and medical costs
    16,731       16,157       17,484  
Tuxedo rental deposits
    26,021       22,228       9,523  
Cash dividends declared
    4,779       3,680       4,753  
Loyalty program reward certificates
    6,427       5,635       6,342  
Other
    12,047       9,226       11,409  
 
                 
 
                       
Total accrued expenses and other current liabilities
  $ 129,971     $ 115,488     $ 117,047  
 
                 
 
                       
Deferred taxes and other liabilities consist of the following (in thousands):
 
                       
Deferred rent and landlord incentives
  $ 46,703     $ 44,223     $ 44,656  
Non-current deferred and other income tax liabilities
    11,209       12,506       10,976  
Other
    6,490       6,560       6,604  
 
                 
 
                       
Total deferred taxes and other liabilities
  $ 64,402     $ 63,289     $ 62,236  
 
                 

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
7. Treasury Stock
     As of July 31, 2010, we had 18,118,736 shares held in treasury stock. The change in our treasury shares for the year ended January 30, 2010 and for the six months ended July 31, 2010 is provided below:
         
    Treasury  
    Shares  
Balance, January 31, 2009
    18,104,310  
Purchases of treasury stock
    7,292  
 
     
Balance, January 30, 2010
    18,111,602  
Purchases of treasury stock
    7,134  
 
     
Balance, July 31, 2010
    18,118,736  
 
     
     In January 2006, the Board of Directors authorized a $100.0 million share repurchase program of our common stock. This authorization superceded any remaining previous authorizations. In August 2007, the Company’s Board of Directors approved a replenishment of the Company’s share repurchase program to $100 million by authorizing $90.3 million to be added to the remaining $9.7 million of the then current program. No shares were purchased under the August 2007 authorization during the first six months of 2010 or 2009. At July 31, 2010, the remaining balance available under the August 2007 authorization was $44.3 million.
     During the six months ended July 31, 2010, 7,134 shares at a cost of $0.1 million were repurchased at an average price per share of $20.24 in a private transaction to satisfy tax withholding obligations arising upon the vesting of certain restricted stock. During the six months ended August 1, 2009, 7,292 shares at a cost of $0.1 million were repurchased at an average price per share of $12.29 in a private transaction to satisfy tax withholding obligations arising upon the vesting of certain restricted stock.
8. Share-Based Compensation Plans
     We maintain several equity plans under which we may grant stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards to full-time key employees and non-employee directors. We account for share-based awards in accordance with the FASB standard regarding share-based payments, which requires the compensation cost resulting from all share-based payment transactions be recognized in the financial statements. The amount of compensation cost is measured based on the grant-date fair value of the instrument issued and is recognized over the vesting period. Share-based compensation expense recognized for the three and six months ended July 31, 2010 was $3.1 million and $5.7 million, respectively. Share-based compensation expense recognized for the three and six months ended August 1, 2009 was $2.4 million and $5.2 million, respectively.
     Stock Options
     The following table summarizes stock option activity for the six months ended July 31, 2010:
                 
            Weighted-  
            Average  
            Exercise  
    Shares     Price  
Outstanding at January 30, 2010
    1,642,905     $ 20.29  
Granted
    50,000       18.79  
Exercised
    (20,745 )     15.35  
Expired
    (5,374 )     20.89  
 
             
Outstanding at July 31, 2010
    1,666,786     $ 20.30  
 
           
Exercisable at July 31, 2010
    802,608     $ 18.47  
 
           

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     The weighted-average grant date fair value of the 50,000 stock options granted during the six months ended July 31, 2010 was $8.27 per share. The following table summarizes the weighted average assumptions used to fair value stock options at the date of grant using the Black-Scholes option pricing model for the three and six months ended July 31, 2010:
                 
    For the Three   For the Six
    Months Ended   Months Ended
    July 31,   July 31,
    2010   2010
Risk-free interest rate
    1.80 %     1.80 %
Expected lives
  5.0 years   5.0 years
Dividend yield
    1.65 %     1.65 %
Expected volatility
    57.03 %     57.03 %
     The assumptions presented in the table above represent the weighted average of the applicable assumptions used to fair value stock options. Expected volatility is based on historical volatility of our common stock. The expected term represents the period of time the options are expected to be outstanding after their grant date. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the average of the annual dividend divided by the market price of our common stock at the time of declaration.
     As of July 31, 2010, we have unrecognized compensation expense related to nonvested stock options of approximately $5.9 million which is expected to be recognized over a weighted average period of 3.0 years.
     Restricted Stock and Deferred Stock Units
     The following table summarizes restricted stock and deferred stock unit activity for the six months ended July 31, 2010:
                 
            Weighted-  
            Average  
            Grant-Date  
    Shares     Fair Value  
Nonvested at January 30, 2010
    506,133     $ 22.35  
Granted
    328,978       23.96  
Vested (1)
    (327,945 )     21.19  
Forfeited
    (3,175 )     22.73  
 
             
Nonvested at July 31, 2010
    503,991     $ 24.15  
 
           
 
(1)   Includes 104,839 shares relinquished for tax payments related to vested deferred stock units for the six months ended July 31, 2010.
     During the six months ended July 31, 2010, 14,058 restricted stock shares and 314,920 deferred stock units were granted and 19,360 restricted stock shares and 308,585 deferred stock units vested. No shares of restricted stock were forfeited during the six months ended July 31, 2010. Total nonvested shares of 503,991 at July 31, 2010 include 63,196 nonvested restricted stock shares.
     As of July 31, 2010, we have unrecognized compensation expense related to nonvested restricted stock shares and deferred stock units of approximately $8.5 million which is expected to be recognized over a weighted average period of 1.2 years.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     Employee Stock Purchase Plan
     The Employee Stock Discount Plan (“ESDP”) allows employees to authorize after-tax payroll deductions to be used for the purchase of up to 2,137,500 shares of our common stock at 85% of the lesser of the fair market value on the first day of the offering period or the fair market value on the last day of the offering period. We make no contributions to this plan but pay all brokerage, service and other costs incurred. The plan, as amended, allows participants to purchase no more than 125 shares during any calendar quarter.
     During the six months ended July 31, 2010, employees purchased 59,604 shares under the ESDP, which had a weighted-average share price of $16.83 per share. As of July 31, 2010, 1,117,896 shares were reserved for future issuance under the ESDP.
9. Fair Value Measurements
     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value. The hierarchy can be described as follows: Level 1- observable inputs such as quoted prices in active markets; Level 2- inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
     Effective January 31, 2010, we adopted enhanced disclosure requirements for fair value measurements. There were no transfers into or out of Level 1 and Level 2 during the three and six months ended July 31, 2010.
     Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
                                 
            Fair Value Measurements at Reporting Date Using  
            Quoted Prices              
            in Active     Significant        
            Markets for     Other     Significant  
            Identical     Observable     Unobservable  
            Instruments     Inputs     Inputs  
(in thousands)   July 31, 2010     (Level 1)     (Level 2)     (Level 3)  
Assets:
                               
Derivative financial instruments
  $ 155     $     $ 155     $  
 
                       
Liabilities:
                               
Derivative financial instruments
  $ 60     $     $ 60     $  
 
                       
     Derivative financial instruments are comprised of foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted purchases of certain inventories denominated in a foreign currency (primarily the Euro). Our derivative financial instruments are recorded in the condensed consolidated balance sheets at fair value based upon observable market inputs. Derivative financial instruments in an asset position are included within other current assets in the condensed consolidated balance sheets. Derivative financial instruments in a liability position are included within accrued expenses and other current liabilities in the condensed consolidated balance sheets. Refer to Note 10 for further information regarding our derivative instruments.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     At August 1, 2009, we had highly liquid investments of $19.5 million classified as short-term investments included in our condensed consolidated balance sheet. The carrying amount of these instruments approximates fair value and is based on quoted market prices at the reporting date and is considered a Level 1 fair value measurement within the fair value hierarchy. We had no financial liabilities measured at fair value on a recurring basis at August 1, 2009. At January 30, 2010, we had no financial assets or liabilities measured at fair value on a recurring basis.
     Assets and Liabilities that are Measured at Fair Value on a Non-Recurring Basis
     Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. The fair values of long-lived assets held-for-use are based on our own judgments about the assumptions that market participants would use in pricing the asset and on observable market data, when available. We classify these measurements as Level 3 within the fair value hierarchy. For the three and six months ended July 31, 2010, we recorded charges for the impairment of long-lived assets of $0.2 million which is included within “Selling, general and administrative expenses” in our condensed consolidated statement of earnings. The asset impairment charges reduced the carrying amounts of the applicable long-lived assets to their fair values of $0.2 million as of July 31, 2010. No asset impairment charges were recorded for the three and six months ended August 1, 2009.
     Fair Value of Financial Instruments
     Our financial instruments, other than those presented in the disclosures above, consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities, current maturities of long-term debt and long-term debt. Management estimates that, as of July 31, 2010, August 1, 2009 and January 30, 2010 the fair value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their fair value due to the highly liquid or short-term nature of these instruments. The fair values of current maturities of long-term debt at July 31, 2010 and of long-term debt at August 1, 2009 and January 30, 2010 approximate their carrying amounts based upon terms available to us for borrowings with similar arrangements and remaining maturities.
10. Derivative Financial Instruments
     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. In accordance with the guidance for derivatives and hedging instruments, 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. The effective portion of the gain or loss on the derivative financial instruments is reported as a component of accumulated other comprehensive income and is recognized in income in the period which approximates the time when the underlying transaction occurs. Gains and losses on the derivative financial instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, if any, are reported in earnings immediately. Our derivative financial instruments are recorded in the condensed consolidated balance sheet at fair value determined 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. Refer to Note 9 for further information regarding fair value measurements of our derivative instruments.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     At July 31, 2010, we had three contracts maturing in varying increments to purchase an aggregate notional amount of $2.9 million in foreign currency, maturing at various dates through March 2011. No contracts were held at August 1, 2009 or January 30, 2010. No amounts were recorded in our results of operations for the six months ended July 31, 2010 as a result of hedge ineffectiveness, hedge components excluded from the assessment of effectiveness or the discontinuance of cash flow hedges because the forecasted transactions were no longer probable. As of July 31, 2010, accumulated other comprehensive income included an unrealized gain of approximately $0.1 million, net of tax, of which an immaterial amount is estimated will be recognized as a reduction to cost of sales over the next 12 months at the then current values on a pre-tax basis, which may differ from the current quarter-end values. Additionally, no amounts were reclassified from accumulated other comprehensive income to earnings for the six months ended July 31, 2010.
     We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of July 31, 2010.
11. Legal Matters
     On October 8, 2009, the Company was named in a federal securities class action lawsuit filed in the United States District Court for the Southern District of Texas, Houston Division. The case is styled Material Yard Workers Local 1175 Benefit Funds, et al. v. The Men’s Wearhouse, Inc., Case No. 4:09-cv-03265. The class period alleged in the complaint runs from March 7, 2007 to January 9, 2008. The primary allegations are that the Company issued false and misleading press releases regarding its guidance for fiscal year 2007 on various occasions during the alleged class period. The complaint seeks damages based on the decline in the Company’s stock price following the announcement of lowered guidance on Oct. 10, 2007, Nov. 28, 2007, and Jan. 9, 2008. The case is in its early stages and discovery has not begun. The Company believes the lawsuit is without merit and intends to mount a vigorous defense; we are unable to determine the likely outcome at this time.
     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 position, results of operations or cash flows.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
12. Supplemental Sales Information (in thousands)
                                           
    For the Three Months Ended     For the Six Months Ended  
    July 31, 2010     August 1, 2009     July 31, 2010     August 1, 2009  
Net sales:
                               
Men’s tailored clothing product
  $ 194,190     $ 197,774     $ 391,284     $ 389,541  
Men’s non-tailored clothing product
    145,206       145,981       290,907       288,640  
Ladies clothing product
    18,203       17,762       40,098       38,477  
Corporate apparel uniform product
    4,629       2,785       8,310       6,706  
 
                       
Total clothing product
    362,228       364,302       730,599       723,364  
 
                       
 
                               
Tuxedo rental services
    142,462       129,567       214,616       200,986  
 
                               
Alteration services
    26,421       26,788       53,573       54,753  
Retail dry cleaning services
    5,878       5,551       11,667       11,239  
 
                       
Total alteration and other services
    32,299       32,339       65,240       65,992  
 
                       
 
                               
Total net sales
  $ 536,989     $ 526,208     $ 1,010,455     $ 990,342  
 
                       
 
                               
Net sales by brand:
                               
MW (1)
  $ 367,354     $ 359,039     $ 685,694     $ 669,962  
K&G
    87,578       93,597       185,838       198,113  
Moores
    71,550       65,236       118,946       104,322  
MW Cleaners (2)
    5,878       5,551       11,667       11,239  
Twin Hill (3)
    4,629       2,785       8,310       6,706  
 
                       
 
                               
Total net sales
  $ 536,989     $ 526,208     $ 1,010,455     $ 990,342  
 
                       
 
(1)   MW includes Men’s Wearhouse and Men’s Wearhouse and Tux stores.
 
(2)   MW Cleaners is our retail dry cleaning and laundry facilities in Houston, Texas.
 
(3)   Twin Hill is our corporate apparel and uniform program.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
13. Subsequent Events
     On August 6, 2010, subsequent to the end of our 2010 second quarter, we acquired Dimensions Clothing Limited (“Dimensions”) and certain assets of Alexandra plc (“Alexandra”), two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for a total cash consideration of approximately £61 million (US$97.8 million). The acquisition of Dimensions and certain assets of Alexandra will expand our corporate apparel operations. The combined businesses are organized under a UK-based holding company, of which the Company controls 86% and certain existing shareholders of Dimensions control 14%. The Company has the right to acquire the remaining outstanding shares of the UK-based holding company in the future on the terms set forth in the Investment, Shareholders’ and Stock Purchase Agreement. The cash consideration of £61 million (US$97.8 million) was funded through the Company’s cash on hand. Given the recent timing of this acquisition, we have not completed the initial accounting for the Dimensions and Alexandra business combination and we have not made certain disclosures. These disclosures include the fair value of assets acquired and liabilities assumed, intangible asset classifications, and pro-forma information. The initial accounting and related disclosures required for business combinations will be made in a subsequent filing.
     In late August 2010, a decision was made by management to cease tuxedo rental distribution operations at four of the ten U.S. facilities that we currently use for that purpose. The tuxedo rental distribution operations at these four facilities will cease in November 2010 and will be assumed by the remaining U.S. tuxedo distribution facilities, which will allow us to perform tuxedo rental distribution requirements more cost effectively. Three of the facilities will be converted to hub locations that redistribute tuxedo rental units and retail apparel merchandise to our Men’s Wearhouse, Men’s Wearhouse and Tux and K&G stores within limited geographic areas. We expect the total pre-tax charge to be incurred in ceasing tuxedo rental distribution operations at these four facilities to be approximately $3.4 million, which consists primarily of severance payments, the write-off of fixed assets and facility remediation costs. We also estimate that approximately $1.6 million of the charge will result in future cash expenditures.
     On September 1, 2010, the Company assigned its rights to receive an aggregate of $2.6 million of the proceeds from life insurance policies on the life of George Zimmer to Mr. Zimmer and a trust for the benefit of Mr. Zimmer in exchange for a cash payment of $2.6 million from Mr. Zimmer. The Company acquired the right to receive a portion of the proceeds from the life insurance policies as a result of paying premiums in the amount of $2.6 million on the policies. All such premium payments were made by the Company prior to 2003.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
     For supplemental information, it is suggested that “Management’s Discussion and Analysis of Financial Condition and Results of Operations” be read in conjunction with the corresponding section included in our Annual Report on Form 10-K for the year ended January 30, 2010. 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 “2010” mean the 52-week fiscal year ending January 29, 2011.
     The following table presents information with respect to retail apparel stores in operation during each of the respective fiscal periods:
                                         
    For the Three Months   For the Six Months   For the Year
    Ended   Ended   Ended
    July 31,   August 1,   July 31,   August 1,   January 30,
    2010   2009   2010   2009   2010
Stores open at beginning of period:
    1,252       1,284       1,259       1,294       1,294  
Opened
    3       1       4       3       6  
Closed
    (16 )     (7 )     (24 )     (19 )     (41 )
 
                                       
Stores open at end of period
    1,239       1,278       1,239       1,278       1,259  
 
                                       
 
                                       
Stores open at end of period:
                                       
U.S. —
                                       
Men’s Wearhouse
    584       580       584       580       581  
Men’s Wearhouse & Tux
    434       473       434       473       454  
K&G
    104       108       104       108       107  
 
                                       
 
    1,122       1,161       1,122       1,161       1,142  
Canada —
                                       
Moores
    117       117       117       117       117  
 
                                       
 
    1,239       1,278       1,239       1,278       1,259  
 
                                       
     We had revenues of $537.0 million and net earnings of $42.5 million for the three months ended July 31, 2010, compared to revenues of $526.2 million and net earnings of $39.5 million for the three months ended August 1, 2009. We had revenues of $1,010.5 million and net earnings of $56.1 million for the six months ended July 31, 2010, compared to revenues of $990.3 million and net earnings of $44.7 million for the six months ended August 1, 2009. Although high unemployment levels and tight credit conditions in the U.S. continued in 2010, we increased our revenues by $10.8 million or 2.0% and our gross margin by $21.8 million or 9.2% for the second quarter of 2010, and for the six months ended July 31, 2010, we increased our revenues by $20.1 million or 2.0% and our gross margin by $34.9 million or 8.2%. We closed 24 stores (one Men’s Wearhouse store, three K&G stores and 20 Men’s Wearhouse & Tux stores), of which 16 had reached the end of their lease terms, and opened four Men’s Wearhouse stores during the first six months of 2010. We plan to continue our efforts to stimulate sales with discounts and other promotional events, to maintain our cost control efforts and to limit our capital expenditures.
     On August 6, 2010, subsequent to the end of our 2010 second quarter, we acquired Dimensions Clothing Limited (“Dimensions”) and certain assets of Alexandra plc (“Alexandra”), two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for a total cash consideration of approximately £61 million (US$97.8 million). The acquisition of Dimensions and certain assets of Alexandra will expand our corporate apparel operations. The combined businesses are organized under a UK-based holding company, of which the Company controls 86% and certain existing shareholders of Dimensions control 14%. The Company has the right to acquire the remaining outstanding shares of the UK-based holding company in the future on the terms set forth in the Investment, Shareholders’ and Stock Purchase Agreement. The cash consideration of £61 million (US$97.8 million) was funded through the Company’s cash on hand.

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     Our sales and net earnings are subject to seasonal fluctuations. In most years, a greater portion of our net retail clothing sales have been generated during the fourth quarter of each year when holiday season shopping peaks. In addition, our tuxedo rental revenues are heavily concentrated in the second quarter while the fourth quarter is considered the seasonal low point. Because of the seasonality of our sales, results for any quarter are not necessarily indicative of the results that may be achieved for the full year.
Results of Operations
Three Months Ended July 31, 2010 compared to Three Months Ended August 1, 2009
     The following table sets forth the Company’s results of operations expressed as a percentage of net sales for the periods indicated:
                 
    For the Three Months
    Ended (1)
    July 31,   August 1,
    2010   2009
Net sales:
               
Clothing product
    67.5 %     69.2 %
Tuxedo rental services
    26.5       24.6  
Alteration and other services
    6.0       6.2  
 
               
Total net sales
    100.0 %     100.0 %
Cost of sales:
               
Clothing product, including buying and distribution costs
    30.0       32.3  
Tuxedo rental services
    4.1       4.1  
Alteration and other services
    4.6       4.5  
Occupancy costs
    13.0       13.9  
 
               
Total cost of sales
    51.7       54.8  
 
               
Gross margin
    48.3       45.2  
Selling, general and administrative expenses
    35.6       33.1  
 
               
Operating income
    12.7       12.1  
Interest income
    0.0       0.0  
Interest expense
    (0.1 )     (0.0 )
 
               
Earnings before income taxes
    12.7       12.1  
Provision for income taxes
    4.8       4.6  
 
               
Net earnings
    7.9 %     7.5 %
 
               
 
(1)   Percentage line items may not sum to totals due to the effect of rounding.
     The Company’s net sales increased $10.8 million, or 2.0%, to $537.0 million for the quarter ended July 31, 2010 as compared to the same prior year quarter. The increase was due mainly to a $12.9 million increase in tuxedo rental service revenues, offset partially by a $2.1 million decrease in clothing product revenues, and is attributable to the following:
         
(in millions)     Amount Attributed to
$ 5.3    
Increase in comparable sales.
  2.3    
Increase from net sales of stores opened in 2009, relocated stores and expanded stores not yet included in comparable sales.
  (0.4 )  
Decrease in alteration services sales.
  2.6    
Increase in corporate apparel and other sales.
  (5.0 )  
Decrease in net sales resulting from stores closed.
  0.5    
Increase in net sales from 4 new stores opened in 2010.
  5.5    
Increase in net sales resulting from change in U.S./Canadian dollar exchange rate.
     
 
$ 10.8    
Total
     Our 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) increased 2.7% at Men’s Wearhouse due mainly to continued unit growth in our tuxedo rental services business which offset lower clothing product sales caused mainly by a decrease in units per transaction and lower store traffic levels. At Moores, comparable store sales increased a slight 0.6% due mainly to continued unit growth in our tuxedo rental services business which

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offset lower clothing product sales caused mainly by a decrease in units per transaction. At K&G, comparable store sales decreased 4.6% due mainly to a decrease in the average transaction value. Tuxedo rental service revenues as a percentage of total net sales increased from 24.6% in the second quarter of 2009 to 26.5% in the second quarter of 2010; in absolute dollars, tuxedo rental service revenues increased $12.9 million or 10.0% due mainly to a 7.0% increase in units rented, offset partially by lower average rental rates in the U.S. Exchange rate changes from a stronger Canadian dollar also caused total sales for the second quarter of 2010 to be $5.5 million more than the comparable prior year sales.
     The Company’s gross margin was as follows:
                 
    For the Three Months  
    Ended  
    July 31,     August 1,  
    2010     2009  
Gross margin (in thousands)
  $ 259,583     $ 237,788  
 
           
Gross margin as a percentage of related sales:
               
Clothing product, including buying and distribution costs
    55.5 %     53.3 %
Tuxedo rental services
    84.5 %     83.4 %
Alteration and other services
    24.3 %     26.7 %
Occupancy costs
    (13.0 )%     (13.9 )%
Total gross margin
    48.3 %     45.2 %
     Total gross margin increased 9.2% from the same prior year quarter to $259.6 million in the second quarter of 2010. As a percentage of sales, total gross margin increased from 45.2% in the second quarter of 2009 to 48.3% in the second quarter of 2010. This increase is due mainly to improved clothing product and tuxedo rental margins and a decrease from 13.9% in the second quarter of 2009 to 13.0% in the second quarter of 2010 for occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation. On an absolute dollar basis, occupancy cost decreased by $3.3 million or 4.5% from the second quarter of 2009 to the second quarter of 2010 primarily due to fewer open stores in 2010 and reduced depreciation following impairment charges taken in the fourth quarter of 2009. With respect to gross margin as a percentage of related sales, clothing product gross margin increased from 53.3% in second quarter 2009 to 55.5% in second quarter 2010 due primarily to different promotional offerings, as well as the mix of products on promotion, in 2010 compared to 2009 and lower product costs. The tuxedo rental services gross margin increased from 83.4% in second quarter 2009 to 84.5% in second quarter 2010 due mainly to a decrease in rental product retirement costs in 2010. The gross margin for alteration and other services decreased from 26.7% in second quarter 2009 to 24.3% in second quarter 2010 mainly as a result of decreased alteration sales associated with decreased suit unit sales in 2010.
     Selling, general and administrative expenses increased to $191.2 million in the second quarter of 2010 from $173.9 million in the second quarter of 2009, an increase of $17.3 million or 9.9%. As a percentage of sales, these expenses increased from 33.1% in the second quarter of 2009 to 35.6% in the second quarter of 2010. The components of this 2.5% net increase in SG&A expenses as a percentage of net sales and the related absolute dollar changes were as follows:
         
  %     Attributed to
  0.9    
Increase in advertising expense as a percentage of sales from 3.4% in the second quarter of 2009 to 4.3% in the second quarter of 2010. On an absolute dollar basis, advertising expense increased $5.1 million.
     
Store salaries as a percentage of sales remained flat at 13.6% for the second quarter of 2010 and 2009. Store salaries on an absolute dollar basis increased $1.8 million.
  1.6    
Increase in other SG&A expenses as a percentage of sales from 16.1% in the second quarter of 2009 to 17.7% in the second quarter of 2010. On an absolute dollar basis, other SG&A expenses increased $10.4 million primarily due to expenses related to our acquisition of Dimensions and certain assets of Alexandra on August 6, 2010, increased medical insurance costs, and the absence in 2010 of a cumulative adjustment of $3.1 million recognized in the second quarter of 2009 for gift card breakage income.
       
 
  2.5 %  
Total

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     Interest expense increased from $0.2 million in the second quarter of 2009 to $0.3 million in the second quarter of 2010 while interest income decreased from $0.2 million in the second quarter of 2009 to $46 thousand in the second quarter of 2010. Weighted average borrowings outstanding increased from $41.1 million in the second quarter of 2009 to $44.4 million in the second quarter of 2010, and the weighted average interest rate on outstanding indebtedness increased from 1.0% to 2.0%. The increase in the weighted average borrowings is due to the strengthening of the Canadian dollar in the second quarter of 2010 as compared to the prior year. The weighted average interest rate for the second quarter of 2010 increased mainly due to an increase in the effective interest rate for the Canadian term loan from 1.3% at August 1, 2009 to 1.6% at July 31, 2010. The decrease in interest income was primarily attributable to a shift in our investments and lower interest rates for the second quarter of 2010 as compared to the second quarter of 2009.
     Our effective income tax rate was 37.6% for the second quarter of 2010 and 38.2% for the second quarter of 2009. The effective tax rate in 2010 and 2009 was higher than the statutory U.S. federal rate of 35% primarily due to the unfavorable tax rate effect from state income taxes.
     These factors resulted in net earnings of $42.5 million or 7.9% of net sales for the second quarter of 2010, compared with net earnings of $39.5 million or 7.5% of net sales for the second quarter of 2009.
Six Months Ended July 31, 2010 compared to Six Months Ended August 1, 2009
     The following table sets forth the Company’s results of operations expressed as a percentage of net sales for the periods indicated:
                 
    For the Six Months
    Ended (1)
    July 31,   August 1,
    2010   2009
Net sales:
               
Clothing product
    72.3 %     73.0 %
Tuxedo rental services
    21.2       20.3  
Alteration and other services
    6.5       6.7  
 
               
Total net sales
    100.0 %     100.0 %
Cost of sales:
               
Clothing product, including buying and distribution costs
    32.5       34.1  
Tuxedo rental services
    3.3       3.4  
Alteration and other services
    4.8       4.8  
Occupancy costs
    13.8       14.7  
 
               
Total cost of sales
    54.4       57.0  
 
               
Gross margin
    45.6       43.0  
Selling, general and administrative expenses
    36.7       35.7  
 
               
Operating income
    8.9       7.3  
Interest income
    0.0       0.1  
Interest expense
    (0.1 )     (0.1 )
 
               
Earnings before income taxes
    8.8       7.3  
Provision for income taxes
    3.3       2.8  
 
               
Net earnings
    5.6 %     4.5 %
 
               
 
(1)   Percentage line items may not sum to totals due to the effect of rounding.

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     The Company’s net sales increased $20.1 million, or 2.0%, to $1,010.5 million for the six months ended July 31, 2010. The increase was due mainly to a $13.6 million increase in tuxedo rental service revenues and a $7.2 million increase in clothing product revenues, and is attributable to the following:
         
(in millions)     Amount Attributed to
$ 7.5    
Increase in comparable sales.
  5.1    
Increase from net sales of stores opened in 2009, relocated stores and expanded stores not yet included in comparable sales.
  (1.2 )  
Decrease in alteration services sales.
  2.6    
Increase in corporate apparel and other sales.
  (7.8 )  
Decrease in net sales resulting from stores closed.
  0.6    
Increase in net sales from 4 new stores opened in 2010.
  13.3    
Increase in net sales resulting from change in U.S./Canadian dollar exchange rate.
     
 
$ 20.1    
Total
     Our comparable store sales increased 2.6% at Men’s Wearhouse due mainly to continued unit growth in our tuxedo services business, with clothing product sales remaining flat as average ticket and store traffic levels were stable. At Moores, comparable store sales increased a slight 0.5% due mainly to continued unit growth in our tuxedo services business, while clothing product sales remained flat with a higher average transaction value offsetting a decrease in units per transaction and lower store traffic levels. At K&G, comparable store sales decreased 4.8% due mainly to a decrease in the average transaction value. Tuxedo rental service revenues as a percentage of total net sales increased from 20.3% in the first six months of 2009 to 21.2% in the first six months of 2010; in absolute dollars, tuxedo rental service revenues increased $13.6 million or 6.8% due mainly to a 5.5% increase in units rented, offset partially by lower average rental rates in the U.S. Exchange rate changes from a stronger Canadian dollar also caused total sales for the first half of 2010 to be $13.3 million more than the comparable prior year sales.
     The Company’s gross margin was as follows:
                 
    For the Six Months Ended  
    July 31,     August 1,  
    2010     2009  
Gross margin (in thousands)
  $ 460,655     $ 425,777  
 
           
Gross margin as a percentage of related sales:
               
Clothing product, including buying and distribution costs
    55.1 %     53.3 %
Tuxedo rental services
    84.5 %     83.3 %
Alteration and other services
    25.6 %     27.6 %
Occupancy costs
    (13.8 )%     (14.7 )%
Total gross margin
    45.6 %     43.0 %
     Total gross margin increased 8.2% from the same prior year period to $460.7 million in the first six months of 2010. As a percentage of sales, total gross margin increased from 43.0% in the first six months of 2009 to 45.6% in the first six months of 2010. This increase is due mainly to improved clothing product and tuxedo rental margins and a decrease from 14.7% in the first six months of 2009 to 13.8% in the first six months of 2010 for occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation. On an absolute dollar basis, occupancy cost decreased by $6.1 million or 4.2% from the first six months of 2009 to the first six months of 2010 primarily due to fewer open stores in 2010 and reduced depreciation following impairment charges taken in the fourth quarter of 2009. With respect to gross margin as a percentage of related sales, clothing product gross margin increased from 53.3% in first six months of 2009 to 55.1% in the first six months of 2010 due primarily to different promotional offerings, as well as the mix of products on promotion, in 2010 compared to 2009 and lower product costs. The tuxedo rental services gross margin increased from 83.3% in the first six months of 2009 to 84.5% in the first six months of 2010 due mainly to a decrease in rental product retirement costs in 2010. The gross margin for alteration and other services decreased from 27.6% in the first six months of 2009 to 25.6% in first six months of 2010 mainly as a result of decreased alteration sales associated with decreased suit unit sales in 2010.

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     Selling, general and administrative expenses increased to $370.8 million in the first six months of 2010 from $353.1 million in the first six months of 2009, an increase of $17.7 million or 5.0%. As a percentage of sales, these expenses increased from 35.7% in the first six months of 2009 to 36.7% in the first six months of 2010. The components of this 1.0% net increase in SG&A expenses as a percentage of net sales and the related absolute dollar changes were as follows:
         
  %     Attributed to
  0.3    
Increase in advertising expense as a percentage of sales from 4.1% in the first six months of 2009 to 4.4% in the first six months of 2010. On an absolute dollar basis, advertising expense increased $3.7 million.
  (0.1 )  
Decrease in store salaries as a percentage of sales from 14.2% in the first six months of 2009 to 14.1% in the first six months of 2010. Store salaries on an absolute dollar basis increased $2.6 million.
  0.8    
Increase in other SG&A expenses as a percentage of sales from 17.4% in the first six months of 2009 to 18.2% in the first six months of 2010. On an absolute dollar basis, other SG&A expenses increased $11.4 million primarily due to expenses related to our acquisition of Dimensions and certain assets of Alexandra on August 6, 2010, increased medical insurance costs and the absence in 2010 of a cumulative adjustment of $3.1 million recognized in the second quarter of 2009 for gift card breakage income.
       
 
  1.0 %  
Total
     Interest expense remained flat at $0.6 million for the first six months of 2010 and 2009 while interest income decreased from $0.5 million in the first six months of 2009 to $0.1 million in the first six months of 2010. Weighted average borrowings outstanding decreased from $51.5 million in the first six months of 2009 to $44.9 million in the first six months of 2010, and the weighted average interest rate on outstanding indebtedness decreased from 1.9% to 1.8%. The decrease in the weighted average borrowings and the weighted average interest rate was due to the repayment of our outstanding balance on our revolving credit facility of $25.0 million in the first quarter of 2009. The decrease in interest income was primarily attributable to a shift in our investments and lower interest rates for the first six months of 2010 as compared to the first six months of 2009.
     Our effective income tax rate was 37.2% for the first six months of 2010 and 38.3% for the first six months of 2009. The effective tax rate in 2010 and 2009 was higher than the statutory U.S. federal rate of 35% due to the unfavorable tax rate effect from state income taxes, offset partially in 2010 by the favorable tax rate effect from the recognition of previously unrecognized tax benefits and associated accrued interest resulting from the conclusion of certain income tax audits.
     These factors resulted in net earnings of $56.1 million or 5.6% of net sales for the first six months of 2010, compared with net earnings of $44.7 million or 4.5% of net sales for the first six months of 2009.
Liquidity and Capital Resources
     At July 31, 2010, January 30, 2010 and August 1, 2009, cash and cash equivalents totaled $281.5 million, $186.0 million and $144.4 million, respectively. We had working capital of $513.8 million, $484.3 million and $450.0 million at July 31, 2010, January 30, 2010 and August 1, 2009, respectively, which included short-term investments of $19.5 million at August 1, 2009. We held no short-term investments at July 31, 2010 or January 30, 2010. Our primary sources of working capital are cash flows from operations and borrowings under our Credit Agreement. Historically, our working capital has been at its lowest level in January and February, and has increased through November as inventory buildup occurs in preparation for the fourth quarter selling season. The $29.5 million increase in working capital at July 31, 2010 compared to January 30, 2010 resulted primarily from increased cash balances, offset partially by the current liability classification at quarter end of our Canadian debt of US$45.2 million due on February 10, 2011.
     On August 6, 2010, subsequent to the end of our 2010 second quarter, we acquired Dimensions Clothing Limited and certain assets of Alexandra plc, two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for a total cash consideration of approximately £61 million (US$97.8 million). The acquisition of Dimensions and certain assets of Alexandra will expand our corporate apparel operations. The combined businesses are organized under a UK-based holding company, of which the Company controls 86% and certain existing shareholders of Dimensions control 14%. The Company has the right to acquire the remaining outstanding shares of the UK-based holding company in the future on the terms set forth in the Investment, Shareholders’ and Stock Purchase Agreement. The cash consideration of £61 million (US$97.8 million) was funded through the Company’s cash on hand.

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Credit Facilities
     Our Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks, which was last amended on February 2, 2007, provides for a total senior secured revolving credit facility of $200.0 million, which can be expanded to $250.0 million upon additional lender commitments, that matures on February 11, 2012. The Credit Agreement also provided our Canadian subsidiaries with a senior secured term loan used to fund the repatriation of US$74.7 million of Canadian earnings in January 2006 under the American Jobs Creation Act of 2004. The Canadian term loan matures on February 10, 2011. The Credit Agreement is secured by the stock of certain of the Company’s subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) an alternate base rate (equal to the greater of the prime rate or the federal funds rate plus 0.5%) or (ii) LIBO rate or (iii) CDO rate. Advances under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin up to 1.125%. The Credit Agreement also provides for fees applicable to unused commitments ranging from 0.100% to 0.175%. As of July 31, 2010, there was US$45.2 million outstanding under the Canadian term loan, with an effective interest rate of 1.6%, and no borrowings outstanding under the revolving credit facility.
     The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement reflect an overall covenant structure that is generally representative of a commercial loan made to an investment-grade company. Our debt, however, is not rated, and we have not sought, and are not seeking, a rating of our debt. We were in compliance with the covenants in the Credit Agreement as of July 31, 2010.
     Conditions in the U.S. and global credit markets have made it difficult for many businesses to obtain financing on acceptable terms. If these market conditions continue or worsen, it may be more difficult for us to renew or increase our credit facility.
     We utilize letters of credit primarily to secure inventory purchases and as collateral for workers compensation claims. At July 31, 2010, letters of credit totaling approximately $11.6 million were issued and outstanding. Borrowings available under our Credit Agreement at July 31, 2010 were $188.4 million.
Cash flow activities
     Operating activities — Our primary source of operating cash flow is from sales to our customers. Our primary uses of cash include merchandise inventory and tuxedo rental product purchases, personnel related expenses, occupancy costs, advertising costs and income tax payments. Our operating activities provided net cash of $130.3 million in the first six months of 2010, due mainly to net earnings, adjusted for non-cash charges, a decrease in inventories and an increase in accounts payable, accrued expenses and other current liabilities, offset by increases in tuxedo rental product and a decrease in income taxes payable. During the first six months of 2009, our operating activities provided net cash of $110.1 million, due mainly to net earnings, adjusted for non-cash charges, a decrease in inventories and other assets and an increase in income taxes payable, offset by a decrease in accounts payable, accrued expenses and other current liabilities and an increase in tuxedo rental product. The decrease in inventories during the first six months of 2010 and 2009 was primarily due to lower inventory purchases as a result of decreased clothing sales in 2009 and our continued efforts in 2010 to align our inventory purchases with sales expectations. Tuxedo rental product increased in each of the periods to support the continued growth of our tuxedo rental business and, in 2009, to replenish and replace a portion of our tuxedo rental product offerings. The decrease in accounts payable, accrued expenses and other current liabilities for the first six months of 2009 was primarily due to the timing of vendor payments and reduced purchases associated with decreased clothing sales, while the increase in income taxes payable was due to the timing and amounts of required tax payments. The increase in accounts payable, accrued expenses and other current liabilities in the first six months of 2010 was primarily due to the timing of vendor payments and the seasonal increase in tuxedo rental deposits, while the decrease in income taxes payable was due to the timing of required tax payments. The decrease in other assets in the first six months of 2009 was due mainly to tax refunds received.
     Investing activities — Our cash outflows from investing activities are primarily for capital expenditures. During the first six months of 2010 and 2009, our investing activities used net cash of $25.8 and $28.8 million, respectively, primarily for capital expenditures. Our capital expenditures relate to costs incurred for stores opened, remodeled or relocated during the period or under construction at the end of the period, office and distribution facility additions and infrastructure technology investments.

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     Financing activities — Our cash outflows from financing activities consist primarily of cash dividend payments and debt payments, while cash inflows from financing activities consist primarily of proceeds from our revolving credit facility. During the first six months of 2010, our financing activities used net cash of $10.2 million due mainly to cash dividends paid of $9.5 million. Our financing activities used net cash of $33.0 million for the first six months of 2009, due mainly to payments on our revolving credit facility of $25.0 million and cash dividends paid of $7.3 million.
     Share repurchase program — In January 2006, the Board of Directors authorized a $100.0 million share repurchase program of our common stock. This authorization superceded any remaining previous authorizations. In August 2007, the Company’s Board of Directors approved a replenishment of the Company’s share repurchase program to $100 million by authorizing $90.3 million to be added to the remaining $9.7 million of the then current program. No shares were purchased under the August 2007 authorization during the first six months of 2010 or 2009. At July 31, 2010, the remaining balance available under the August 2007 authorization was $44.3 million.
     During the six months ended July 31, 2010, 7,134 shares at a cost of $0.1 million were repurchased at an average price per share of $20.24 in a private transaction to satisfy tax withholding obligations arising upon the vesting of certain restricted stock. During the six months ended August 1, 2009, 7,292 shares at a cost of $0.1 million were repurchased at an average price per share of $12.29 in a private transaction to satisfy tax withholding obligations arising upon the vesting of certain restricted stock.
     Dividends — Cash dividends paid were approximately $9.5 million and $7.3 million for the six months ended July 31, 2010 and August 1, 2009, respectively.
     In June 2010, our Board of Directors declared a quarterly cash dividend of $0.09 per share payable on September 24, 2010 to shareholders of record at close of business on September 14, 2010. The dividend payout is estimated to be approximately $4.8 million and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheet as of July 31, 2010.
Future cash flow
     Current domestic and global economic conditions, including high unemployment levels and tightened credit markets, could negatively affect our future operating results as well as our existing cash and cash equivalents balances. In addition, conditions in the financial markets could limit our access to additional capital resources, if needed, and could increase associated costs. We believe based on our current business plan that our existing cash and cash flows from operations will be sufficient to fund our planned store openings, relocations and remodelings, other capital expenditures and operating cash requirements, including integration costs and other requirements related to our August 6, 2010 Dimensions and Alexandra acquisition, and that we will be able to maintain compliance with the covenants in our Credit Agreement for at least the next 12 months. In addition, as of July 31, 2010, borrowings available under our Credit Agreement were $188.4 million. However, current economic conditions are creating potential acquisition opportunities. If such acquisition opportunities develop, we may need to raise additional capital in order to complete such acquisitions and our Credit Agreement may need to be modified or expanded.
     As a substantial portion of our cash and cash equivalents, which are primarily governmental agencies and U.S. treasuries, is held by four financial institutions (three U.S. and one Canadian), we are exposed to risk of loss in the event of failure of any of these parties. However, due to the creditworthiness of these financial institutions, we anticipate full performance and access to our deposits and liquid investments.
     In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro). We generally enter into forward exchange contracts to reduce the risk of currency fluctuations related to such commitments. As these forward exchange contracts are with one financial institution, we are exposed to credit risk in the event of nonperformance by this party. However, due to the creditworthiness of this major financial institution, full performance is anticipated. We may also be exposed to market risk as a result of changes in foreign exchange rates. This market risk should be substantially offset by changes in the valuation of the underlying transactions.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Foreign Currency Risk
     We are subject to exposure from fluctuations in U.S. dollar/Euro exchange rates. As further described in Note 10 of Notes to Condensed 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 July 31, 2010, we had three contracts maturing in varying increments to purchase an aggregate notional amount of $2.9 million in foreign currency, maturing at various dates through March 2011. We held no outstanding contracts at August 1, 2009. Unrealized pretax gains on these forward contracts totaled approximately $0.2 million at July 31, 2010. A hypothetical 10% change in applicable July 31, 2010 forward rates could increase or decrease the July 31, 2010 unrealized pretax gain by approximately $0.3 million related to these positions. However, it should be noted that any change in the value of these contracts, whether real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged item.
     Subsequent to our August 6, 2010 Dimensions and Alexandra acquisition, we will be subject to exposure from fluctuations in U.S. dollar/ Pounds Sterling (“GBP”) exchange rates as Dimensions and Alexandra sell their products and services primarily in GBP but acquire a significant part of their goods in transactions paid in U.S. dollars. A decline in the value of the GBP as compared to the U.S. dollar will adversely impact their operating results, particularly in relation to longer term customer contracts that have little or no pricing adjustment provisions. Dimensions and Alexandra utilize foreign currency hedging contracts to limit exposure to changes in U.S. dollar/GBP exchange rates.
     Moores conducts its business in Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars has fluctuated over the last ten years. If the value of the Canadian dollar against the U.S. dollar weakens, then the revenues and earnings of our Canadian operations will be reduced when they are translated to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may decline.
     Interest Rate Risk
     We are also subject to market risk as a result of the outstanding balance of US$45.2 million under our Canadian term loan at July 31, 2010, which bears a variable interest rate (see Note 3 of Notes to Condensed Consolidated Financial Statements). An increase in market interest rates would increase our interest expense and our cash requirements for interest payments. For example, an average increase of 0.5% in the variable interest rate would increase our interest expense and payments by approximately $0.2 million. At July 31, 2010, there were no borrowings outstanding under our revolving credit facility.
     We also have exposure to market rate risk for changes in interest rates as those rates relate to our investment portfolio. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. As of July 31, 2010, we have highly liquid investments classified as cash equivalents in our condensed consolidated balance sheet. Future investment income earned on our cash equivalents will fluctuate in line with short-term interest rates.
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 period covered by this report. Based on this evaluation, the CEO and CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective 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 (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

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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 July 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
     On October 8, 2009, the Company was named in a federal securities class action lawsuit filed in the United States District Court for the Southern District of Texas, Houston Division. The case is styled Material Yard Workers Local 1175 Benefit Funds, et al. v. The Men’s Wearhouse, Inc., Case No. 4:09-cv-03265. The class period alleged in the complaint runs from March 7, 2007 to January 9, 2008. The primary allegations are that the Company issued false and misleading press releases regarding its guidance for fiscal year 2007 on various occasions during the alleged class period. The complaint seeks damages based on the decline in the Company’s stock price following the announcement of lowered guidance on Oct. 10, 2007, Nov. 28, 2007, and Jan. 9, 2008. The case is in its early stages and discovery has not begun. The Company believes the lawsuit is without merit and intends to mount a vigorous defense; we are unable to determine the likely outcome at this time.
     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 position, results of operations or cash flows.
ITEM 1A — RISK FACTORS
     In addition to the general risk factors described in our Annual Report on Form 10-K, including those related to acquisition integration and to general economic conditions, our acquisition of Dimensions and Alexandra on August 6, 2010 involves the following risks:
A reduction in the value of the Pound Sterling against the U.S. dollar can significantly impact the acquired businesses.
     The acquired businesses sell their products and services in Pound Sterling but acquire a significant part of their goods in transactions paid in U.S. dollars. Therefore a decline in the value of the Pound Sterling as compared to the U.S. dollar will adversely impact their operating results, particularly in relation to longer term customer contracts that have little or no pricing adjustment provisions. The acquired businesses have taken steps through hedging and price renegotiations to mitigate some of this risk.
The general economic conditions in the United Kingdom and particularly service cut backs being put forth by the current government may reduce demand for the businesses of Dimensions and Alexandra.
     The United Kingdom has experienced and is continuing to experience an economic slow down. As a result of expected deficits, the UK government has announced significant reductions in public services including reductions in employment. Employees in the public service in the UK are a significant target market for the acquired businesses and a substantial reduction in the number of these employees could adversely affect the acquired businesses.
The competition authorities in the UK will review the combination of Dimensions and Alexandra and this could result in a requirement to divest some assets.
     The combination of Dimensions and Alexandra has been noticed to the Office of Fair Trading in the UK for review. The Company believes for a variety of reasons that upon completion of its review, the Office of Fair Trading will unconditionally clear the combination. However, no assurance can be given that this will be the case and the Office of Fair Trading could refer the combination to the Competition Commission in the UK for a more detailed investigation. The Competition Commission could require the divestiture of some of the acquired assets if it were to conclude that the combination resulted, or may be expected to result, in a substantial lessening of competition.

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ITEM 6 — EXHIBITS
     (a) Exhibits.
         
Exhibit        
Number       Exhibit Index
 
       
2.1
    Investment, Shareholders’ and Stock Purchase Agreement dated August 6, 2010, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., MWUK Holding Company Limited, Ensco 648 Limited, Gresham 4A and Gresham 4B and the stockholders of Ensco 648 Limited (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed with the Commission on August 16, 2010).
 
       
4.1
    Amended and Restated Credit Agreement, dated as of December 21, 2005, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. as Canadian Agent (filed herewith).
 
       
4.2
    Agreement and Amendment to Amended and Restated Credit Agreement effective as of January 31, 2007, by and among the Company, Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (filed herewith).
 
       
31.1
    Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).
 
       
31.2
    Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).
 
       
32.1
    Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).
 
       
32.2
    Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).
 
       
101.1
    The following financial information from The Men’s Wearhouse, Inc.’s Quarterly Report on Form 10-Q for the quarter and six months ended July 31, 2010, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
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 9, 2010  THE MEN’S WEARHOUSE, INC.
 
 
By  /s/ NEILL P. DAVIS    
  Neill P. Davis   
  Executive Vice President, Chief Financial Officer,
Treasurer and Principal Financial Officer 
 

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EXHIBIT INDEX
         
Exhibit        
Number       Exhibit Index
 
       
2.1
    Investment, Shareholders’ and Stock Purchase Agreement dated August 6, 2010, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., MWUK Holding Company Limited, Ensco 648 Limited, Gresham 4A and Gresham 4B and the stockholders of Ensco 648 Limited (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed with the Commission on August 16, 2010).
 
       
4.1
    Amended and Restated Credit Agreement, dated as of December 21, 2005, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. as Canadian Agent (filed herewith).
 
       
4.2
    Agreement and Amendment to Amended and Restated Credit Agreement effective as of January 31, 2007, by and among the Company, Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (filed herewith).
 
       
31.1
    Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).
 
       
31.2
    Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).
 
       
32.1
    Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).
 
       
32.2
    Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).
 
       
101.1
    The following financial information from The Men’s Wearhouse, Inc.’s Quarterly Report on Form 10-Q for the quarter and six months ended July 31, 2010, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

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