e10vq
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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 October 28, 2006 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)
     
5803 Glenmont Drive    
Houston, Texas   77081-1701
(Address of Principal Executive Offices)   (Zip Code)
(713) 592-7200
(Registrant’s telephone number, including area code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes þ.      No o.
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ       Accelerated filer o       Non-accelerated filer o
     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 December 1, 2006 was 52,896,654, excluding 14,741,277 shares classified as Treasury Stock.
 
 

 


 

REPORT INDEX
         
Part and Item No.   Page No.
       
 
       
       
 
       
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 Certification Pursuant to Section 302
 Certification Pursuant to Section 302
 Certification Pursuant to Section 906
 Certification Pursuant to Section 906

 


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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, future capital expenditures, acquisitions (including the amount and nature thereof), future sales, earnings, margins, costs, number and costs of store openings, demand for clothing, market trends in the retail clothing business, currency fluctuations, inflation and various economic and business trends. Forward-looking statements may be made by management orally or in writing, including, but not limited to, 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, 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, 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 28, 2006 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 wholly owned 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 statement of the results for the three and nine months ended October 29, 2005 and October 28, 2006.
     Operating results for interim periods are not necessarily indicative of the results for full years. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements for the year ended January 28, 2006 and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year then ended filed with the SEC.
     Unless the context otherwise requires, “Company”, “we”, “us” and “our” refer to The Men’s Wearhouse, Inc. and its wholly owned subsidiaries.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                         
    October 29,     October 28,     January 28,  
    2005     2006     2006  
    (Unaudited)     (Unaudited)          
ASSETS
                       
CURRENT ASSETS:
                       
Cash and cash equivalents
  $ 27,645     $ 75,093     $ 200,226  
Short-term investments
    69,925       180,275       62,775  
Accounts receivable, net
    15,676       17,671       16,837  
Inventories
    465,719       481,885       416,603  
Other current assets
    32,720       36,164       33,171  
 
                 
 
                       
Total current assets
    611,685       791,088       729,612  
 
                       
PROPERTY AND EQUIPMENT, net
    269,629       277,510       269,586  
 
                       
GOODWILL
    57,020       58,261       57,601  
TUXEDO RENTAL PRODUCT, net
    46,883       57,542       52,561  
OTHER ASSETS, net
    13,881       14,044       13,914  
 
                 
 
                       
TOTAL
  $ 999,098     $ 1,198,445     $ 1,123,274  
 
                 
 
                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
 
                       
CURRENT LIABILITIES:
                       
Accounts payable
  $ 141,152     $ 121,105     $ 125,064  
Accrued expenses
    70,621       78,691       91,935  
Income taxes payable
    16,608       18,699       21,086  
 
                 
 
                       
Total current liabilities
    228,381       218,495       238,085  
 
                       
LONG-TERM DEBT
    130,000       207,310       205,251  
 
                       
DEFERRED TAXES AND OTHER LIABILITIES
    50,446       49,216       52,405  
 
                 
 
                       
Total liabilities
    408,827       475,021       495,741  
 
                 
 
                       
COMMITMENTS AND CONTINGENCIES (Note 7 and Note 10)
                       
 
                       
SHAREHOLDERS’ EQUITY:
                       
Preferred stock
                 
Common stock
    670       676       671  
Capital in excess of par
    251,056       271,030       255,214  
Retained earnings
    584,599       702,828       614,680  
Accumulated other comprehensive income
    23,856       29,009       26,878  
 
                 
Total
    860,181       1,003,543       897,443  
 
                       
Treasury stock, at cost
    (269,910 )     (280,119 )     (269,910 )
 
                 
 
                       
Total shareholders’ equity
    590,271       723,424       627,533  
 
                 
 
                       
TOTAL
  $ 999,098     $ 1,198,445     $ 1,123,274  
 
                 
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 Nine Months Ended  
    October 29,     October 28,     October 29,     October 28,  
    2005     2006     2005     2006  
Net sales:
                               
Clothing product
  $ 340,681     $ 366,409     $ 1,070,252     $ 1,135,759  
Tuxedo rental, alteration and other services
    52,014       63,659       157,668       189,460  
 
                       
Total net sales
    392,695       430,068       1,227,920       1,325,219  
 
                               
Cost of sales:
                               
Clothing product, including buying and distribution costs
    160,446       162,795       517,146       517,564  
Tuxedo rental, alteration and other services
    26,318       28,696       78,872       86,063  
Occupancy costs
    48,102       53,199       139,994       154,262  
 
                       
Total cost of sales
    234,866       244,690       736,012       757,889  
 
                               
Gross margin
    157,829       185,378       491,908       567,330  
 
                               
Selling, general and administrative expenses
    123,380       136,610       382,181       416,580  
 
                       
 
                               
Operating income
    34,449       48,768       109,727       150,750  
 
                               
Interest income
    (557 )     (2,461 )     (2,122 )     (7,249 )
Interest expense
    1,428       2,346       4,427       6,826  
 
                       
 
                               
Earnings before income taxes
    33,578       48,883       107,422       151,173  
 
                               
Provision for income taxes
    9,499       17,109       36,253       54,922  
 
                       
 
                               
Net earnings
  $ 24,079     $ 31,774     $ 71,169     $ 96,251  
 
                       
 
                               
Net earnings per share:
                               
Basic
  $ 0.45     $ 0.60     $ 1.32     $ 1.81  
 
                       
 
                               
Diluted
  $ 0.44     $ 0.58     $ 1.28     $ 1.76  
 
                       
 
                               
Weighted average common shares outstanding:
                               
Basic
    53,661       53,098       54,050       53,163  
 
                       
 
                               
Diluted
    54,971       54,903       55,765       54,715  
 
                       
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 Nine Months Ended  
    October 29,     October 28,  
    2005     2006  
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net earnings
  $ 71,169     $ 96,251  
 
               
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
    46,719       45,191  
Tuxedo rental product amortization
    11,944       14,627  
Loss on disposition of assets
          1,325  
Deferred rent expense
    (1,317 )     1,180  
Stock-based compensation
    1,967       5,139  
Deferred tax benefit
    (343 )     (4,873 )
(Increase) decrease in accounts receivable
    934       (797 )
Increase in inventories
    (56,175 )     (63,578 )
Increase in tuxedo rental product
    (21,789 )     (19,155 )
(Increase) decrease in other assets
    762       (2,687 )
Decrease in accounts payable and accrued expenses
    (2,705 )     (20,642 )
Increase (decrease) in income taxes payable
    1,289       (1,288 )
Increase (decrease) in other liabilities
    (312 )     120  
 
           
 
               
Net cash provided by operating activities
    52,143       50,813  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Capital expenditures
    (52,109 )     (47,552 )
Purchases of available-for-sale investments
    (99,000 )     (197,920 )
Proceeds from sales of available-for-sale investments
    29,075       80,420  
Investment in trademarks, tradenames and other assets
    (69 )     (913 )
 
           
 
               
Net cash used in investing activities
    (122,103 )     (165,965 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from issuance of common stock
    22,192       7,583  
Deferred financing costs
          (100 )
Cash dividends paid
          (8,072 )
Tax payments related to vested deferred stock units
          (670 )
Excess tax benefits from stock-based compensation
          1,931  
Purchase of treasury stock
    (90,280 )     (11,512 )
 
           
 
               
Net cash used in financing activities
    (68,088 )     (10,840 )
 
           
 
               
Effect of exchange rate changes
    685       859  
 
           
 
               
DECREASE IN CASH AND CASH EQUIVALENTS
    (137,363 )     (125,133 )
Balance at beginning of period
    165,008       200,226  
 
           
 
               
Balance at end of period
  $ 27,645     $ 75,093  
 
           
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 wholly owned 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 28, 2006.
     The preparation of the condensed consolidated financial statements in conformity with accounting principles 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.
     Certain previously reported amounts have been reclassified to conform to the current period presentation. Stock-based compensation and tuxedo rental product assets and amortization have been reclassified on the condensed consolidated statement of cash flows for the nine months ended October 29, 2005 to conform to the current period’s presentation. Approximately $2.0 million and $2.4 million have been reclassified from accounts receivable to other current assets on the condensed consolidated balance sheets for the periods ended October 29, 2005 and January 29, 2006, respectively, to conform to the current period’s presentation. In addition, tuxedo rental product assets have been reclassified from other assets on the condensed consolidated balance sheets as of October 29, 2005 and January 29, 2006.
     During fiscal year 2004, we opened six new casual clothing/sportswear concept stores in order to test an expanded, more fashion-oriented merchandise concept for men and women. In March 2005, it was determined that no further investments would be made into these test concept stores and that the six stores opened in 2004 would be wound down over the course of fiscal 2005. All six of these stores were closed by June 30, 2005. Net operating losses from these stores reduced diluted earnings per share by $0.11 for the nine months ended October 29, 2005.
     Our significant accounting policies are consistent with those discussed in our Annual Report on Form 10-K for the year ended January 28, 2006. The information below provides updating information with respect to those policies.
     Tuxedo Rental Product — Tuxedo rental product is amortized to cost of sales based on the cost of each unit rented. The cost of each unit rented is estimated based on the number of times the unit is expected to be rented and the average cost of the rental product. An estimate for lost and damaged rental product is also charged to cost of sales. Tuxedo rental product is amortized to expense generally over a two to three year period. Amortization expense was $3.9 million and $11.9 million for the three and nine months ended October 29, 2005, respectively. Amortization expense was $4.8 million and $14.6 million for the three and nine months ended October 28, 2006, respectively.
     Revenue Recognition — Clothing product revenue is recognized at the time of sale and delivery of merchandise, net of actual sales returns and a provision for estimated sales returns, and excludes sales taxes. Revenues from tuxedo rental, alteration and other services are recognized upon completion of the services. Proceeds from the sale of gift cards are recorded as a liability and are recognized as revenues when the cards are redeemed. We do not recognize revenue from unredeemed gift cards as these amounts are reflected as a liability until escheated in accordance with applicable laws.
     Stock Based Compensation — On January 29, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. This Statement establishes the fair value method for measurement and requires all entities to apply this fair value method in accounting for share-based payment transactions. 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.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
     Prior to the adoption of SFAS 123R, we accounted for share-based awards to employees and directors using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). SFAS 123R replaces SFAS 123 and supersedes APB 25. We adopted SFAS 123R using the modified prospective transition method; therefore, results from prior periods have not been restated. Under this transition method, stock-based compensation expense recognized in fiscal 2006 includes: (i) compensation expense for share-based payment awards granted prior to, but not yet vested at, January 29, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and (ii) compensation expense for the share-based payment awards granted subsequent to January 29, 2006, based on the grant-date fair values estimated in accordance with the provisions of SFAS 123R. Stock-based compensation expense recognized under SFAS 123R for the three and nine months ended October 28, 2006 was $1.8 million and $5.1 million, respectively, which primarily related to stock options and deferred stock units. Stock-based compensation expense for the three and nine months ended October 29, 2005 was $0.9 million and $2.0 million, respectively, which primarily related to deferred stock units.
     SFAS 123R requires companies to estimate the fair value of share-based payments on the grant-date using an option pricing model. Under SFAS 123, we used the Black-Scholes option pricing model for valuation of share-based awards for our pro forma information. Upon adoption of SFAS 123R, we elected to continue to use the Black-Scholes option pricing model for valuing awards. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period.
     Prior to the adoption of SFAS 123R, we presented all tax benefits resulting from the exercise of stock-based compensation as operating cash flows in the Condensed Consolidated Statement of Cash Flows. SFAS 123R requires the benefits of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. For the nine months ended October 28, 2006, excess tax benefits realized from the exercise of stock-based compensation was $1.9 million.
     Had we elected to apply the accounting standards of SFAS 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS 148”) in 2005, our net earnings and net earnings per share would have been approximately the pro forma amounts indicated below (in thousands, except per share data):
                 
    For the Three     For the Nine  
    Months     Months  
    Ended     Ended  
    October 29,     October 29,  
    2005     2005  
Net earnings, as reported
  $ 24,079     $ 71,169  
Add: Stock-based compensation expense, net of tax included in reported net earnings
    666       1,338  
Deduct: Stock-based compensation expense, net of tax determined under fair-value based method
    (1,374 )     (3,641 )
 
           
Pro forma net earnings
  $ 23,371     $ 68,866  
 
           
 
               
Net earnings per share:
               
As reported:
               
Basic
  $ 0.45     $ 1.32  
Diluted
  $ 0.44     $ 1.28  
 
               
Pro forma:
               
Basic
  $ 0.44     $ 1.27  
Diluted
  $ 0.43     $ 1.23  
     Refer to Note 9 for additional disclosures regarding stock-based compensation.

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
     Recently Issued Accounting Pronouncements — In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs — an Amendment of Accounting Research Bulletin (“ARB”) No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 was effective for fiscal years beginning after June 15, 2005. The adoption of SFAS 151 did not have a material impact on our financial position, results of operations or cash flows.
     In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections–A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 requires retrospective application to prior period financial statements for changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 was effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did not have a material impact on our financial position, results of operations or cash flows.
     In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination” (“EITF 05-06”). The guidance requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. The guidance was effective for periods beginning after June 29, 2005. The adoption of EITF 05-06 did not have a material impact on our financial position, results of operations or cash flows.
     In October 2005, the FASB issued FSP No. FAS 13-1 (“FSP 13-1”), “Accounting for Rental Costs Incurred during a Construction Period,” which requires that rental costs associated with ground or building operating leases that are incurred during a construction period be recognized as rental expense. This FSP was effective for reporting periods beginning after December 15, 2005, with early adoption permitted. We adopted FSP 13-1 at the beginning of fiscal 2006, at which time we ceased capitalizing rent expense on those leases with properties under construction. We estimate that the adoption of FSP 13-1 will result in additional expenses of $2.0 million to $3.0 million in fiscal 2006. The impact of the adoption of FSP 13-1 for the three and nine months ended October 28, 2006 was approximately $0.8 million and $1.7 million, respectively, of additional expense.
     In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a Company’s financial statements in accordance with FASB No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective as of the beginning of fiscal years that begin after December 15, 2006. We are currently evaluating the impact that the adoption of FIN 48 will have on our financial position, results of operations and cash flows.
     In June 2006, the EITF ratified its conclusion on EITF Issue No. 06-02 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43,” “Accounting for Compensated Absences” (“EITF 06-02”). EITF 06-02 requires that compensation expense associated with a sabbatical leave, or other similar benefit arrangement, be accrued over the requisite service period during which an employee earns the benefit. EITF 06-02 is effective for fiscal years beginning after December 15, 2006 and should be recognized as either a change in accounting principle through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption or a change in accounting principle through retrospective application to all prior periods. We are currently evaluating the impact that the adoption of EITF 06-02 will have on our financial position, results of operations and cash flows.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
     In June 2006, the EITF ratified its conclusion on EITF No. 06-03, “How Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation),” (“EITF 06-03”). EITF 06-03 concluded that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer such as sales, use, value added and certain excise taxes is an accounting policy decision that should be disclosed in a Company’s financial statements. Additionally, companies that record such taxes on a gross basis should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 is effective for fiscal years beginning after December 15, 2006. The adoption of EITF 06-03 will have no effect on our financial position, results of operations or cash flows.
     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact that the adoption of SFAS 157 will have on our financial position, results of operations and cash flows.
     In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which provides interpretive guidance regarding the consideration given to prior year misstatements when determining materiality in current year financial statements. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 is not expected to have a material impact on our financial position, results of operations and cash flows.
2. Earnings per Share
     Basic EPS is computed using the weighted average number of common shares outstanding during the period and net earnings. Diluted EPS gives effect to the potential dilution which would have occurred if additional shares were issued for stock options exercised under the treasury stock method, as well as the potential dilution that could occur if our contingent convertible debt or other contracts to issue common stock were converted or exercised. The following table reconciles basic and diluted weighted average common shares outstanding and the related net earnings per share (in thousands, except per share amounts):
                                 
    For the Three Months     For the Nine Months  
    Ended     Ended  
    October 29,     October 28,     October 29,     October 28,  
    2005     2006     2005     2006  
Net earnings
  $ 24,079     $ 31,774     $ 71,169     $ 96,251  
 
                       
 
                               
Basic weighted average common shares outstanding
    53,661       53,098       54,050       53,163  
Effect of dilutive securities:
                               
Convertible Notes
    175       1,023       281       781  
Stock options and equity-based compensation
    1,135       782       1,434       771  
 
                       
Diluted weighted average common shares outstanding
    54,971       54,903       55,765       54,715  
 
                       
 
                               
Net earnings per share:
                               
Basic
  $ 0.45     $ 0.60     $ 1.32     $ 1.81  
 
                       
Diluted
  $ 0.44     $ 0.58     $ 1.28     $ 1.76  
 
                       

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THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
3. Dividends
     On June 13, 2005, we effected a three-for-two stock split by paying a 50% stock dividend to shareholders of record as of May 31, 2005.
     Cash dividends paid were approximately $8.1 million for the nine months ended October 28, 2006. The quarterly cash dividends per share for fiscal 2006 are presented below:
         
First quarter ended April 29, 2006
  $ 0.05  
Second quarter ended July 29, 2006
  $ 0.05  
Third quarter ended October 28, 2006
  $ 0.05  
     In October 2006, our Board of Directors declared a quarterly cash dividend of $0.05 per share of our common stock payable on December 29, 2006 to shareholders of record at the close of business on December 19, 2006. The dividend payout is estimated to be approximately $2.7 million and is included in accrued expenses as of October 28, 2006.
4. Accounting For Derivative Instruments and Hedging
     In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro). Our practices include entering into foreign currency forward exchange contracts to minimize foreign currency exposure related to forecasted purchases of certain inventories. Under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), such contracts have been designated as and accounted for as cash flow hedges. The settlement terms of the forward contracts, including amount, currency and maturity, correspond with payment terms for the merchandise inventories. Any ineffective portion (arising from the change in the difference between the spot rate and the forward rate) of a hedge is reported in earnings immediately. At October 29, 2005, we had eight contracts maturing in varying increments to purchase an aggregate notional amount of $3.3 million in foreign currency, maturing at various dates through April 2006. During the first nine months of 2005 we recognized a pre-tax $26 thousand loss from hedge ineffectiveness. At October 28, 2006 we had no contracts outstanding. No-pretax hedge ineffectiveness was recognized during the first nine months of 2006.
     The changes in the fair value of the foreign currency forward exchange contracts are matched to inventory purchases by period and are recognized in earnings as such inventory is sold. The fair value of the forward exchange contracts is estimated by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at quarter end.
5. Comprehensive Income and Supplemental Cash Flows
     Our comprehensive income is as follows (in thousands):
                                 
    For the Three Months     For the Nine Months  
    Ended     Ended  
    October 29,     October 28,     October 29,     October 28,  
    2005     2006     2005     2006  
Net earnings
                               
 
  $ 24,079     $ 31,774     $ 71,169     $ 96,251  
Change in derivative fair value, net of tax
    (36 )     (3 )     (432 )     19  
Currency translation adjustments, net of tax
    5,208       1,049       6,811       2,112  
 
                       
 
                               
Comprehensive income
  $ 29,251     $ 32,820     $ 77,548     $ 98,382  
 
                       
     We paid cash during the first nine months of 2005 of $4.5 million for interest and $35.9 million for income taxes, compared with $7.1 million for interest and $60.2 million for income taxes during the first nine months of 2006. We had non-cash investing and financing activities resulting from the tax benefit recognized upon exercise of stock-based compensation

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
of $8.5 million and $3.1 million for the first nine months of 2005 and 2006, respectively, and from the issuance of treasury stock to the employee stock ownership plan of $1.5 million and $2.0 million for the first nine months of 2005 and 2006, respectively. We had non-cash investing and financing activities resulting from cash dividends declared of $2.7 million for the first nine months of 2006.
     We had capital expenditure purchases accrued in accounts payable and accrued expenses of approximately $4.8 million at October 28, 2006.
6. Goodwill and Other Intangible Assets
     Changes in the net carrying amount of goodwill for the year ended January 28, 2006 and for the nine months ended October 28, 2006 are as follows (in thousands):
         
Balance, January 29, 2005
  $ 55,824  
Translation adjustment
    1,777  
 
     
Balance, January 28, 2006
  $ 57,601  
Translation adjustment
    660  
 
     
Balance, October 28, 2006
  $ 58,261  
 
     
     The gross carrying amount and accumulated amortization of our other intangibles, which are included in other assets in the accompanying balance sheet, are as follows (in thousands):
                         
    For the Nine Months     For the Year  
    Ended     Ended  
    October 29,     October 28,     January 28,  
    2005     2006     2006  
Trademarks, tradenames and other intangibles
  $ 9,733     $ 9,316     $ 9,733  
Accumulated amortization
    (4,007 )     (4,192 )     (4,261 )
 
                 
Net total
  $ 5,726     $ 5,124     $ 5,472  
 
                 
     The pretax amortization expense associated with intangible assets totaled approximately $700,000 and $671,000 for the nine months ended October 29, 2005 and October 28, 2006, respectively, and approximately $954,000 for the year ended January 28, 2006. Pretax amortization associated with intangible assets at October 28, 2006 is estimated to be $224,000 for the remainder of fiscal year 2006, $808,000 for each of the fiscal years 2007 and 2008, $791,000 for fiscal year 2009 and $559,000 for fiscal year 2010.
7. Long-Term Debt
     On December 21, 2005, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks to amend and restate our existing revolving credit facility that was scheduled to mature on July 7, 2009. The Credit Agreement provides us with a $100.0 million senior secured revolving credit facility that can be expanded to $150.0 million upon additional lender commitments and includes a sublimit for the issuance of letters of credit. In addition, the Credit Agreement provided our Canadian subsidiaries with senior secured term loans in the aggregate equivalent of US$75.0 million. The proceeds of the Canadian term loan were 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 revolving credit facility and the Canadian term loan mature 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%.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The effective interest rate for the Canadian term loan was 5.0% at October 28, 2006. As of October 28, 2006, there were no borrowings outstanding under the revolving credit facility and there was US$77.3 million outstanding under the Canadian term loan.
     The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement were modified to afford us with greater operating flexibility than was provided for in our previous facility and to 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 October 28, 2006.
     On October 21, 2003, we issued $130.0 million of 3.125% Convertible Senior Notes due 2023 (“Notes”) in a private placement. Interest on the Notes is payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2004. The Notes will mature on October 15, 2023. However, holders may require us to purchase all or part of the Notes, for cash, at a purchase price of 100% of the principal amount per Note plus accrued and unpaid interest on October 15, 2008, October 15, 2013 and October 15, 2018 or upon a designated event. Beginning on October 15, 2008, we will pay additional contingent interest on the Notes if the average trading price of the Notes is above a specified level during a specified period. In addition, we may redeem all or a portion of the Notes on or after October 20, 2008 at 100% of the principal amount of the Notes plus any accrued and unpaid interest, contingent interest and additional amounts, if any. We also have the right to redeem the Notes between October 20, 2006 and October 19, 2008 if the price of our common stock reaches certain levels. See Note 12 regarding a subsequent event that affects the redemption of the Notes.
     During certain periods, the Notes are convertible by holders into shares of our common stock at a conversion rate of 35.1309 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of $28.47 per share of common stock (subject to adjustment in certain events), under the following circumstances: (1) if the closing sale price of our common stock issuable upon conversion exceeds 120% of the conversion price under specified conditions; (2) if we call the Notes for redemption; or (3) upon the occurrence of specified corporate transactions. Upon conversion of the Notes, in lieu of delivering common stock we may, at our election, deliver cash or a combination of cash and common stock. However, on January 28, 2005, we entered into a supplemental indenture relating to the Notes and irrevocably elected to settle the principal amount at issuance of such Notes in 100% cash when they become convertible and are surrendered by the holders thereof. The Notes are general senior unsecured obligations, ranking on parity in right of payment with all our existing and future unsecured senior indebtedness and our other general unsecured obligations, and senior in right of payment with all our future subordinated indebtedness. The Notes are effectively subordinated to all of our senior secured indebtedness and all indebtedness and liabilities of our subsidiaries. See Note 12 regarding a subsequent event that affects the convertibility of the Notes.
     On May 19, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 120% of the conversion price for the Company’s 3.125% Convertible Senior Notes due 2023 for the requisite number of days set forth in the indenture governing such Notes, the Notes were convertible during the conversion period beginning May 19, 2006 and ending August 17, 2006. As previously announced, we have irrevocably elected to settle the principal amount at issuance of the notes in cash when and if surrendered for conversion. No Notes were converted during the conversion period which ended August 17, 2006.
     We utilize letters of credit primarily to secure inventory purchases. At October 28, 2006, letters of credit totaling approximately $15.8 million were issued and outstanding.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
8. Stock Repurchase Program
     In June 2004, the Board of Directors authorized a program for the repurchase of up to $50.0 million of our common stock in the open market or in private transactions. As of October 29, 2005, a total of 1,652,850 shares at a cost of $43.0 million were repurchased in open market transactions under this program at an average price per share of $26.00. During the nine months ended October 29, 2005, a total of 1,503,750 shares at a cost of $40.5 million were repurchased under this program at an average price per share of $26.93.
     In May 2005, the Board of Directors approved a replenishment of our share repurchase program to $50.0 million by authorizing $43.0 million to be added to the remaining $7.0 million under the June 2004 authorization program. During the nine months ended October 29, 2005, a total of 1,696,000 shares at a cost of $49.8 million were repurchased under this program at an average price per share of $29.36.
     During the first nine months of 2005, a total of 3,199,750 shares at a cost of $90.3 million were repurchased in open market transactions under all authorized stock repurchase programs at an average price per share of $28.21.
     In January 2006, the Board of Directors authorized a new $100.0 million share repurchase program of our common stock. This authorization superceded the approximately $0.2 million we had remaining under the May 2005 authorization.
     The following table shows activity under the January 2006 treasury stock repurchase program for the nine months ended October 28, 2006 (in thousands, except share data and average price per share):
                         
                    Average  
                    Price Per  
    Shares     Cost     Share  
Total shares repurchased as of January 28, 2006
        $     $  
Repurchases under the program in open market transactions
    369,400       11,512       31.16  
 
                 
Total shares repurchased as of October 28, 2006
    369,400     $ 11,512     $ 31.16  
 
                 
     The remaining balance available under the January 2006 authorization at October 28, 2006 is $88.5 million.
9. Stock-Based Compensation Plans
Stock Plans
     We have adopted the 1992 Stock Option Plan (“1992 Plan”) which, as amended, provides for the grant of options to purchase up to 1,607,261 shares of our common stock to full-time key employees (excluding certain officers); the 1996 Long-Term Incentive Plan (formerly known as the 1996 Stock Option Plan) (“1996 Plan”) which, as amended, provides for an aggregate of up to 2,775,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees (excluding certain officers); the 1998 Key Employee Stock Option Plan (“1998 Plan”) which, as amended, provides for the grant of options to purchase up to 3,150,000 shares of our common stock to full-time key employees (excluding certain officers); and the 2004 Long-Term Incentive Plan which provides for an aggregate of up to 900,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees. The 1992 Plan expired in February 2002 and each of the other plans will expire at the end of ten years following the effective date of such plan; no awards may be granted pursuant to the plans after the expiration date. In fiscal 1992, we also adopted a Non-Employee Director Stock Option Plan (“Director Plan”) which, as amended, provides for an aggregate of up to 251,250 shares of our common stock with respect to which stock options, stock appreciation rights or restricted stock awards may be granted to non-employee directors of the Company. In fiscal 2001, the Director Plan’s termination date was extended to February 23, 2012. Options granted under these plans must be exercised within ten years of the date of grant.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     Generally, options granted pursuant to the employee plans vest at the rate of 1/3 of the shares covered by the grant on each of the first three anniversaries of the date of grant. However, a significant portion of options granted under these Plans vest annually in varying increments over a period from one to ten years. Under the 1996 Plan and the 2004 Plan, options may not be issued at a price less than 100% of the fair market value of our stock on the date of grant. In addition, under the 1996 Plan and the 2004 Plan, the vesting, transferability restrictions and other applicable provisions of any stock appreciation rights, restricted stock, deferred stock units or performance based awards will be determined by the Compensation Committee of the Company’s Board of Directors. Options granted under the Director Plan vest one year after the date of grant and are issued at a price equal to the fair market value of our stock on the date of grant; provided, however, that the committee who administers the Director Plan may elect to grant stock appreciation rights, having such terms and conditions as the committee determines, in lieu of any option grant. Restricted stock awards granted under the Director Plan vest one year after the date of grant. Grants of deferred stock units generally vest over a three year period; however, certain grants vest annually at varying increments over a period up to seven years.
Stock Options
     The following table summarizes stock option activity for the nine months ended October 28, 2006:
                                 
                    Weighted-        
            Weighted-     Average        
            Average     Remaining     Aggregate  
            Exercise     Contractual     Intrinsic  
Options   Shares     Price     Term     Value (000’s)  
Outstanding at January 28, 2006
    2,006,545     $ 15.58                  
Granted
                           
Exercised
    (388,322 )     16.29                  
Forfeited or expired
    (12,676 )     12.09                  
 
                             
Outstanding at October 28, 2006
    1,605,547     $ 15.44     5.4 years   $ 40,109  
 
                       
Exercisable at October 28, 2006
    725,203     $ 14.91     4.1 years   $ 18,500  
 
                       
     No stock options were granted during the nine months ended October 28, 2006. For the nine months ended October 29, 2005, 4,500 stock options were granted, at a weighted-average fair value of $14.50 The fair value of the options is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for grants during the nine months ended October 29, 2005: expected volatility of 48.86%, risk-free interest rates (U.S. Treasury five year notes) of 3.95% and an expected life of six years. The expected volatility is based on historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term represents the period of time the options are expected to be outstanding after their grant date. The total intrinsic value of options exercised during the nine months ended October 29, 2005 and October 28, 2006 was $24.1 million and $7.7 million, respectively. As of October 28, 2006, we have unrecognized compensation expense related to nonvested stock options of approximately $3.5 million which is expected to be recognized over a weighted average period of 3.3 years.
Restricted Stock and Deferred Stock Units
     The following table summarizes restricted stock and deferred stock unit activity for the nine months ended October 28, 2006:
                 
            Weighted-  
            Average  
            Grant-Date  
Nonvested Shares   Shares     Fair Value  
Nonvested at January 28, 2006
    512,888     $ 28.35  
Granted
    83,252       35.31  
Vested
    (67,485 )     27.86  
Forfeited
    (13,980 )     28.16  
 
             
Nonvested at October 28, 2006
    514,675     $ 29.54  
 
             

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
     For the nine months ended October 28, 2006, we granted 83,252 deferred stock units at a weighted-average grant date fair value of $35.31. For the nine months ended October 29, 2005, we granted 423,285 deferred stock units at a weighted-average grant date fair value of $27.81. As of October 28, 2006, we have unrecognized compensation expense related to nonvested restricted stock and deferred stock units of approximately $10.1 million which is expected to be recognized over a weighted average period of 2.9 years. The total fair value of shares vested during the nine months ended October 28, 2006 was $2.4 million. No shares vested during the nine months ended October 29, 2005. At October 28, 2006, there were total nonvested shares of 514,675, including 105,800 nonvested restricted stock shares. No shares of restricted stock were granted, vested or forfeited during the nine months ended October 28, 2006.
Employee Stock Purchase Plan
     In 1998, we adopted an Employee Stock Discount Plan (“ESDP”) which 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. Effective for offering periods beginning July 1, 2002, the plan was amended so that a participant may not purchase more than 125 shares during any calendar quarter.
     The fair value of ESDP shares is estimated using the Black-Scholes option pricing model in the quarter that the purchase occurs with the following weighted average assumptions:
                 
    For The Three     For The Nine  
    Months Ended     Months Ended  
    October 28, 2006     October 28, 2006  
Risk-free interest rates
    5.01 %     4.73 %
Expected lives
    0.25       0.25  
Dividend yield
    0.60 %     0.60 %
Expected volatility
    34.34 %     39.84 %
     The assumptions presented in the table above represent the weighted average of the applicable assumptions used to value ESDP shares. Expected volatility is based on historical volatility of our common stock. The expected term represents the time in the offering period. 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.
     During the nine months ended October 28, 2006, employees purchased 48,084 shares under the ESDP, the weighted-average fair value of which was $26.28 per share. We recognized approximately $0.6 million of stock-based compensation expense related to the ESDP for the nine months ended October 28, 2006. As of October 28, 2006, 1,545,075 shares were reserved for future issuance under the ESDP.
10. Legal Matters
     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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
11. Supplemental Sales Information
                                 
    For the Three Months Ended     For the Nine Months Ended  
    October 29,     October 28,     October 29,     October 28,  
    2005     2006     2005     2006  
(In thousands)
                               
Men’s tailored clothing product
  $ 181,055     $ 189,709     $ 567,688     $ 596,501  
Men’s non-tailored clothing product
    143,691       159,221       450,154       486,901  
Tuxedo rental
    28,063       34,486       84,228       104,401  
Alteration services
    19,963       24,511       61,260       71,217  
Other clothing product
    15,935       17,479       52,410       52,357  
Other services
    3,988       4,662       12,180       13,842  
 
                       
Net sales
  $ 392,695     $ 430,068     $ 1,227,920     $ 1,325,219  
 
                       
 
                               
Net sales by brand:
                               
MW
  $ 263,502     $ 282,205     $ 809,758     $ 864,711  
K&G
    81,190       89,906       270,326       288,215  
Moores
    44,015       53,295       133,865       158,451  
Other
    3,988       4,662       13,971       13,842  
 
                       
 
  $ 392,695     $ 430,068     $ 1,227,920     $ 1,325,219  
 
                       
12. Subsequent Events
     On November 15, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 120% of the conversion price for the Company’s 3.125% Convertible Senior Notes due 2023 (the “Notes”) for the requisite number of days set forth in the indenture governing such Notes, the Notes may be converted by the holders at their election during the conversion period beginning November 17, 2006 and ending February 22, 2007. However, as a result of the Company’s election to redeem the Notes the time period to convert the Notes will cease as of 5:00 p.m., Eastern time on December 13, 2006. As previously announced, we have irrevocably elected to settle the principal amount at issuance of the notes in cash when and if surrendered for conversion.
     On November 16, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 140% of the conversion price for the requisite number of days during the requisite period, the Company has elected to redeem the full $130.0 million aggregate principal amount of the Notes. The redemption date will be December 15, 2006.
     On November 16, 2006, we entered into a definitive stock purchase agreement with Federated Department Stores, Inc. and David’s Bridal, Inc. to acquire After Hours Formalwear, Inc. for a cash consideration of $100 million, subject to certain adjustments. The acquisition is conditioned upon, among other things, the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions and is expected to close on or after February 2, 2007.

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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 28, 2006. 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 “2006” mean the 53-week fiscal year ending February 3, 2007.
     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 Nine Months     For the Year  
    Ended     Ended     Ended  
    October 29,     October 28,     October 29,     October 28,     January 28,  
    2005     2006     2005     2006     2006  
Stores open at beginning of period:
    713       735       707       719       707  
Opened
    4       8       12       26       18  
Closed
                (2 )     (2 )     (6 )
 
                             
Stores open at end of period
    717       743       717       743       719  
 
                             
 
                                       
Stores open at end of period:
                                       
U.S. —
                                       
Men’s Wearhouse
    525       538       525       538       526  
K&G
    77       89       77       89       77  
 
                             
 
    602       627       602       627       603  
Canada — Moores
    115       116       115       116       116  
 
                             
 
    717       743       717       743       719  
 
                             
     In connection with our strategy of testing opportunities to market complementary products and services, in December 2003 and in September 2004 we acquired the assets and operating leases for 13 and 11, respectively, retail dry cleaning and laundry facilities operating in the Houston, Texas area. We launched a rebranding campaign for these facilities in March 2005. We may open or acquire additional facilities on a limited basis during 2006 as we continue to test market and evaluate the feasibility of developing a national retail dry cleaning and laundry line of business. As of October 28, 2006, we are operating 28 retail dry cleaning and laundry facilities.
     During fiscal year 2004, we opened six new casual clothing/sportswear concept stores in order to test an expanded, more fashion-oriented merchandise concept for men and women. In March 2005, it was determined that no further investments would be made into these test concept stores and that the six stores opened in 2004 would be wound down over the course of fiscal 2005. All six of these stores were closed by June 30, 2005. Net operating losses from these stores reduced diluted earnings per share $0.11 for the nine months ended October 29, 2005.
     During the fourth quarter of fiscal 2004, we opened two test bridal stores in the San Francisco Bay Area in order to test additional opportunities in the bridal industry. A decision was made to exit the test of these bridal stores and to close both locations by the third quarter of fiscal 2006. As of October 28, 2006, both of these locations were closed.

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Results of Operations
     Three Months Ended October 29, 2005 and October 28, 2006
     The Company’s net sales increased $37.4 million, or 9.5%, to $430.1 million for the three months ended October 28, 2006 due mainly to a $30.3 million increase in clothing and alteration sales and an $6.4 million increase in tuxedo rental revenues. The components of this $37.4 million increase in net sales are as follows:
     
( in millions)   Amount Attributed to
$16.4
  3.4% and 13.0% increase in comparable sales for US and Canadian stores, respectively, in the three months ended October 28, 2006 compared to the three months ended October 29, 2005.
5.1
  Increase from net sales of stores opened in 2005, relocated stores and expanded stores not yet included in comparable sales.
9.4
  Net sales from 8 new stores opened in 2006.
6.0
  Increase from other sales.
(2.0)
  Closed stores in 2005.
2.5
  Effect of exchange rate changes.
$37.4
  Total
     Our Men’s Wearhouse and K&G comparable store sales increased 4.3% and 0.2%, respectively, due primarily to increased traffic levels. We also continued to experience growth in our tuxedo rental business at our Men’s Wearhouse stores. In Canada, comparable store sales increased 13.0% primarily as a result of an improved average ticket for clothing, increased traffic and continued growth in our tuxedo rental business. As a percentage of total revenues, combined U.S. and Canadian tuxedo rental revenues increased from 7.2% in the third quarter of 2005 to 8.0% in the third quarter of 2006.
     Gross margin increased $27.5 million or 17.5% from the same prior year quarter to $185.4 million in the third quarter of 2006. As a percentage of sales, gross margin increased from 40.2% in the third quarter of 2005 to 43.1% in the third quarter of 2006. This increase in gross margin percentage resulted mainly from improvements in merchandise margins related to lower product costs and continued growth in our tuxedo rental business, which carries a significantly higher incremental gross margin impact than our traditional businesses. This increase in the gross margin percentage was partially offset by an increase in 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, from the third quarter of 2005 to the third quarter of 2006. On an absolute dollar basis, occupancy costs increased by 10.6% from third quarter of 2005 to the third quarter of 2006 due mainly to higher rent expense from our increased store count and renewals of existing leases at higher rates.
     Selling, general and administrative (“SG&A”) expenses increased to $136.6 million in the third quarter of 2006 from $123.4 million in the third quarter of 2005, an increase of $13.2 million or 10.7%. As a percentage of sales, these expenses increased from 31.4% in the third quarter of 2005 to 31.8% in the third quarter of 2006. The components of this 0.4% increase in SG&A expenses as a percentage of net sales are as follows:
     
%   Attributed to
0.2
  Increase in advertising expenses as a percentage of sales from 3.3% for the third quarter of 2005 to 3.5% for the third quarter of 2006. On an absolute dollar basis, advertising expense increased $1.9 million.
0.0
  Store salaries as a percentage of sales remained constant at 13.1% for the third quarter of 2005 and 2006. On an absolute dollar basis, store salaries increased $5.0 million primarily due to increased commissions associated with higher sales and increased base salaries.
0.2
  Increase in other SG&A expenses as a percentage of sales from 15.0% for the third quarter of 2005 to 15.2% for the third quarter of 2006. On an absolute dollar basis, other SG&A expenses increased $6.3 million primarily as a result of continued growth in our tuxedo rental business, increased base salaries and stock based compensation recorded in connection with the adoption of SFAS 123R.
0.4%
  Total

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     Interest expense increased from $1.4 million in the third quarter of 2005 to $2.4 million in the third quarter of 2006 while interest income increased from $0.6 million in the third quarter of 2005 to $2.5 million in the third quarter of 2006. Weighted average borrowings outstanding increased from $130.0 million in the third quarter of 2005 to $207.3 million for the third quarter of 2006, and the weighted average interest rate on outstanding indebtedness increased from 3.2% to 3.9%. The increase in weighted average borrowings is due to Canadian term loan borrowings of US$75.0 million in January 2006 that were used to fund the repatriation of foreign earnings from our Canadian subsidiaries under the American Jobs Creation Act of 2004. The increase in interest income primarily relates to increases in our average cash and short-term investment balances and in higher interest rates. See “Liquidity and Capital Resources” discussion herein.
     Our effective income tax rate increased from 28.3% for the third quarter of 2005 to 35.0% for the third quarter of 2006, primarily due to the absence in the current year of a $2.0 million reduction in previously recorded tax reserves associated with favorable developments on certain outstanding income tax matters incurred in the third quarter of 2005. Excluding the reduction to the previously recorded reserves, our effective tax rate would have been 34.4% for the third quarter of 2005.
     These factors resulted in net earnings of $31.8 million or 7.4% of net sales for the third quarter of 2006, compared with net earnings of $24.1 million or 6.1% of net sales for the third quarter of 2005.
     Nine Months Ended October 29, 2005 and October 28, 2006
     The Company’s net sales increased $97.3 million, or 7.9%, to $1,325.2 million for the nine months ended October 28, 2006 due mainly to a $75.5 million increase in clothing and alteration sales and a $20.2 million increase in tuxedo rental revenues. The components of this $97.3 million increase in net sales are as follows:
     
( in millions)   Amount Attributed to
$43.4
  3.3% and 8.3% increase in comparable sales for US and Canadian stores, respectively, in the first nine months of 2006 compared to the first nine months of 2005.
19.8
  Increase from net sales of stores opened in 2005, relocated stores and expanded stores not yet included in comparable sales.
17.7
  Net sales from 26 new stores opened in 2006.
12.3
  Increase from other sales.
(6.7)
  Closed stores in 2005 and 2006.
10.8
  Effect of exchange rate changes.
$97.3
  Total
     Our Men’s Wearhouse comparable store sales increased 4.3%, while our K&G comparable store sales remained constant, as compared to the prior year. Our Men’s Wearhouse comparable store sales increased as a result of improvement in the clothing average ticket, increased traffic and continued growth in our tuxedo rental business. In Canada, comparable store sales increased 8.3% primarily as a result of an improved average ticket for clothing as well as continued growth in our tuxedo rental business. As a percentage of total revenues, combined U.S. and Canadian tuxedo rental revenues increased from 6.9% in the first nine months of 2005 to 7.9% in the first nine months of 2006.
     Gross margin increased $75.4 million or 15.3% over the same prior year period to $567.3 million for the first nine months of 2006. As a percentage of sales, gross margin increased from 40.1% for the first nine months of 2005 to 42.8% for the first nine months of 2006. This increase in gross margin percentage resulted mainly from improvements in merchandise margins related to lower product costs and continued growth in our tuxedo rental business, which carries a significantly higher incremental gross margin impact than our traditional businesses. This increase in the gross margin percentage was partially offset by an increase in 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, from the first nine months of 2005 to the first nine months of 2006. On an absolute dollar basis, occupancy costs increased by 10.2% from the first nine months of 2005 to the first nine months of 2006 due mainly to higher rent expense from our increased store count and renewals of existing leases at higher rates.

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     Selling, general and administrative expenses increased to $416.6 million in the first nine months of 2006 from $382.2 million in the first nine months of 2005, an increase of $34.4 million or 9.0%. As a percentage of sales, these expenses increased from 31.1% in the first nine months of 2005 to 31.4% in the first nine months of 2006. The components of this 0.3% increase in SG&A expenses as a percentage of net sales are as follows:
     
%   Attributed to
(0.1)
  Decrease in advertising expenses as a percentage of sales from 3.5% for the first nine months of 2005 to 3.4% for the first nine months of 2006. On an absolute dollar basis, advertising expense increased $1.3 million.
0.1
  Increase in store salaries as a percentage of sales from 12.7% in the first nine months of 2005 to 12.8% in the first nine months of 2006. Store salaries on an absolute dollar basis increased $13.7 million primarily due to increased commissions associated with higher sales and increased base salaries.
0.3
  Increase in other SG&A expenses as a percentage of sales from 14.9% for the first nine months of 2005 to 15.2% for the first nine months of 2006. On an absolute dollar basis, other SG&A expenses increased $19.4 million primarily as a result of continued growth in our tuxedo rental business, increased base salaries and stock based compensation recorded in connection with the adoption of SFAS 123R. These increases were offset in part by the absence in the current year of costs associated with the closure of our R&D casual clothing/sportswear concept stores incurred in the first nine months of 2005.
0.3%
  Total
     Interest expense increased from $4.4 million for the first nine months of 2005 to $6.8 million in the first nine months of 2006 while interest income increased from $2.1 million for the first nine months of 2005 to $7.2 million for the first nine months of 2006. Weighted average borrowings outstanding increased from $130.0 million in the prior year to $207.3 million for the first nine months of 2006, and the weighted average interest rate on outstanding indebtedness increased from 3.3% to 3.8%. The increase in weighted average borrowings is due to Canadian term loan borrowings of US$75.0 million in January 2006 that were used to fund the repatriation of foreign earnings from our Canadian subsidiaries under the American Jobs Creation Act of 2004. The increase in interest income primarily relates to increases in our average cash and short-term investment balances and in higher interest rates. See “Liquidity and Capital Resources” discussion herein.
     Our effective income tax rate increased from 33.7% for the first nine months of 2005 to 36.3% for the first nine months of 2006, primarily due to the absence in the current year of a $2.0 million reduction in previously recorded tax reserves associated with favorable developments on certain outstanding income tax matters incurred in the first nine months of 2005. Excluding the reduction to the previously recorded reserves, our effective tax rate would have been 35.7% for the first nine months of 2005.
     These factors resulted in net earnings of $96.3 million or 7.3% of net sales for the first nine months of 2006, compared with net earnings of $71.2 million or 5.8% of net sales for the first nine months of 2005.
Liquidity and Capital Resources
     On December 21, 2005, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks to amend and restate our existing revolving credit facility that was scheduled to mature on July 7, 2009. The Credit Agreement provides us with a $100.0 million senior secured revolving credit facility that can be expanded to $150.0 million upon additional lender commitments and includes a sublimit for the issuance of letters of credit. In addition, the Credit Agreement provided our Canadian subsidiaries with senior secured term loans in the aggregate equivalent of US$75.0 million. The proceeds of the Canadian term loan were 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 revolving credit facility and the Canadian term loan mature 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%. The effective interest rate for the Canadian term loan was 5.0% at October 28, 2006. As of October 28, 2006, there were no borrowings outstanding under the revolving credit facility and there was US$77.3 million outstanding under the Canadian term loan.

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     The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement were modified to afford us with greater operating flexibility than was provided for in our previous facility and to 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 October 28, 2006.
     On October 21, 2003, we issued $130.0 million of 3.125% Convertible Senior Notes due 2023 (“Notes”) in a private placement. Interest on the Notes is payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2004. The Notes will mature on October 15, 2023. However, holders may require us to purchase all or part of the Notes, for cash, at a purchase price of 100% of the principal amount per Note plus accrued and unpaid interest on October 15, 2008, October 15, 2013 and October 15, 2018 or upon a designated event. Beginning on October 15, 2008, we will pay additional contingent interest on the Notes if the average trading price of the Notes is above a specified level during a specified period. In addition, we may redeem all or a portion of the Notes on or after October 20, 2008 at 100% of the principal amount of the Notes plus any accrued and unpaid interest, contingent interest and additional amounts, if any. We also have the right to redeem the Notes between October 20, 2006 and October 19, 2008 if the price of our common stock reaches certain levels.
     During certain periods, the Notes are convertible by holders into shares of our common stock at a conversion rate of 35.1309 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of $28.47 per share of common stock (subject to adjustment in certain events), under the following circumstances: (1) if the closing sale price of our common stock issuable upon conversion exceeds 120% of the conversion price under specified conditions; (2) if we call the Notes for redemption; or (3) upon the occurrence of specified corporate transactions. Upon conversion of the Notes, in lieu of delivering common stock we may, at our election, deliver cash or a combination of cash and common stock. However, on January 28, 2005, we entered into a supplemental indenture relating to the Notes and irrevocably elected to settle the principal amount at issuance of such Notes in 100% cash when they become convertible and are surrendered by the holders thereof. The Notes are general senior unsecured obligations, ranking on parity in right of payment with all our existing and future unsecured senior indebtedness and our other general unsecured obligations, and senior in right of payment with all our future subordinated indebtedness. The Notes are effectively subordinated to all of our senior secured indebtedness and all indebtedness and liabilities of our subsidiaries.
     On May 19, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 120% of the conversion price for the Notes for the requisite number of days set forth in the indenture governing such Notes, the Notes were convertible during the conversion period beginning May 19, 2006 and ending August 17, 2006. As previously announced, we have irrevocably elected to settle the principal amount at issuance of the notes in cash when and if surrendered for conversion. No Notes were converted during the conversion period which ended on August 17, 2006.
     On November 15, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 120% of the conversion price for the Notes for the requisite number of days set forth in the indenture governing such Notes, the Notes may be converted by the holders at their election during the conversion period beginning November 17, 2006 and ending February 22, 2007. However, as a result of the Company’s election to redeem the Notes the time period to convert the Notes will cease as of 5:00 p.m. Eastern time on December 13, 2006. As previously announced, we have irrevocably elected to settle the principal amount at issuance of the notes in cash when and if surrendered for conversion.
     On November 16, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 140% of the conversion price for the requisite number of days during the requisite period, the Company has elected to redeem the full $130.0 million aggregate principal amount of the Notes. The redemption date will be December 15, 2006.
     We utilize letters of credit primarily to secure inventory purchases. At October 28, 2006, letters of credit totaling approximately $15.8 million were issued and outstanding.

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     On June 13, 2005, we effected a three-for-two stock split by paying a 50% stock dividend to shareholders of record as of May 31, 2005.
     A quarterly cash dividend of $0.05 per share has been paid for the first quarter ended April 29, 2006, the second quarter ended July 29, 2006 and the third quarter ended October 28, 2006. Cash dividends paid were approximately $8.1 million for the nine months ended October 28, 2006. In October 2006, our Board of Directors declared a quarterly cash dividend of $0.05 per share of our common stock payable on December 29, 2006 to shareholders of record at the close of business on December 19, 2006. The dividend payout is estimated to be approximately $2.7 million and is included in accrued expenses as of October 28, 2006.
     On November 16, 2006, we entered into a definitive stock purchase agreement with Federated Department Stores, Inc. and David’s Bridal, Inc. to acquire After Hours Formalwear, Inc. for a cash consideration of $100 million, subject to certain adjustments. The acquisition is conditioned upon, among other things, the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions and is expected to close on or after February 2, 2007.
     Our primary sources of working capital are cash flow from operations and, if necessary, borrowings under the Credit Agreement. We had working capital of $572.6 million at October 28, 2006, which is up from $491.5 million at January 28, 2006 and up from $383.3 million at October 29, 2005. 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 $81.1 million increase in working capital at October 28, 2006 compared to January 28, 2006 resulted from the following:
     
(in millions)   Amount Attributed to
(7.6)
  Decrease in cash and short-term investments due mainly to purchases of treasury stock and cash dividends paid.
63.6
  Increase in inventories due to seasonal inventory buildup and square footage growth of 6.6%.
9.1
  Decrease in accounts payable due to seasonal timing of payments.
11.5
  Decrease in accrued expenses due to payment of accrued bonuses, employee benefits and interest.
4.5
  Other items.
$81.1
  Total
     Our operating activities provided net cash of $52.1 million during the first nine months of 2005, due mainly to net earnings, adjusted for non-cash charges, offset by increases in inventories and tuxedo rental product. During the first nine months of 2006, our operating activities provided net cash of $50.8 million, due mainly to net earnings, adjusted for non-cash charges, offset by increases in inventories and tuxedo rental product and a decrease in accounts payable and accrued expenses. Accounts payable and accrued expenses decreased in the first nine months of 2006 due mainly do the timing of vendor payments and the payment of accrued bonuses, employee benefits and interest. Inventories increased in the first nine months of 2005 and 2006 due mainly to seasonal inventory buildup and an increase in selling square footage. The increase in tuxedo rental product in the first nine months of 2005 and 2006 is due to purchases of this product to support the continued growth in our tuxedo rental business.
     Our investing activities used net cash of $122.1 million and $166.0 million for the first nine months of 2005 and 2006, respectively. Cash used in investing activities was primarily comprised of capital expenditures and net purchases of short-term investments of $69.9 million and $117.5 million for the first nine months of 2005 and 2006, respectively. Short-term investments consist of auction rate securities which represent funds available for current operations. These securities have stated maturities beyond three months but are priced and traded as short-term instruments due to the liquidity provided through the interest rate mechanism of 7 to 35 days. As of October 29, 2005 and October 28, 2006, we held short-term investments of $69.9 million and $180.3 million, respectively. 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, distribution facility additions and infrastructure technology investments.

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     Our financing activities used net cash of $68.1 million and $10.8 million for the first nine months of 2005 and 2006, respectively. Cash used in financing activities was due mainly to purchases of treasury stock and, in 2006, cash dividends paid, offset by proceeds from the issuance of our common stock in connection with the exercise of stock options.
     In June 2004, the Board of Directors authorized a program for the repurchase of up to $50.0 million of our common stock in the open market or in private transactions. As of October 29, 2005, a total of 1,652,850 shares at a cost of $43.0 million were repurchased in open market transactions under this program at an average price per share of $26.00. During the nine months ended October 29, 2005, a total of 1,503,750 shares at a cost of $40.5 million were repurchased under this program at an average price per share of $26.93.
     In May 2005, the Board of Directors approved a replenishment of our share repurchase program to $50.0 million by authorizing $43.0 million to be added to the remaining $7.0 million under the June 2004 authorization program. During the nine months ended October 29, 2005, a total of 1,696,000 shares at a cost of $49.8 million were repurchased under this program at an average price per share of $29.36.
     During the first nine months of 2005, a total of 3,199,750 shares at a cost of $90.3 million were repurchased in open market transactions under all authorized stock repurchase programs at an average price per share of $28.21.
     In January 2006, the Board of Directors authorized a new $100.0 million share repurchase program of our common stock. This authorization superceded the approximately $0.2 million we had remaining under the May 2005 authorization. As of October 28, 2006, a total of 369,400 shares at a cost of $11.5 million were repurchased in open market transactions under this program at an average price per share of $31.16. The remaining balance available under the January 2006 authorization at October 28, 2006 is $88.5 million.
     We anticipate that our existing cash and cash flow from operations, supplemented by borrowings under our Credit Agreement, will be sufficient to fund planned store openings, redemption of our 3.125% Convertible Senior Notes, the After Hours acquisition, other capital expenditures and operating cash requirements for at least the next 12 months.
     As substantially all of our cash is held by three financial institutions, we are exposed to risk of loss in the event of failure of any of these parties. However, due to the creditworthiness of these three 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. 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
     We are subject to exposure from fluctuations in U.S. dollar/Euro exchange rates. As further described in Note 4 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 October 28, 2006 we had no contracts outstanding. At October 29, 2005, we had eight contracts maturing in varying increments to purchase an aggregate notional amount of $3.3 million in foreign currency, maturing at various dates through April 2006. Unrealized pretax gains on these forward contracts totaled approximately $44 thousand at October 29, 2005.
     Moores conducts its business in Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars has fluctuated historically. If the value of the Canadian dollar against the U.S. dollar weakens, then the revenues and earnings of our Canadian operations will be reduced when they are translated to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may decline.
     We are also subject to market risk from our Canadian term loan of US$77.3 million at October 28, 2006, which bears interest at CDOR plus an applicable margin (see Note 7 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 $0.4 million.
ITEM 4 — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
     The Company’s management, with the participation of the Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the fiscal quarter ended October 28, 2006. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter ended October 28, 2006 to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Controls over Financial Reporting
     There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended October 28, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
     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
     There are no material changes from the risk factors previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended January 28, 2006.

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ITEM 6 – EXHIBITS
         
Exhibit        
Number       Exhibit Index
 
       
2.1
    Stock Purchase Agreement (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 17, 2006).
 
       
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).
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
Dated: December 7, 2006  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
    Stock Purchase Agreement (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 17, 2006).
 
       
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).

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