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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-20036
THE MEN'S WEARHOUSE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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TEXAS 74-1790172
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5803 GLENMONT DRIVE 77081
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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(713) 295-7200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 Par Value
5 1/4% Convertible Subordinated Notes Due 2003
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in the Proxy Statement or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment hereto. [ ]
The aggregate market value of the outstanding Common Stock of the
registrant held by non-affiliates of the registrant as of April 16, 1996, based
on the closing sale price of the Common Stock on the Nasdaq National Market
System on said date, was $318,872,684.
There were 21,063,872 shares of Common Stock of the registrant outstanding
as of April 16, 1996, not including 53,735 shares classified as Treasury Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Items 10, 11, 12 and 13 of Part III will be
included in the registrant's definitive proxy statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
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PART I
ITEM 1. BUSINESS.
The Men's Wearhouse commenced operations in 1973 as a partnership and was
incorporated as The Men's Wearhouse, Inc. under the laws of Texas in May 1974.
Its principal executive offices are located at 5803 Glenmont Drive, Houston,
Texas 77081 (telephone number 713/295-7200), and at 40650 Encyclopedia Circle,
Fremont, California 94538 (telephone number 510/657-9821).
The Company is one of the country's largest off-price specialty retailers
of men's tailored business attire. The Company opened its first store in
Houston, Texas in 1973 and, as of February 1, 1997, operated 345 stores in 33
states, with approximately 42% of its locations in Texas and California. During
fiscal 1996, the Company opened 50 new stores, entered 10 new markets and on
January 17, 1997, through VPC, acquired 17 additional stores operating under the
name "C&R Clothiers", as described more fully under "Recent Developments".
As used herein, the term "The Men's Wearhouse" refers to The Men's
Wearhouse, Inc. and its wholly-owned subsidiaries, exclusive of Value Priced
Clothing, Inc. ("VPC"), and the term the "Company" refers to The Men's
Wearhouse, Inc. and its wholly-owned subsidiaries including VPC. Additionally,
the terminology a "Men's Wearhouse store" refers to the Company's traditional
stores while a "C&R store" refers to the 17 stores operating under VPC.
The Men's Wearhouse continues to target middle and upper middle income men
with a strategy of providing value to its customers by offering quality
merchandise at consistent, everyday low prices with a superior level of customer
service. With the late 1996 acquisition of the C&R stores, the Company has
broadened its potential market as VPC targets a more price sensitive customer.
The price of suits generally range from $199 to $499 at the traditional Men's
Wearhouse stores. VPC generally prices suits from $99 to $199. The Company
believes that a large portion of the men's tailored clothing market is motivated
by low prices rather than superior service.
The Men's Wearhouse stores offer a broad selection of designer, brand name
and private label merchandise at prices it believes are typically 20% to 30%
below the regular retail prices of traditional department and specialty store
prices. VPC offers a selection of brand names and private label merchandise the
Company believes are typically 30% to 50% below the regular retail prices of
traditional department and specialty store prices.
The Company considers its merchandise, which includes suits, sport coats,
slacks, outerwear, dress shirts, shoes and accessories, conservative. By
concentrating on tailored business attire, a category of men's clothing
characterized by infrequent and more predictable fashion changes, the Company
believes it is not as exposed to trends typical of more fashion-forward apparel
retailers, where markdowns and promotional pricing are more prevalent.
The Company's expansion strategy includes opening additional stores in
existing markets, opening stores in new markets and increasing its net sales and
profitability in its existing markets. In general terms, a market is defined as
a geographic area served by a common group of television stations. The Company
anticipates that the addition of new stores will be the primary source of its
future growth. On a limited basis, the Company has acquired store locations,
inventories, customer lists, trademarks and tradenames from existing local
menswear retailers in both new and existing markets, and may do so in the
future. At present, the Company plans to open approximately 50 new stores during
1997, approximately one-half of which will be in new markets, and to continue
its expansion in subsequent years.
As a result of the continuing consolidation of the men's tailored clothing
industry, the Company has been and expects to continue to be presented with more
significant opportunities within its industry. Such opportunities may include,
but are not limited to, increased direct sourcing of merchandise, including
possible ventures with apparel manufacturers, acquisitions of menswear retailers
and the acquisition or licensing of designer or nationally recognized brand
labels. Recent financial difficulties of significant menswear retailers
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may present the Company with opportunities to acquire retail chains
significantly larger than the Company's past acquisitions. Any such acquisitions
may be undertaken as an alternative to opening new stores.
RECENT DEVELOPMENTS
In November 1996, VPC was organized as a wholly-owned subsidiary of the
Company for the purpose of acquiring assets of C&R Clothiers, Inc. ("C&R"), a
privately-held retailer of men's tailored clothing stores operating in Southern
California. On January 17, 1997, VPC acquired 17 C&R stores in Southern
California and C&R's existing inventory and entered into a lease for C&R's
distribution center in Culver City, California. The C&R acquisition served to
launch a new division selling men's apparel, targeting the more price sensitive
clothing customer.
During March 1997, the Company, through its wholly-owned subsidiary Value
Priced Liquidators, Inc., formed a joint venture with Buxbaum, Ginsberg &
Associates and entered into an asset purchase and license agreement to acquire
and liquidate certain of the assets of Kuppenheimer's Men's Clothiers, a chain
of 42 men's clothing stores. The joint venture is acting as agent with respect
to Kuppenheimer's going-out-of-business sale under such agreement. Under the
agreement, the Company acquired the rights to the trade name, customer lists,
labels, and other proprietary data as well as certain property and equipment
which has been or will be sold for cash or used in its continuing operations.
Although the Company had an option to assume any and all leases related to the
42 Kuppenheimer stores, on April 18, 1997 it elected not to take all but two of
such leases.
MERCHANDISING
The Men's Wearhouse offers a broad selection of designer, brand name and
private label men's business attire, including a consistent stock of basic items
(such as navy blazers, tuxedos and navy and gray suits) and considers its
merchandise conservative. Although basic styles are emphasized, each season's
merchandise does reflect current fabric and color trends, and a small percentage
of inventory, accessories in particular, is usually more fashion oriented. The
Company's broad merchandise selection creates increased sales opportunities by
permitting a customer to purchase substantially all of his tailored wardrobe and
accessory requirements, including shoes, at a Men's Wearhouse store. Within its
tailored clothing, The Men's Wearhouse offers an assortment of styles from a
variety of manufacturers and maintains a broad selection of fabrics and colors.
The Company believes that the depth of selection it offers at The Men's
Wearhouse provides it with an advantage over most of its competitors.
In 1995, The Men's Wearhouse expanded its inventory mix to include
"business casual" merchandise designed to meet increased demand for such product
resulting from the trend toward more relaxed dress codes in the workplace. The
added merchandise consists of tailored and nontailored clothing which
complements the existing product mix and provides opportunity for enhanced sales
without significant inventory risk. The expanded inventory includes, among other
things, more sports coats, casual slacks, knits and woven sports shirts,
sweaters and casual shoes.
The Men's Wearhouse believes it differs from most other off-price retailers
in that it does not purchase significant quantities of merchandise overruns or
close-outs. The Company provides recognizable quality merchandise at consistent
prices that assist the customer in identifying the value available at The Men's
Wearhouse. The Men's Wearhouse believes its merchandise is generally offered 20%
to 30% below traditional department and specialty store prices. The The Men's
Wearhouse affixes a ticket to each item, which displays The Men's Wearhouse
selling price alongside the price the Company regards as the regular retail
price of the item. At the check-out counter, the customer's receipt reflects the
savings from what the Company considers the regular retail price.
By targeting men's tailored business attire, a category of men's clothing
characterized by infrequent and more predictable fashion changes, the Company
believes it is not as exposed to trends typical of more fashion-forward apparel
retailers. This allows the Company to carry basic merchandise over to the
following season and reduces the need for markdowns; for example, a navy blazer
or gray business suit may be carried over to the next season. The Men's
Wearhouse has a once-a-year sale after Christmas that has typically lasted until
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the fourth week in January, during which prices on many items are reduced 20% to
50% off the everyday low prices. This sale reduces stock at year-end and
prepares for the arrival of the new season's merchandise. Management believes
the Company's three outlet stores assist in the reduction of merchandise the
Company desires to move out of The Men's Wearhouse stores to make room for new
merchandise without using promotional methods in its traditional stores. The
Company may also, on a limited basis, use the VPC stores to assist in the
reduction of merchandise it desires to move out of The Men's Wearhouse stores.
During 1994, 1995 and 1996, 77%, 74% and 72%, respectively, of the
Company's net sales were attributable to tailored clothing (suits, sport coats
and slacks), and 23%, 26% and 28%, respectively, were attributable to
accessories and other items.
Customers may pay for merchandise with cash, check or nationally recognized
credit cards. Credit card sales were 65% of net sales in 1994, 67% in 1995 and
68% in 1996.
CUSTOMER SERVICE AND MARKETING
The Men's Wearhouse sales personnel are trained as clothing consultants to
provide customers with assistance and advice on their apparel needs, including
product style, color coordination, fabric and garment fit. Clothing consultants
attend an intensive training program at the Company's training facility in
Fremont, California, which is further supplemented with weekly store meetings,
periodic merchandise meetings, and frequent interaction with multi-unit managers
and merchandise managers.
The Company encourages its clothing consultants to be friendly and
knowledgeable and to promptly greet each customer entering the store. The
consultants are encouraged to offer guidance to the customer at each stage of
the decision-making process, making every effort to earn the customer's
confidence and to create a professional relationship that will continue beyond
the initial visit. Clothing consultants are also encouraged to contact customers
after the purchase or pick-up of tailored clothing to determine whether
customers are satisfied with their purchases and, if necessary, to take
corrective action. Store personnel have full authority to respond to customer
complaints and reasonable requests, including the approval of returns,
exchanges, refunds, re-alterations and other special requests, all of which the
Company believes helps promote customer satisfaction and loyalty.
Each of The Men's Wearhouse stores provides on-site tailoring services to
facilitate timely alterations at a reasonable cost to customers. Tailored
clothing purchased at a Men's Wearhouse store will be pressed and re-altered (if
the alterations were performed at a Men's Wearhouse store) free of charge for
the life of the garment.
Because management believes that men prefer direct and easy store access,
the Company attempts to locate its stores in neighborhood strip and specialty
retail centers or in free standing buildings to enable customers to park near
the entrance of the store.
The Company's annual advertising expenditures, which were $23.2 million,
$27.4 million and $31.0 million in 1994, 1995 and 1996, respectively, are
significant. However, the Company believes that once it attracts prospective
customers, the experience of shopping in its stores will be the primary factor
encouraging subsequent visits. The Company advertises principally on television
and radio, which it considers the most effective means of attracting and
reaching potential customers, and its advertising campaign is designed to
reinforce its image of providing value and customer service. "I guarantee it" is
a long standing phrase associated with The Men's Wearhouse and its advertising
campaign. In the advertisements, the Company's Chief Executive Officer and
co-founder guarantees customer satisfaction with the apparel purchased, the
quality of tailoring and the total shopping experience.
PURCHASING AND DISTRIBUTION
The Company purchases merchandise from approximately 180 vendors. In 1996,
no vendor accounted for 10% or more of purchases. Management does not believe
that the loss of any vendor would significantly impact the Company. The buying
staff is led by the Chief Operating Officer of the Company. While the Company
has
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no material long-term contracts with its vendors, the Company believes that it
has developed an excellent relationship with its vendors, which is supported by
consistent purchasing practices.
The Company believes it obtains favorable buying opportunities relative to
many of its competitors. The Company does not request cooperative advertising
support from manufacturers, which reduces the manufacturers' costs of doing
business and enables them to offer lower prices to the Company. Further, the
Company believes it obtains better discounts by entering into purchase
arrangements that provide for limited return policies, although the Company
always retains the right to return goods that are damaged upon receipt or
determined to be improperly manufactured. Finally, volume purchasing of
specifically planned quantities enables more efficient production runs by
manufacturers, who, in turn, are provided the opportunity to pass some of the
cost savings back to the Company.
During 1993, the Company expanded its inventory sourcing capabilities by
implementing a direct sourcing program. Under this program, the Company
purchases fabric from mills and contracts with certain factories for the
assembly of the end product (suits, sport coats or slacks). Such arrangements
for fabric and assembly have been with both domestic and foreign mills and
factories. Previous purchases from such mills and factories had been through
other suppliers. Product acquired during 1994, 1995 and 1996 through the direct
sourcing program represented approximately 10%, 20% and 28%, respectively, of
total inventory purchases, and the Company expects that purchases through such
program will represent between approximately 25% to 30% of total purchases in
1997.
To protect against currency exchange risks associated with certain firmly
committed and certain other probable, but not firmly committed inventory
transactions denominated in a foreign currency, the Company enters into forward
exchange contracts. In addition, many of the purchases from foreign vendors are
financed by letters of credit.
In 1995, the Company entered into license agreements with a limited number
of parties under which the Company is entitled to use designer labels, such as
"Pierre Balmain" and "Vito Rufolo", and nationally recognized brand labels such
as "Botany" and "Botany 500", in return for royalties paid to the licensor based
on the costs of the relevant product. These license agreements generally limit
the use of the individual label to products of a specific nature (such as men's
suits, men's formal wear or men's shirts). The labels licensed under these
agreements will continue to be used in connection with a portion of the
purchases under the direct sourcing program described above, as well as
purchases from other vendors. During 1996, the Company purchased several
trademarks from Hugo Boss. These marks include "Cricketeer," "Joseph & Feiss
International," "Baracuda," and "Country Britches," among others, and will be
used similarly to the Company's licensed labels. The Company monitors the
performance of these licensed labels compared to their cost and may elect to
selectively terminate any license. Because of the continued consolidation in the
men's tailored clothing industry, the Company may be presented with
opportunities to acquire or license other designer or nationally recognized
brand labels.
All merchandise is received into the Company's central warehouse located in
Houston, Texas, except for merchandise intended for the C&R stores which is
principally received at VPC's Culver City, California distribution center. Once
received, merchandise is arranged by size. The computer generates bar-coded
garment tags and labels and recommends distribution of the merchandise on the
basis of each store's past performance with similar merchandise and existing
inventory levels. This distribution is reviewed by a member of the merchandise
staff and any necessary changes are made. Merchandise for a store is picked and
then moved to the appropriate staging area for shipping. In addition to the
central warehouse in Houston, the Company leases additional space within Men's
Wearhouse stores in the majority of its markets, which operate as redistribution
facilities for their respective areas. The Company's executive offices in
Fremont, California also serve as a redistribution facility for the San
Francisco Bay area.
The Company leases and operates 19 long-haul tractors and 30 trailers,
which, together with common carriers, ship merchandise from the vendors to the
Company's distribution facilities and from the distribution facilities to
centrally located stores within each market. The Company also leases 46 smaller
van-like trucks, which are used to ship merchandise locally or within a given
geographic region.
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MANAGEMENT INFORMATION AND TELECOMMUNICATION SYSTEMS
The Company has aggressively pursued the implementation of technology which
provides the opportunity for competitive advantage, and which leverages human
resources. By implementing a sophisticated management information system, and by
integrating it with a highly functional telecommunication system, the Company
has effectively managed the operation of its business and its inventory while
experiencing substantial growth.
The Company's inventory control systems, including purchase order
management, automatic replenishment of basic items, and real-time point of sale,
have contributed to enhanced performance and profitability and to achieving
inventory shrinkage rates that are consistently below industry averages.
Electronic Data Interchange (EDI) with several suppliers and use of data
warehousing and decision support technologies have substantially leveraged the
efforts of the merchandising team, allowing them to reallocate time from simple
and repetitive tasks to those requiring more analytical skills.
The Company has developed and is now using an "expert" system to assist in
the distribution of incoming merchandise. This system uses rules for
distribution decisions which reflect the decision making process of the senior
product managers. In addition, in 1996 the Company negotiated a comprehensive
telecommunications arrangement with a major telecommunications vendor that
allowed the Company to transition its data network to a more modern, flexible,
and reliable frame relay environment, while simultaneously reducing operating
costs.
The Company's voice mail system has not only enhanced internal
communication capabilities, it has also provided an actively used channel for
improving customer service and it has contributed to the Company's advertising
efforts, giving the Company access to unsolicited customer testimonials.
The Company employs technology in several other areas of its operations
and intends to continue its pursuit of technologies which favorably impact
performance and/or the delivery of customer service.
COMPETITION
The Company believes that the unit demand for men's tailored clothing has
declined. The Company's primary competitors include specialty men's clothing
stores, traditional department stores, off-price retailers and
manufacturer-owned and independently-owned outlet stores. Over the past several
years market conditions have resulted in consolidation of the industry.
Management believes that the principal competitive factors in the men's tailored
clothing market are merchandise assortment, quality, price, garment fit,
merchandise presentation, store location and customer service. The Company
attempts to distinguish itself from its competitors by providing what it
believes are the best features of each competing shopping alternative.
Management believes that strong vendor relationships, its direct sourcing
program and the buying power of the Company are the principal factors enabling
it to obtain quality merchandise at attractive prices. The Company believes that
its vendors rely on the Company's predictable payment record and on the
Company's history of honoring all promises, including the Company's promise not
to advertise names of labeled and unlabeled designer merchandise, when
requested. Certain of the Company's competitors (principally department stores)
are larger and have substantially greater financial, marketing and other
resources than the Company and there can be no assurance that the Company will
be able to compete successfully with them in the future.
SEASONALITY
Like most retailers, the Company's business is subject to seasonal
fluctuations. Historically, over 30% of the Company's net sales and
approximately 50% of its net earnings have been generated during the fourth
quarter of each year. Because of the seasonality of the Company's business,
results for any quarter are not necessarily indicative of the results that may
be achieved for the full year. See Note 8 of Notes to Consolidated Financial
Statements.
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TRADEMARKS AND SERVICE MARKS
The Company is the owner in the United States of the trademark and service
mark The Men's Wearhouse(R), and of federal registrations therefor expiring in
2009 and 2002, respectively, subject to renewal. The Company has also been
granted registrations for that trademark and service mark in 28 states
(including Texas and California) of the 33 states in which it does business and
has used those marks. Applications for the most recent states entered are in
process. The Company's rights in the "The Men's Wearhouse" mark are a
significant part of the Company's business, as the mark has become well known
through the Company's television and radio advertising campaigns. Accordingly,
the Company intends to maintain its mark and the related registrations.
The Company is also the owner in the United States of the servicemarks
"C&R" and "C&R Clothiers" and the owner in the State of California of the
servicemark "C&R Clothiers". Federal applications for the registration of the
servicemarks have been filed by the Company. The State of California has issued
a registration for the servicemark "C&R Clothiers". Such marks are used to
identify the retail store services of and is the tradename utilized by the
retail clothing stores operated by VPC.
In addition to The Men's Wearhouse and C&R Clothiers trademarks/service
marks, the Company owns or licenses other trademarks/service marks used in the
business, principally in connection with the labeling of product purchased
through the direct sourcing program.
EMPLOYEES
At February 1, 1997, the Company had approximately 4,900 employees, of whom
approximately 4,200 were full-time employees and approximately 700 were
part-time employees. Seasonality affects the number of part-time employees as
well as the number of hours worked by full-time and part-time personnel. The
Company has no collective bargaining agreements.
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ITEM 2. PROPERTIES.
As of February 1, 1997, the Company operated 345 stores in 33 states. The
following table sets forth the location, by state, of these Company stores, 17
of which operate as C&R stores in California:
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California.................................................. 101
Texas (including two outlet stores)......................... 45
Florida..................................................... 21
Michigan.................................................... 18
Illinois.................................................... 16
Ohio........................................................ 12
Washington.................................................. 12
Georgia (including one outlet store)........................ 11
Colorado.................................................... 9
North Carolina.............................................. 9
Massachusetts............................................... 7
Minnesota................................................... 7
Indiana..................................................... 6
Maryland.................................................... 6
Missouri.................................................... 6
Pennsylvania................................................ 6
Tennessee................................................... 6
Arizona..................................................... 5
Oregon...................................................... 5
Wisconsin................................................... 5
South Carolina.............................................. 4
Utah........................................................ 4
Virginia.................................................... 4
Louisiana................................................... 3
Nevada...................................................... 3
Oklahoma.................................................... 3
Alabama..................................................... 2
Connecticut................................................. 2
Kansas...................................................... 2
New Hampshire............................................... 2
Idaho....................................................... 1
Kentucky.................................................... 1
New Mexico.................................................. 1
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The Men's Wearhouse stores vary in size from approximately 2,800 to 9,600
total square feet (average square footage at February 1, 1997 was 4,683 square
feet), excluding the three outlet stores. The C&R stores vary in size from
approximately 5,000 to 9,508 total square feet (average square footage at
February 1, 1997 was 6,632 square feet). The Men's Wearhouse stores are
primarily located in middle and upper middle income neighborhood strip and
specialty retail shopping centers. The Company believes its customers generally
prefer to limit the amount of time they spend shopping for men's tailored
clothing and seek easily accessible store sites.
The Men's Wearhouse stores are designed to further the Company's strategy
of facilitating sales while making the shopping experience pleasurable. Each
store is staffed with clothing consultants and sales associates and has a
tailoring facility with at least one tailor.
The Men's Wearhouse attempts to create a specialty store atmosphere through
effective merchandise presentation and sizing, attractive in-store signs and
efficient check-out procedures. Most of the stores have similar floor plans and
merchandise presentation to facilitate the shopping experience and sales
process.
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Designer, brand name and private label garments are intermixed, and emphasis is
placed on the fit of the garment rather than on a particular label or
manufacturer.
The Company owns its Houston, Texas outlet store, which comprises
approximately 12,000 square feet. The Company also owns the building that houses
one of its stores in Dallas, Texas, and leases the underlying land from certain
principal shareholders of the Company. The Company leases all of its other
stores on terms generally from five to ten years with renewal options at higher
fixed rates in most cases. Leases typically provide for percentage rent over
sales break points. Additionally, most leases provide for a base rent as well as
"triple net charges", including but not limited to common area and maintenance
expenses, property taxes, utilities, center promotions and insurance. In certain
markets, the Company leases between 1,000 and 3,000 additional square feet in a
Men's Wearhouse store to be utilized as a redistribution facility in a
geographic area.
The Company purchased land and constructed a store thereon in 1995. During
1996, the Company sold and leased back this property on terms similar to those
discussed in the preceding paragraph. There was no gain or loss resulting from
this transaction. The Company may, on a limited basis, enter into similar
transactions in the future.
In July 1995, the Company moved its executive offices in Fremont,
California to a new 35,500 square foot facility owned by the Company, which
serves as an office, training and redistribution facility.
The Company owns its principal office, warehouse and distribution facility
which is situated on approximately seven acres of land in Houston, Texas. In
late 1994, a 120,000 square foot expansion (a three story building on a 50,000
square foot foundation) of this facility was completed, increasing the facility
to an aggregate of 240,000 square feet. Approximately 40,000 square feet of this
facility is used as office space for the Company's accounting, treasury,
management information systems and merchandising departments with the remaining
200,000 square feet serving as a warehouse and distribution center.
The Company also leases a building, situated on one acre in Houston, Texas
and used as a supply depot, from certain principal shareholders of the Company.
The lease term on this facility runs until August 31, 2005, and is on terms that
the Company believes are no less favorable than could be obtained from an
independent third party.
During 1996 the Company purchased a six acre corner lot across the street
from its Houston distribution center and plans to use this for future warehouse
and distribution facility expansion. The Company is currently evaluating the
nature and timing of such expansion. Additionally, the Company purchased land
and began construction of two stores in Seattle, Washington and Memphis,
Tennessee to be opened in fiscal 1997. The Company will seek to enter into
sale-and-leaseback transactions with respect to these two stores.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various routine legal proceedings, including
ongoing litigation, incidental to the conduct of its business. Management
believes that none of these matters will have a material adverse effect on the
financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 1, 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"SUIT". The following table sets forth, on a per share basis for the periods
indicated, the high and low sale prices for the Common Stock as reported by
NASDAQ. The prices set forth below for periods prior to November 16, 1995 have
been adjusted to give retroactive effect to the 50% stock dividend paid on that
date.
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HIGH LOW
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FISCAL YEAR ENDED FEBRUARY 3, 1996
First Quarter............................................. $17.09 $12.83
Second Quarter............................................ 23.83 15.50
Third Quarter............................................. 28.83 19.17
Fourth Quarter............................................ 30.25 20.75
FISCAL YEAR ENDED FEBRUARY 1, 1997
First Quarter............................................. $38.50 $25.50
Second Quarter............................................ 37.00 17.00
Third Quarter............................................. 27.00 18.25
Fourth Quarter............................................ 28.50 16.25
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On April 16, 1997, there were approximately 280 record holders and
approximately 3,700 beneficial holders of Common Stock.
The Company has not paid any dividends on its Common Stock and for the
foreseeable future intends to retain all its earnings for the future operation
and expansion of its business. The Company's Credit Agreement prohibits the
payment of cash dividends on the Common Stock. See Note 3 of Notes to
Consolidated Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected statement of earnings and balance sheet information
for the fiscal years indicated has been derived from the Company's audited
consolidated financial statements. The Company's consolidated financial
statements as of February 3, 1996 and February 1, 1997 and for each of the three
years in the period ended February 1, 1997 were audited by Deloitte & Touche LLP
, independent auditors, whose report thereon appears elsewhere herein. The
information set forth below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto of the
Company included elsewhere herein. References herein to years are to the
Company's 52- or 53-week fiscal year, which ends on the Saturday nearest January
31 in the following calendar year. For example, references to "1996" mean the
fiscal year ended February 1, 1997. All fiscal years for which financial
information is included herein had 52 weeks, except for 1995 which had 53 weeks.
<TABLE>
<CAPTION>
YEAR
----------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AND PER SQUARE FOOT DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales................................... $169,977 $240,394 $317,127 $406,343 $483,547
Gross margin................................ 63,976 91,766 121,878 157,615 188,366
Operating income............................ 10,803 15,818 22,375 30,606 38,134
Net earnings................................ 5,870 8,739 12,108 16,508 21,143
Net earnings per share of common stock(1)... $ 0.35 $ 0.48 $ 0.63 $ 0.82 $ 1.00
Weighted average shares outstanding(1)(2)... 16,532 18,138 19,163 20,226 21,193
OPERATING INFORMATION:
Percentage increase in comparable store
sales(3)................................. 6.2% 17.2% 8.4% 6.8% 3.9%
Average square footage -- all stores(4)..... 4,287 4,374 4,426 4,583 4,780
Average sales per square foot of selling
space(5)................................. $ 381 $ 409 $ 419 $ 425 $ 420
Number of stores:
Open at beginning of the period.......... 113 143 183 231 278
Opened during the period................. 31 40 48 48 50
C&R acquired during the period........... -- -- -- -- 17
Closed during the period................. 1 -- -- 1 --
-------- -------- -------- -------- --------
Open at end of the period................ 143 183 231 278 345
Capital expenditures(6)..................... $ 9,345 $ 11,461 $ 23,736 $ 22,538 $ 26,222
</TABLE>
<TABLE>
<CAPTION>
JAN. 30, JAN. 29, JAN. 28, FEB. 3, FEB. 1,
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital............................. $ 28,289 $ 42,689 $ 68,078 $ 88,798 $136,837
Total assets................................ 78,745 112,176 160,494 204,105 295,478
Long-term debt and capital leases(7)........ 8,909 10,790 24,575 4,250 57,500
Shareholders' equity........................ 38,448 57,867 84,944 136,961 159,129
</TABLE>
- ---------------
(1) Adjusted to give effect to a 2.5541-for-one stock split effected on March
23, 1992, a 50% stock dividend effected on August 6, 1993, and a 50% stock
dividend effected on November 15, 1995.
(2) Includes common shares and common share equivalents, in thousands.
(3) Comparable store sales data is calculated by excluding the net sales of a
store for any month of one period if the store was not open throughout the
same month of the prior period.
(4) Average square footage -- all stores is calculated by dividing the total
square footage for all stores (excluding the Company's outlet stores) open
at the end of the period by the number of stores open at the end of such
period. Excluding the 17 C&R stores acquired on January 17, 1997, the
average square footage per store at the end of 1996 was 4,683.
(5) Average sales per square foot of selling space is calculated by dividing
total selling square footage for all stores (excluding the Company's outlet
stores) open the entire year into total sales for those stores. Selling
square footage does not include space for tailoring operations and storage.
(6) Excludes additions to capital lease property.
(7) February 1, 1997 balance represents the 5 1/4% Convertible Subordinated
Notes Due 2003 (see Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources).
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The Men's Wearhouse opened its first store in Houston, Texas in August
1973, growing to 25 stores by the end of 1985 and 345 stores by February 1,
1997. The Company's most significant growth has occurred since 1991. This growth
has resulted in significant increases in net sales and has also contributed to
increased net earnings for the Company.
On average, new Men's Wearhouse stores contribute toward covering corporate
overhead and other indirect costs within three months of opening, depending
primarily upon the month within which the store is opened. See "Item 1.
Business -- Seasonality". In determining store contribution, the Company
considers net sales, cost of sales and other direct store costs, but excludes
buying costs, corporate overhead, depreciation and amortization, financing costs
and advertising. Expansion is generally continued within a market as long as
management believes it will provide profitable incremental sales volume.
The Company presently intends to continue its expansion in existing and new
markets and plans to open approximately 50 new stores in 1997. The Company
anticipates that approximately one-half of these new stores will be in new
markets. The average cost (excluding telecommunications and point-of-sale
equipment and inventory) of opening a new store was approximately $250,000 in
1996 and is expected to be between approximately $240,000 and $250,000 in 1997.
Prior to 1996, the average cost (excluding telecommunications and point-of-sale
equipment and inventory) of opening a new store was approximately $235,000. The
increase in 1996 resulted primarily from an increase in the average square
footage per new store.
In addition to increases in net sales resulting from new stores, the
Company has experienced comparable store sales increases in each of the past
five years, including a 3.9% increase for 1996.
The Company closed only two stores in the five years ended February 1,
1997. One store was closed in 1992 at the end of its lease term due to declining
sales and deteriorating neighborhood conditions. In March 1995, the Company
closed another store due to substandard performance and the opening of a store
at a more attractive alternative location. In general, in determining whether to
close a store, the Company considers such store's historical and projected
performance and the continued desirability of the store's location. Store
performance is continually monitored and, from time to time, as neighborhoods
and shopping areas change, management may determine that it is in the best
interest of the Company to close or relocate a store. In March 1997, the Company
closed one store in Houston, Texas due to its proximity to a new Men's Wearhouse
store opened in this market.
The following table sets forth the Company's results of operations
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of goods sold, including buying and occupancy costs.... 61.6 61.2 61.0
----- ----- -----
Gross margin................................................ 38.4 38.8 39.0
Selling, general and administrative expenses................ 31.4 31.3 31.1
----- ----- -----
Operating income............................................ 7.0 7.5 7.9
Interest expense............................................ .5 .6 .4
----- ----- -----
Earnings before income taxes................................ 6.5 6.9 7.5
Income taxes................................................ 2.7 2.8 3.1
----- ----- -----
Net earnings................................................ 3.8% 4.1% 4.4%
===== ===== =====
</TABLE>
12
<PAGE> 13
RESULTS OF OPERATIONS
1996 Compared to 1995
The following table presents a breakdown of 1995 and 1996 net sales of the
Company by stores open in each of these periods:
<TABLE>
<CAPTION>
NET SALES
----------------------------
STORES 1995 1996 INCREASE
------ ------ ------ --------
(IN MILLIONS)
<S> <C> <C> <C>
50 stores opened in 1996*................................ $ -- $ 36.8 $ 36.8
48 stores opened in 1995................................. 30.8 65.9 35.1
Stores opened before 1995................................ 375.5 380.8 5.3
------ ------ ------
Total.......................................... $406.3 $483.5 $ 77.2
====== ====== ======
</TABLE>
- ---------------
* Sales include $900,000 attributed to the 17 C&R stores acquired on January 17,
1997, with the remaining $35.9 million being attributable to the 50 The Men's
Wearhouse stores opened in 1996.
Net sales in 1996 increased $77.2 million, or 19.0%, compared to 1995
primarily due to the increased number of stores and increased sales at existing
stores. Comparable store sales (which are calculated by excluding the net sales
of a store for any month of one period if the store was not open throughout the
same month of the prior period) increased 3.9% from 1995. The comparable store
sales increase for 1996 does not include sales from the C&R stores. Since the
C&R stores were not acquired until January 17, 1997, these stores will not be
included in the comparable store sales comparison until February 1998.
Gross margin increased by $30.8 million in 1996, and increased as a
percentage of sales from 38.8% in 1995 to 39.0% in 1996. The improvement in
gross margin as a percentage of sales resulted from a decrease in product costs
and alteration costs as a percentage of sales, partially offset by an increase
in occupancy costs as a percentage of sales, principally due to an increase in
the average square footage per store.
Selling, general and administrative expenses increased by $23.2 million
between 1995 and 1996. All the principal components of selling, general and
administrative expenses increased primarily due to the Company's growth. As a
percentage of net sales, selling, general and administrative expenses decreased
from 31.3% to 31.1%. Advertising expense decreased from 6.7% to 6.4% of net
sales and store salaries decreased from 13.0% to 12.4% of net sales, while other
selling, general and administrative expenses increased from 11.5% to 12.3% of
net sales.
Interest expense, net of interest income, decreased from $2.5 million in
1995 to $2.1 million in 1996. Weighted average borrowings outstanding increased
from $31.6 million in 1995 to $54.6 million in 1996, while the weighted average
interest rates on outstanding indebtedness decreased from 8.3% to 6.2%. The
effective interest rate includes commitment fees paid pursuant to the Credit
Agreement (see Liquidity and Capital Resources) under which indebtedness was
outstanding for only a portion of the first quarter of 1996. Interest expense
associated with the 5 1/4% Convertible Subordinated Notes (the "Notes") was
offset by interest income of $1.2 million resulting from the investment of
excess cash from the sale of Notes in short-term securities in 1996 (see
Liquidity and Capital Resources).
The Company's 1996 effective tax rate of 41.3% was relatively unchanged
from the 41.2% effective rate for 1995. This, combined with the factors
discussed above, resulted in 1996 net earnings of $21.1 million, or 4.4% of net
sales, as compared to 1995 net earnings of $16.5 million, or 4.1% of net sales.
13
<PAGE> 14
1995 Compared to 1994
The following table presents a breakdown of 1995 and 1994 net sales of the
Company by stores open in each of these periods.
<TABLE>
<CAPTION>
NET SALES
----------------------------
STORES 1994 1995 INCREASE
------ ------ ------ --------
(IN MILLIONS)
<S> <C> <C> <C>
48 stores opened in 1995................................. $ -- $ 30.8 $30.8
48 stores opened in 1994................................. 28.6 64.8 36.2
Stores opened before 1994................................ 288.5 310.7 22.2
------ ------ -----
Total.......................................... $317.1 $406.3 $89.2
====== ====== =====
</TABLE>
Net sales in 1995 increased $89.2 million, or 28.1%, compared to 1994
primarily due to the increased number of stores and increased sales at existing
stores. Sales also increased as a result of the additional week in 1995, a
53-week year. Comparable store sales (which are calculated by excluding the net
sales of a store for any month of one period if the store was not open
throughout the same month of the prior period) increased 6.8% from 1994.
Comparable store sales increases were experienced in all major markets.
Gross margin increased by $35.7 million in 1995, and increased as a
percentage of sales from 38.4% in 1994 to 38.8% in 1995. The improvement in
gross margin as a percentage of sales resulted from a decrease in product costs
and alteration costs as a percentage of sales, partially offset by an increase
in occupancy costs as a percentage of sales.
Selling, general and administrative expenses increased by $27.5 million
between 1994 and 1995. All the principal components of selling, general and
administrative expenses increased primarily due to the Company's growth. As a
percentage of net sales, selling, general and administrative expenses decreased
from 31.4% to 31.3%. Advertising expense decreased from 7.3% to 6.7% of net
sales and store salaries increased from 12.4% to 13.0% of net sales, while other
selling, general and administrative expenses decreased from 11.7% to 11.5% of
net sales. The decrease in other selling, general and administrative expenses as
a percent of net sales resulted from sales growth exceeding the increase in
other selling, general and administrative costs as such costs are not a direct
function of sales.
Interest expense of $2.5 million in 1995 was relatively unchanged, as a
percent of net sales, from expense of $1.8 million in 1994. Weighted average
borrowings outstanding, including obligations under capital leases, increased
32.3% and weighted average interest rates applicable to those borrowings
increased from 7.4% to 8.3%. Weighted average borrowings increased as a result
of the continuation of the Company's expansion program despite the application
of net proceeds of $34.7 million from the Company's public offering in August
1995 to repay indebtedness. Weighted average interest rates increased as a
result of the increase in variable rates applicable to the Company's bank debt.
The Company's 1995 effective tax rate of 41.2% was relatively unchanged
from the 41.3% effective rate for 1994. This, combined with the factors
discussed above, resulted in 1995 net earnings of $16.5 million, or 4.1% of net
sales, as compared to 1994 net earnings of $12.1 million, or 3.8% of net sales.
LIQUIDITY AND CAPITAL RESOURCES
In April 1992, the Company completed an initial public offering of
3,375,000 shares of Common Stock at $5.78 per share, of which 2,531,250 shares
were sold by the Company for net proceeds of $12.7 million. In April 1993, May
1994 and August 1995 the Company issued an aggregate of 3,958,125 shares of
Common Stock for net proceeds of $59.6 million. The Company used the proceeds
from such offerings to reduce indebtedness under its revolving credit
facilities.
In March 1996, the Company issued $57.5 million of 5 1/4% Convertible
Subordinated Notes due 2003. The Notes are convertible into Common Stock at a
conversion price of $34.125 per share. A portion of the net proceeds from the
Notes was used to repay outstanding indebtedness under the Credit Agreement and
the
14
<PAGE> 15
balance has been invested in new stores, the acquisition of C&R, licenses,
trademarks, short-term interest bearing securities or otherwise used to minimize
borrowings under the Credit Agreement. Interest on the Notes is payable
semi-annually on March 1 and September 1 of each year.
In March 1995, the Company entered into a second amended and restated
Credit Agreement with its bank group that became effective on June 30, 1995. The
Credit Agreement provides for borrowings under two separate revolving facilities
of up to $100 million through June 30, 1998 and may be extended for a maximum of
two years subject to approval of all of the banks. The first facility allows the
Company to borrow up to $75 million and the second facility, which can be
activated and deactivated at the discretion of the Company, allows the Company
to borrow up to $25 million. On June 30, 1998 (subject to extension as discussed
above), the Company may convert all amounts then outstanding under the revolving
facilities to a term loan that is payable in equal quarterly principal
installments (based on a five-year amortization schedule) and matures at the end
of three years (June 30, 2003, assuming extensions). As of February 1, 1997, the
Company had no indebtedness outstanding under the Credit Agreement.
Advances under the Credit Agreement bear interest at a rate per annum equal
to, at the Company's option, (i) the bank's prime rate or (ii) the reserve
adjusted LIBOR rate plus an interest rate margin varying between 1.00% to 1.50%.
The Credit Agreement provides for facility fees applicable to commitments under
each facility of (i) .125% with respect to the first facility and (ii) .1875%
with respect to the second facility during periods in which it is activated or
.0625% with respect to periods in which it is not activated.
The Credit Agreement contains certain restrictive and financial covenants,
including a requirement to maintain a minimum amount of Consolidated Tangible
Net Worth (as defined in the Credit Agreement). The Credit Agreement also
specifies that for 30-day periods that include the last day of each fiscal year
during the revolving period, amounts drawn under the revolving credit facility
cannot exceed $60 million. The Company is also required to maintain certain debt
to equity, cash flow and current ratios and must keep its average store
inventories below certain specified amounts. In addition, the Company is
prohibited, subject to certain exceptions, from incurring additional
indebtedness (including capital leases) or creating liens, making certain
Restricted Payments (as defined in the Credit Agreement), making Investments (as
defined in the Credit Agreement) and paying dividends on the Common Stock, other
than in shares of Common Stock. The Credit Agreement also permits but has
certain limitations regarding the Company's ability to merge or consolidate with
another company, sell or dispose of its property, make acquisitions, issue
options or enter into transactions with affiliates. The Company is in compliance
with the covenants in the Credit Agreement.
The Company is currently in negotiations with its bank group seeking to
amend its Credit Agreement to, among other things, (i) extend the expiration
date, (ii) increase the amount of the revolving facilities and (iii) modify
certain financial covenants and restrictions, particularly those relating to
business acquisitions.
The Company's primary sources of working capital are cash flow from
operations, proceeds from the sale of the Notes discussed above, and borrowings
under the Credit Agreement. The Company had working capital of $68.1 million,
$88.8 million and $136.8 million at the end of 1994, 1995 and 1996,
respectively. Historically, the Company's working capital has been at its lowest
level in January and February, and has increased through November as inventory
buildup is financed with both short-term and long-term borrowings in preparation
for the fourth quarter selling season. In 1994 and 1995, as inventories were
reduced by sales in December and January, working capital was also reduced as
the net proceeds from these sales were used to reduce outstanding long-term
borrowings under the Credit Agreement. In 1996 cash generated by December and
January sales resulted in larger cash balances as no amount was outstanding
under the Credit Agreement after the sale of Notes in March 1996.
Net cash used in operating activities was $4.6 million in 1994. Net cash
provided by operating activities amounted to $9.4 million in 1995 and $19.8 in
1996. These amounts primarily represent net earnings plus depreciation and
amortization and changes in non-current other liabilities, offset by increases
in inventories and other non-cash working capital. The increase in inventories
of $30.3 million in 1994, $28.6 million in 1995 and $27.3 million in 1996
resulted from the addition of inventory for new stores opened and stores
expected to be opened shortly after the year-end, backstocking and the purchase
of fabric used in the direct sourcing of inventory.
15
<PAGE> 16
Capital expenditures amounted to $23.7 million, $22.5 million and $26.2
million in 1994, 1995 and 1996, respectively. These property additions were
principally related to (i) the construction of new stores, including fixtures
and tailoring and other equipment (1994 -- $9.2 million, 1995 -- $10.5 million
and 1996 -- $13.5 million), (ii) the remodeling and equipping of existing
stores, including the addition of tailoring and other equipment (1994 -- $1.6
million, 1995 -- $3.7 million and 1996 -- $3.9 million), (iii) the addition of
leaseholds and equipment for the warehouse and office facilities (1994 -- $2.0
million, 1995 -- $0.5 million and 1996 -- $0.4 million), (iv) the addition of
point-of-sale, telecommunications, and computer equipment (1994 -- $4.4 million,
1995 -- $5.0 million and 1996 -- $5.5 million) and (v) the purchase of land and
buildings (1994 -- $5.7 million, which includes $3.7 million for the acquisition
and expansion of the Houston distribution center, $1.3 million for the
construction of an office, training and redistribution center in Fremont,
California and $0.7 million for the purchase of land for 1995 new store
locations, 1995 -- $2.8 million, which includes $1.9 million for the completion
of the Fremont, California facility and $0.6 million for the construction of new
stores associated with the land purchased in 1994 for such purpose and 1996 --
$2.9 million, which includes $1.9 million for the purchase of land and
construction thereon for 1997 new store locations, $0.7 million for the purchase
of land in Houston for future warehouse and distribution facility expansion, and
$0.3 million for land and building improvements), and (vi) other expenditures of
$0.8 million in 1994. Property additions relating to new stores include stores
in various stages of completion at the end of the fiscal year (three stores at
the end of 1994, two stores at the end of 1995 and eight stores at the end of
1996). In addition, the Company acquired several assets in connection with
various transactions in 1996 for approximately $12.0 million. Such assets
include, but are not limited to, trademarks, tradenames, customer lists,
non-compete agreements and license agreements.
Net cash provided by financing activities amounted to $28.0 million, $14.4
million and $50.0 million in 1994, 1995 and 1996, respectively. Cash provided by
financing activities includes the net proceeds of public offerings of Common
Stock of $14.5 million and $34.7 million in 1994 and 1995, respectively,
proceeds from sale of Notes of $55.5 million in 1996 (net of $2.0 million in
related costs), as well as borrowings under the Company's revolving credit
facilities. Cash used in financing activities is principally comprised of
repayments of amounts outstanding under the Company's revolving credit
facilities.
The Company's primary cash requirements are to finance working capital
increases for its peak selling season and fund capital expenditure requirements
anticipated to be between approximately $22 million and $27 million for 1997.
This amount includes the anticipated costs of opening approximately 50 new
stores in 1997 at an expected average cost per store of between approximately
$240,000 to $250,000 (excluding telecommunications and point-of-sale equipment
and inventory). The balance of the capital expenditures for 1997 will be used
for telecommunications, point-of-sale and other computer equipment, for store
remodeling and expansion, warehousing and distribution and real estate. The
Company anticipates that each of the approximately 50 new stores will require,
on average, an initial inventory costing approximately $500,000 (subject to the
same seasonal patterns affecting inventory at all stores), which will be funded
by the Company's revolving credit facility, trade credit and cash from
operations. The actual amount of future capital expenditures and inventory
purchases will depend in part on the number of new stores opened and the terms
on which new stores are leased. Additionally, the continuing consolidation of
the men's tailored clothing industry and recent financial difficulties of
significant menswear retailers may present the Company with opportunities to
acquire retail chains significantly larger than the Company's past acquisitions.
Any such acquisitions may be undertaken as an alternative to opening new stores.
The Company has recently received, and from time to time in the past has
received, inquiries concerning its interest in possible acquisitions and has
requested information with respect thereto. The Company may use cash on hand,
together with its cash flow from operations and borrowings under the Credit
Agreement, to take advantage of significant acquisition opportunities.
The Company anticipates that its existing cash and cash flow from
operations, supplemented by borrowings under the Credit Agreement, will be
sufficient to fund its planned store openings, other capital expenditures and
operating cash requirements for at least the next 12 months.
In connection with the Company's direct sourcing program, the Company may
enter into purchase commitments that are denominated in a foreign currency. The
Company generally enters into forward
16
<PAGE> 17
exchange contracts to reduce the risk of currency fluctuations related to such
commitments. The majority of the forward exchange contracts are with one
financial institution. Therefore, the Company is exposed to credit risk in the
event of nonperformance by this party. However, due to the creditworthiness of
this major financial institution, full performance is anticipated. The Company
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 being hedged.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share" (SFAS 128), in February 1997. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is permitted.
This statement establishes standards for computing and presenting earnings
per share (EPS) and applies to entities with publicly held common stock or
potential common stock. SFAS 128 simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15 and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to Opinion 15.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
sales, earnings, margins, costs, number and costs of store openings, demand for
men's clothing, market trends in the retail men's clothing business, currency
fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including but not limited to, this Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of the
Company's filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, domestic economic activity
and inflation, the Company's successful execution of internal operating plans
and new store and new market expansion plans, performance issues with key
suppliers, foreign currency fluctuations, government export and import policies
and legal proceedings. Future results will also be dependent upon the ability of
the Company to continue to identify and complete successful expansions and
penetrations into existing and new markets and its ability to integrate such
expansions with the Company's existing operations.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The Men's Wearhouse, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheets of The Men's
Wearhouse, Inc. and its subsidiaries (the "Company") as of February 3, 1996 and
February 1, 1997, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period
ended February 1, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries as of February 3, 1996 and February 1, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended February 1, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 5, 1997
18
<PAGE> 19
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 2,547,000 $ 34,113,000
Inventories............................................... 136,797,000 164,140,000
Other current assets...................................... 5,663,000 10,051,000
------------ ------------
Total current assets................................... 145,007,000 208,304,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land...................................................... 1,861,000 3,231,000
Buildings................................................. 7,645,000 7,978,000
Leasehold improvements.................................... 30,888,000 43,518,000
Furniture, fixtures and equipment......................... 45,998,000 56,324,000
------------ ------------
86,392,000 111,051,000
Less accumulated depreciation and amortization............ (29,247,000) (40,029,000)
------------ ------------
Net property and equipment............................. 57,145,000 71,022,000
------------ ------------
OTHER ASSETS................................................ 1,953,000 16,152,000
------------ ------------
TOTAL............................................. $204,105,000 $295,478,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 33,810,000 $ 38,089,000
Accrued expenses.......................................... 16,507,000 24,742,000
Income taxes payable...................................... 5,276,000 8,194,000
Other current liabilities................................. 616,000 442,000
------------ ------------
Total current liabilities.............................. 56,209,000 71,467,000
LONG-TERM DEBT.............................................. 4,250,000 57,500,000
OTHER LIABILITIES........................................... 6,685,000 7,382,000
------------ ------------
Total liabilities...................................... 67,144,000 136,349,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares
authorized, none issued................................ -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 20,933,230 and 21,012,750 shares issued.... 209,000 210,000
Capital in excess of par.................................. 77,299,000 78,182,000
Retained earnings......................................... 60,173,000 81,316,000
------------ ------------
Total.................................................. 137,681,000 159,708,000
Treasury common stock, 113,418 and 91,294 shares at
cost................................................... (720,000) (579,000)
------------ ------------
Total shareholders' equity............................. 136,961,000 159,129,000
------------ ------------
TOTAL............................................. $204,105,000 $295,478,000
============ ============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 20
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 28, 1995,
FEBRUARY 3, 1996 AND FEBRUARY 1, 1997
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales........................................ $317,127,000 $406,343,000 $483,547,000
Cost of goods sold including buying and occupancy
costs.......................................... 195,249,000 248,728,000 295,181,000
------------ ------------ ------------
Gross margin..................................... 121,878,000 157,615,000 188,366,000
Selling, general and administrative expenses..... 99,503,000 127,009,000 150,232,000
------------ ------------ ------------
Operating income................................. 22,375,000 30,606,000 38,134,000
Interest expense (net of interest income of
$43,000, $93,000 and $1,237,000,
respectively).................................. 1,764,000 2,518,000 2,146,000
------------ ------------ ------------
Earnings before income taxes..................... 20,611,000 28,088,000 35,988,000
Provision for income taxes....................... 8,503,000 11,580,000 14,845,000
------------ ------------ ------------
Net earnings..................................... $ 12,108,000 $ 16,508,000 $ 21,143,000
============ ============ ============
Net earnings per share of common stock........... $ .63 $ .82 $ 1.00
============ ============ ============
Weighted average number of common and common
equivalent shares outstanding.................. 19,163,000 20,226,000 21,193,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 21
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 28, 1995,
FEBRUARY 3, 1996 AND FEBRUARY 1, 1997
<TABLE>
<CAPTION>
CAPITAL
COMMON IN EXCESS RETAINED TREASURY
STOCK OF PAR EARNINGS STOCK TOTAL
-------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE -- January 29, 1994................ $122,000 $27,253,000 $31,557,000 $(1,065,000) $ 57,867,000
Net earnings............................. -- -- 12,108,000 -- 12,108,000
Common stock issued in public offering --
810,000 shares......................... 5,000 14,495,000 -- -- 14,500,000
Common stock issued upon exercise of
stock options -- 56,637 shares......... 1,000 192,000 -- -- 193,000
Common stock withheld to satisfy tax
withholding liabilities of
optionees -- 21,321 shares............. -- (398,000) -- -- (398,000)
Tax benefit recognized upon exercise of
stock options.......................... -- 309,000 -- -- 309,000
Treasury stock issued to profit sharing
plan -- 20,756 shares.................. -- 233,000 -- 132,000 365,000
-------- ----------- ----------- ----------- ------------
BALANCE -- January 28, 1995................ 128,000 42,084,000 43,665,000 (933,000) 84,944,000
Net earnings............................. -- -- 16,508,000 -- 16,508,000
Common stock issued in public offering --
1,725,000 shares....................... 11,000 34,657,000 -- -- 34,668,000
Stock dividend -- 50%.................... 69,000 (69,000) -- -- --
Common stock issued upon exercise of
stock options -- 118,319 shares........ 1,000 456,000 -- -- 457,000
Common stock withheld to satisfy tax
withholding liabilities of
optionees -- 42,356 shares............. -- (692,000) -- -- (692,000)
Tax benefit recognized upon exercise of
stock options.......................... -- 576,000 -- -- 576,000
Treasury stock issued to profit sharing
plan -- 33,708 shares.................. -- 287,000 -- 213,000 500,000
-------- ----------- ----------- ----------- ------------
BALANCE -- February 3, 1996................ 209,000 77,299,000 60,173,000 (720,000) 136,961,000
Net earnings............................. -- -- 21,143,000 -- 21,143,000
Common stock issued upon exercise of
stock options -- 123,058 shares........ 1,000 713,000 -- -- 714,000
Common stock withheld to satisfy tax
withholding liabilities of
optionees -- 43,538 shares............. -- (1,415,000) -- -- (1,415,000)
Tax benefit recognized upon exercise of
stock options.......................... -- 1,101,000 -- -- 1,101,000
Treasury stock issued to profit sharing
plan -- 22,124 shares.................. -- 484,000 -- 141,000 625,000
-------- ----------- ----------- ----------- ------------
BALANCE -- February 1, 1997................ $210,000 $78,182,000 $81,316,000 $ (579,000) $159,129,000
======== =========== =========== =========== ============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 22
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 28, 1995,
FEBRUARY 3, 1996 AND FEBRUARY 1, 1997
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................... $ 12,108,000 $ 16,508,000 $ 21,143,000
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 7,088,000 9,436,000 12,563,000
Deferred tax provision (benefit)............... (300,000) 381,000 (1,093,000)
Increase in inventories........................ (30,268,000) (28,609,000) (27,343,000)
(Increase) decrease in other current assets.... (1,419,000) 425,000 (3,083,000)
Increase in accounts payable and accrued
expenses..................................... 7,616,000 7,836,000 13,138,000
Increase (decrease) in income taxes payable.... (232,000) 2,742,000 4,019,000
Increase in other liabilities.................. 797,000 717,000 455,000
------------ ------------ ------------
Net cash provided by (used in) operating
activities.............................. (4,610,000) 9,436,000 19,799,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................. (23,736,000) (22,538,000) (26,222,000)
Investment in trademarks, tradenames and other
intangibles.................................... -- -- (11,972,000)
------------ ------------ ------------
Net cash used in investing
activities.............................. (23,736,000) (22,538,000) (38,194,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............ 14,693,000 35,125,000 714,000
Bank borrowings................................... 43,750,000 46,820,000 18,750,000
Principal payments on bank debt................... (29,250,000) (66,070,000) (23,000,000)
Net proceeds from debt offering................... -- -- 55,500,000
Principal payments under capital lease
obligations.................................... (826,000) (763,000) (588,000)
Tax payments related to options exercised......... (398,000) (692,000) (1,415,000)
------------ ------------ ------------
Net cash provided by financing
activities.............................. 27,969,000 14,420,000 49,961,000
------------ ------------ ------------
INCREASE (DECREASE) IN CASH......................... (377,000) 1,318,000 31,566,000
CASH:
Beginning of period............................... 1,606,000 1,229,000 2,547,000
------------ ------------ ------------
End of period..................................... $ 1,229,000 $ 2,547,000 $ 34,113,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.......................................... $ 1,570,000 $ 2,788,000 $ 2,145,000
============ ============ ============
Income taxes...................................... $ 9,249,000 $ 8,474,000 $ 11,919,000
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Additional paid in capital resulting from tax
benefit recognized upon exercise of stock
options........................................ $ 309,000 $ 576,000 $ 1,101,000
============ ============ ============
Treasury stock contributed to profit sharing
plan........................................... $ 365,000 $ 500,000 $ 625,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 23
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business -- The Men's Wearhouse, Inc. (the Company) is an
off-price specialty retailer of men's tailored business attire. The Company
follows the standard fiscal year of the retail industry, which is a 52-53 week
period ending on the Saturday closest to January 31. Fiscal year 1994 ended on
January 28, 1995, fiscal year 1995 ended on February 3, 1996, and fiscal year
1996 ended on February 1, 1997; each of these fiscal years included 52 weeks,
except for 1995 which was a 53 week year.
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- For purposes of the statement of cash flows,
the Company considers all highly liquid investments with maturities of three
months or less as cash equivalents.
Inventories -- Inventories are valued at the lower of cost or market, with
cost determined on the retail first-in, first-out (FIFO) method.
Property and Equipment -- Property and equipment are stated at cost. Normal
repairs and maintenance costs are charged to earnings as incurred and additions
and major improvements are capitalized. The cost of assets retired or otherwise
disposed of and the related allowances for depreciation are eliminated from the
accounts in the year of disposal and the resulting gain or loss is credited or
charged to earnings.
The Company provides for depreciation by the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Leasehold improvements...................................... 8 years
Furniture, fixtures and equipment........................... 3-8 years
Buildings................................................... 20-25 years
</TABLE>
New Store Costs -- Promotion and other costs associated with the opening of
new stores are expensed as incurred.
Stock Based Compensation -- As permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123), the Company continues to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, no compensation
expense has been recognized for the Company's employee stock option plans. The
disclosure only provisions of SFAS No. 123 have been included in Note 5 of Notes
to Consolidated Financial Statements.
Derivative Financial Instruments -- The Company enters into foreign
currency forward exchange contracts to hedge against foreign exchange risks
associated with certain firmly committed, and certain other probable, but not
firmly committed inventory purchase transactions that are denominated in a
foreign currency. Gains and losses associated with these contracts are accounted
for as part of the underlying inventory purchase transactions.
Earnings per Share -- Net earnings per share of common stock are based on
the weighted average number of shares of common stock and common stock
equivalents outstanding during each fiscal period. Common stock options are the
only common stock equivalents and have been included in the computation of
23
<PAGE> 24
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
net earnings per share based on the number of shares issuable upon exercise of
the options granted less the number of common shares that are assumed to be
purchased at their estimated fair value.
As discussed in Note 5, in 1994 and 1995, the Company sold shares of common
stock and in 1995 declared a stock split effected as a 50% stock dividend. The
weighted average number of shares outstanding consider the shares sold from the
date of closing of each transaction. All applicable share and per share data in
the consolidated financial statements and related notes give retroactive effect
to the stock split.
2. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Sales, payroll and property tax payable................... $ 3,492,000 $ 4,275,000
Accrued salary, bonus and vacation........................ 6,201,000 7,047,000
Other..................................................... 6,814,000 13,420,000
----------- -----------
Total........................................... $16,507,000 $24,742,000
=========== ===========
</TABLE>
3. LONG-TERM DEBT
The Company entered into a second amended and restated Credit Agreement
with its bank group that became effective on June 30, 1995. The Credit Agreement
provides for borrowings under two separate revolving facilities of up to $100
million through June 30, 1998 and may be extended for a maximum of two years
subject to approval of all of the banks. The first facility allows the Company
to borrow up to $75 million and the second facility, which can be activated and
deactivated at the discretion of the Company, allows the Company to borrow up to
$25 million. On June 30, 1998 (subject to extension as discussed above), the
Company may convert all amounts then outstanding under the revolvers to a term
loan that is payable in equal quarterly principal installments (based on a
five-year amortization schedule) and matures at the end of three years (June 30,
2003, assuming extensions). As of February 1, 1997, there were no borrowings
under the Credit Agreement and letters of credit with an aggregate undrawn
balance of $3.4 million issued on the Company's behalf were outstanding. As of
February 3, 1996, borrowings were $4,250,000 with interest at 8.25%.
Advances under the Credit Agreement bear interest at a rate per annum equal
to, at the Company's option, (i) the bank's prime rate or (ii) the reserve
adjusted LIBOR rate plus an interest rate margin varying between 1.00% to 1.50%.
The Credit Agreement provides for facility fees applicable to commitments under
each facility of (i) .125% with respect to the first facility and (ii) .1875%
with respect to the second facility during periods in which it is activated or
.0625% with respect to periods in which it is not activated. Total commitment
fees related to the Credit Agreement were $86,000 in 1994, $101,000 in 1995 and
$133,000 in 1996.
The Credit Agreement contains certain restrictive and financial covenants,
including a requirement to maintain a minimum amount of Consolidated Tangible
Net Worth (as defined in the Credit Agreement). The Credit Agreement also
specifies that for 30-day periods that include the last day of each fiscal year
during the revolving period, amounts drawn under the revolving credit facility
cannot exceed $60 million. The Company is also required to maintain certain debt
to equity, cash flow and current ratios and must keep its average store
inventories below certain specified amounts. In addition, the Company is
prohibited, subject to certain exceptions, from incurring additional
indebtedness (including capital leases) or creating liens, making certain
Restricted Payments (as defined in the Credit Agreement), making Investments (as
defined in the Credit Agreement) and paying dividends on the Common Stock, other
than in shares of Common Stock. The Credit Agreement also permits but has
certain limitations regarding the Company's ability to merge or consolidate
24
<PAGE> 25
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with another company, sell or dispose of its property, make acquisitions, issue
options or enter into transactions with affiliates. As of February 1, 1997 the
Company was in compliance with the covenants in the Credit Agreement.
In March 1996, the Company sold $57.5 million of 5 1/4% Convertible
Subordinated Notes (the "Notes") due 2003. A portion of the net proceeds from
the Notes was used to repay outstanding indebtedness under the Credit Agreement.
The Notes are convertible at any time through March 1, 2003, unless previously
redeemed into Common Stock at a conversion price of $34.125 per share. Interest
on the Notes is payable semi-annually on March 1 and September 1 of each year.
The Notes are redeemable at the option of the Company, in whole or in part, on
or after March 1, 1998 initially at 103.5% of the face amount and thereafter at
prices declining to 100% at maturity. As of February 1, 1997, the quoted market
price for the Notes was 103 3/4.
4. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Current tax expense:
Federal.................................... $7,346,000 $ 9,266,000 $13,410,000
State...................................... 1,457,000 1,933,000 2,528,000
Deferred tax expense (benefit):
Current.................................... (646,000) (1,007,000) (1,750,000)
Noncurrent................................. 346,000 1,388,000 657,000
---------- ----------- -----------
Total.............................. $8,503,000 $11,580,000 $14,845,000
========== =========== ===========
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. 35% 35% 35%
State income taxes, net of federal benefit.................. 5 4 5
Other....................................................... 1 2 1
-- -- --
41% 41% 41%
== == ==
</TABLE>
25
<PAGE> 26
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At February 3, 1996, the Company had net deferred tax assets of $126,000
with $1,726,000 classified as other current assets and $1,600,000 classified as
other liabilities (noncurrent). At February 1, 1997, the Company had net
deferred tax assets of $1,219,000 with $3,476,000 classified as other current
assets and $2,257,000 classified as other liabilities (noncurrent). No valuation
allowance was required for the deferred tax assets. Total deferred tax assets
and liabilities and the related temporary differences as of February 3, 1996 and
February 1, 1997 were as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accrued rent and other expenses................. $ 1,929,000 $ 3,400,000
Accrued compensation............................ 992,000 683,000
Accrued markdowns............................... 985,000 1,356,000
Other........................................... 475,000 557,000
----------- -----------
4,381,000 5,996,000
----------- -----------
Deferred tax liabilities:
Capitalized inventory costs..................... (1,121,000) (1,225,000)
Property and equipment capitalization........... (2,519,000) (3,103,000)
Different inventory cost method for tax......... (270,000) --
Other........................................... (345,000) (449,000)
----------- -----------
(4,255,000) (4,777,000)
----------- -----------
Net deferred tax assets........................... $ 126,000 $ 1,219,000
=========== ===========
</TABLE>
5. CAPITAL STOCK, STOCK OPTIONS AND BENEFIT PLANS
In April 1994 and August 1995 the Company sold 810,000 shares and 1,725,000
shares of common stock, respectively, with net proceeds to the Company of
$14,500,000 and $34,668,000, respectively. In addition the Board of Directors
took action to cause a 3-for-2 stock split in November 1995 effected in the form
of a 50% stock dividend.
In connection with an employment agreement entered into in January 1991
with an officer, that officer was granted options on February 25, 1991, to
acquire 531,135 shares of common stock of the Company at a price of $2.35 per
share. Among other things, the employment agreement provides that upon the
exercise of any of these options, the Company will pay the officer an amount
which, after the payment of income taxes by the officer on such amount, will
equal the $2.35 per share purchase price for the shares purchased upon exercise
of the options. The Company recognizes compensation expense as the options vest.
The officer exercised 44,262 options in 1994, 73,769 options in 1995 and 73,768
options in 1996. On February 3, 1997 the officer exercised 73,769 options that
vested on January 31, 1997.
In 1992, the Company adopted the 1992 Stock Option Plan (1992 Plan) which,
as amended, provides for the grant of options to purchase up to 714,338 shares
of the Company's common stock to full-time key employees (excluding certain
officers). In 1996, the Company adopted the 1996 Stock Option Plan (1996 Plan),
which provides for the grant of options to purchase up to 750,000 shares of the
Company's common stock to full-time key employees (excluding certain officers)
of the Company. The 1996 Plan will expire at the end of ten years and no option
may be granted pursuant to the 1996 Plan after the expiration date. The Company
also adopted a Non-Employee Director Stock Option Plan (Director Plan) which, as
amended, provides for the grant of options to purchase up to 45,000 shares of
the Company's common stock to non-employee directors of the Company. Options
granted under these plans must be exercised within ten years of the date of
grant. Generally, options granted under the 1992 Plan and the 1996 Plan will
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 and may not be
26
<PAGE> 27
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issued at a price less than 50% of the fair market value of the Company's stock
on the date of grant. However, approximately 68% of the options for the 355,250
shares granted on January 6, 1997 under the 1996 Plan will vest annually in
equal increments over a period from four to ten years. Options granted under the
Director Plan vest one year after the date of grant and will be issued at a
price equal to the fair market value of the Company's stock on the date of
grant.
The following table is a summary of the Company's stock option activity:
<TABLE>
<CAPTION>
SHARES UNDER WEIGHTED AVERAGE OPTIONS
OPTION EXERCISE PRICE EXERCISABLE
------------ ---------------- -----------
<S> <C> <C> <C>
Balance, January 29, 1994................... 646,089 $ 6.85 79,163
======= =======
Granted................................... 107,025 14.93
Exercised................................. (56,637) 3.40
Forfeited................................. (9,637) 8.75
--------
Balance, January 28, 1995................... 686,840 $ 8.35 129,300
======= =======
Granted................................... 133,675 21.85
Exercised................................. (118,319) 3.97
Forfeited................................. (7,650) 13.48
--------
Balance, February 3, 1996................... 694,546 $11.64 318,352
======= =======
Granted................................... 362,000 23.67
Exercised................................. (123,058) 5.24
Forfeited................................. (3,025) 17.79
--------
Balance, February 1, 1997................... 930,463 $17.15 346,288
======== ======= =======
</TABLE>
Grants of stock options outstanding as of February 1, 1997 are summarized
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICES TOTAL LIFE PRICE TOTAL PRICE
- ----------------- ----------- ----------- --------- ----------- ---------
<C> <C> <C> <C> <C> <C>
$ 2.35 to 8.00 219,311 5.2 years $ 5.83 185,561 $ 5.43
8.0001 to 14.83 217,477 7.4 years 14.83 151,227 14.83
14.8334 to 26.63 493,675 9.6 years 23.20 9,500 21.57
------- ------ ------- ------
$ 2.35 to 26.63 930,463 $17.15 346,288 $ 9.98
======= ====== ======= ======
</TABLE>
As of February 1, 1997, 549,354 options were available for grant under
existing plans and 1,479,817 shares of common stock were reserved for future
issuance, of which 750,000 shares pertain to the 1996 Plan.
The difference between the option price and the fair market value of the
Company's common stock on the dates that options for 56,637, 118,319 and 123,058
shares of common stock were exercised during 1994, 1995 and 1996, respectively,
resulted in a tax benefit to the Company of $309,000 in 1994, $576,000 in 1995
and $1,101,000 in 1996, which has been recognized as additional capital in
excess of par. In addition, the Company withheld 21,321 shares, 42,356 shares
and 43,538 shares, respectively, of such common stock for withholding payments
made to satisfy the optionees' income tax liabilities resulting from the
exercises.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's stock option plans
been
27
<PAGE> 28
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's pro forma net earnings and earnings
per share would have been $11,844,000 and $0.62 per share, $16,127,000 and $0.80
per share and $20,586,000 and $0.97 per share for 1994, 1995, and 1996,
respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Dividend yield.............................................. NA NA NA
Expected volatility......................................... 49.83% 49.84% 50.91%
Risk-free interest rate (U.S. Treasury 5 year notes)........ 6.34% 6.37% 6.21%
Expected lives (years)...................................... 5 5 5
</TABLE>
The Company has a profit sharing plan, in the form of an employee stock
plan, which covers all eligible employees, and an employee tax-deferred savings
plan. Contributions to the profit sharing plan are made at the discretion of the
Board of Directors. During 1994, 1995 and 1996, contributions charged to
operations were $500,000, $625,000 and $1,000,000, respectively. The Company
also has an Employee Stock Purchase Plan which allows employees to authorize
after-tax payroll deductions to be used for the purchase of the Company's common
stock in the open market. The Company makes no contributions to this plan but
pays all brokerage, service and other costs incurred.
6. COMMITMENTS AND CONTINGENCIES
The Company leases retail business locations, office and warehouse
facilities, computer equipment and automotive equipment under operating leases
expiring in various years through 2015. Rent expense for fiscal 1994, 1995 and
1996 was $16,840,000, $21,712,000 and $26,905,000, respectively, and includes
contingent rentals of $465,000, $354,000 and $335,000, respectively.
Minimum future rental payments under noncancelable operating leases as of
February 1, 1997 for each of the next five years and in the aggregate are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------------
<S> <C>
1997........................................................ $ 32,611,000
1998........................................................ 30,464,000
1999........................................................ 26,497,000
2000........................................................ 21,963,000
2001........................................................ 19,163,000
Thereafter.................................................. 60,792,000
------------
Total........................................ $191,490,000
============
</TABLE>
Leases on retail business locations specify minimum rentals plus common
area maintenance charges and possible additional rentals based upon percentages
of sales. Most of the retail business location leases provide for renewal
options at rates specified in the leases. In the normal course of business,
these leases are generally renewed or replaced by other leases.
The Company is a defendant in various lawsuits and subject to various
claims and proceedings encountered in the normal conduct of its business. In the
opinion of management, any uninsured losses that might arise from these lawsuits
and proceedings would not have a material adverse effect on the business or
consolidated financial position of the Company.
The Company routinely enters into inventory purchase commitments that are
denominated in a foreign currency. To protect against currency exchange risks
associated with certain firmly committed and certain
28
<PAGE> 29
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other probable, but not firmly committed inventory transactions, the Company
enters into foreign currency forward exchange contracts. At February 1, 1997,
the Company held forward exchange contracts with notional amounts totaling $17.6
million. All such contracts expire within 24 months. Gains and losses associated
with these contracts are accounted for as part of the underlying inventory
purchase transactions. The fair value of the forward exchange contracts is
estimated by comparing the cost (U.S. dollars) of the foreign currency to be
purchased under the contracts using the exchange rates obtained under the
contracts (adjusted for forward points) to the cost using the spot rate at
year-end. At February 1, 1997, the contracts outstanding had a fair value of
$0.3 million in excess of their notional value.
The majority of the forward exchange contracts are with one financial
institution. Therefore, the Company is exposed to credit risk in the event of
nonperformance by this party. However, due to the creditworthiness of this major
financial institution, full performance is anticipated. The Company 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 being hedged.
7. ACQUISITIONS
In November 1996, Value Priced Clothing ("VPC") was organized under the
laws of California as a wholly-owned subsidiary of the Company for the purpose
of acquiring assets of C&R Clothiers, Inc. ("C&R"), a privately-held retailer of
men's tailored clothing operating stores in Southern California. In January,
1997, the Company and VPC entered into an asset purchase agreement with C&R and
other parties for approximately $12 million. Under the agreement, VPC acquired
17 C&R stores in Southern California and C&R's existing inventory and entered
into a lease for C&R's distribution center in Culver City, California. The new
chain will be used to attract the more price-sensitive clothing customer.
Additionally, the Company acquired various trademarks, tradenames and other
intangibles aggregating $12.0 million during 1996.
8. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The Company's consolidated results of operations by quarter for the 1995
and 1996 fiscal years are presented below. These quarterly results of operations
reflect all adjustments, consisting only of normal, recurring adjustments, which
are, in the opinion of management, necessary for a fair statement of the results
for the interim periods presented.
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales......................... $ 81,355,000 $85,714,000 $ 92,864,000 $146,410,000
Gross margin...................... 30,436,000 33,640,000 35,514,000 58,025,000
Net earnings...................... 2,026,000 2,951,000 3,046,000 8,485,000
Net earnings per share of
common stock.................... $ 0.11 $ 0.15 $ 0.15 $ 0.40
</TABLE>
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales......................... $103,697,000 $98,885,000 $110,276,000 $170,689,000
Gross margin...................... 38,962,000 38,962,000 42,505,000 67,937,000
Net earnings...................... 3,109,000 4,009,000 3,744,000 10,281,000
Net earnings per share of
common stock.................... $ 0.15 $ 0.19 $ 0.18 $ 0.49
</TABLE>
29
<PAGE> 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by reference from the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
June 18, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
June 18, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
June 18, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
June 18, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of The Men's Wearhouse,
Inc. and its subsidiaries are included in Part II, Item 8.
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report................................ 18
Consolidated Balance Sheets -- February 3, 1996 and February
1, 1997................................................... 19
Consolidated Statements of Earnings -- Years ended January
28, 1995, February 3, 1996 and February 1, 1997........... 20
Consolidated Statements of Shareholders' Equity -- Years
ended January 28, 1995, February 3, 1996 and February 1,
1997...................................................... 21
Consolidated Statements of Cash Flows -- Years ended January
28, 1995, February 3, 1996 and February 1, 1997........... 22
Notes to Consolidated Financial Statements.................. 23
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
All such schedules are omitted because they are not applicable or because
the required information is included in the Consolidated Financial Statements or
Notes thereto.
30
<PAGE> 31
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Restated Articles of Incorporation (incorporated by
reference from Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter ended July 30, 1994).
3.2 -- By-laws, as amended.
4.1 -- Restated Articles of Incorporation (included as Exhibit
3.1).
4.2 -- By-laws (included as Exhibit 3.2).
4.3 -- Form of Common Stock certificate (incorporated by
reference from Exhibit 4.3 to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-
45949)).
*4.4 -- Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab, including the
First Amendment thereto dated as of September 30, 1991
(incorporated by reference from Exhibit 4.4 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
*4.5 -- Second Amendment effective as of January 1, 1993, to
Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab (incorporated by
reference from Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*4.6 -- Second [sic] Amendment dated as of April 12, 1994, to
Employment Agreement dated as of January 31, 1991
(incorporated by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995).
*4.7 -- Option Issuance Agreement dated as of September 30, 1991,
by and between the Company and David H. Edwab
(incorporated by reference from Exhibit 4.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
*4.8 -- First Amendment to Option Issuance Agreement dated April
22, 1992, but effective as of September 30, 1991
(incorporated by reference from Exhibit 4.7 to the
Registrant's Registration Statement on Form S-8
(Registration No. 33-48109)).
*4.9 -- Second Amendment to Option Issuance Agreement dated
effective as of January 1, 1993 (incorporated by
reference from Exhibit 4.8 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*4.10 -- First [sic] Amendment to Option Issuance Agreement dated
as of April 12, 1994 (incorporated by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1995).
4.11 -- Indenture dated March 1, 1996, between the Company and
Texas Commerce Bank National Association, as trustee
including Form of Note (incorporated by reference from
Exhibit 4.1 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended May 4, 1996).
*10.1 -- Employment Agreement dated as of January 31, 1991,
including the First Amendment thereto dated as of
September 30, 1991 by and between the Company and David
H. Edwab (included as Exhibit 4.4).
*10.2 -- Second Amendment effective as of January 1, 1993, to
Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab (included as
Exhibit 4.5).
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.3 -- Second [sic] Amendment dated as of April 12, 1994, to
Employment Agreement dated as of January 31, 1991
(incorporated by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995).
*10.4 -- Option Issuance Agreement dated as of September 30, 1991,
by and between the Company and David H. Edwab (included
as Exhibit 4.7).
*10.5 -- First Amendment to Option Issuance Agreement dated April
22, 1992, but effective as of September 30, 1991
(included as Exhibit 4.8).
*10.6 -- Second Amendment to Option Issuance Agreement dated
effective as of January 1, 1993 (included as Exhibit
4.9).
*10.7 -- First [sic] Amendment to Option Issuance Agreement dated
as of April 12, 1994 (incorporated by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1995).
*10.8 -- 1992 Stock Option Plan (incorporated by reference from
Exhibit 10.5 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-45949)).
*10.9 -- First Amendment to 1992 Stock Option Plan (incorporated
by reference from Exhibit 10.9 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*10.10 -- Non-Employee Director Stock Option Plan (incorporated by
reference from Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-45949)).
*10.11 -- First Amendment to Non-Employee Director Stock Option
Plan (incorporated by reference from Exhibit 10.16 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
10.12 -- Commercial Lease dated September 1, 1995, by and between
the Company and Zig Zag, A Joint Venture (incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter ended May 4, 1996).
10.13 -- Commercial Lease dated April 5, 1989, by and between the
Company and Preston Road Partnership (incorporated by
reference from Exhibit 10.10 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-45949)).
*10.14 -- Stock Agreement dated as of March 23, 1992, between the
Company and George Zimmer (incorporated by reference from
Exhibit 10.13 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-45949)).
*10.15 -- Split-Dollar Agreement and related Split-Dollar
Collateral Assignment dated November 25, 1994 between the
Company, George Zimmer and David Edwab, Co-Trustee of the
Zimmer 1994 Irrevocable Trust (incorporated by reference
to Exhibit 10.20 to the Company's Annual Report on Form
10-K for the fiscal year ended January 28, 1995).
10.16 -- Second Amended and Restated Credit Agreement dated as of
March 14, 1995, by and among the Company, NationsBank
N.A. of Texas, N.A., as Agent, and NationsBank of Texas,
N.A., Union Bank and Wells Fargo Bank, N.A. (incorporated
by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended January 28,
1995).
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.17 -- First Amendment to Second Amended and Restated Credit
Agreement dated as of August 5, 1996, by and among the
Company, NationsBank N.A. of Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Union Bank and Wells Fargo
Bank, N.A. (incorporated by reference from Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
Quarter ended August 3, 1996).
10.18 -- Second Amendment to Second Amended and Restated Credit
Agreement dated as of November 8, 1996, by and among the
Company, NationsBank N.A. of Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Union Bank and Wells Fargo
Bank, N.A.
*10.19 -- 1996 Stock Option Plan (incorporated by reference from
Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended August 3, 1996).
*10.20 -- Second Amendment to Non-Employee Director Stock Option
Plan (incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the
Quarter ended August 3, 1996).
10.21 -- Indenture dated March 1, 1996, between the Company and
Texas Commerce Bank National Association, as trustee
(included as exhibit 4.12).
11.1 -- Statement of Computation of Net Earnings Per Share.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP , independent auditors.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Management Compensation or Incentive Plan
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Annual Report on Form 10-K certain instruments defining
the rights of holders of long-term debt of the Registrant and its subsidiaries
because the total amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of any such
agreements to the Securities and Exchange Commission upon request.
The Company will furnish a copy of any exhibit described above to any
beneficial holder of its securities upon receipt of a written request therefor,
provided that such request sets forth a good faith representation that, as of
the record date for the Company's 1996 Annual Meeting of Shareholders, such
beneficial holder is entitled to vote at such meeting, and provided further that
such holder pays to the Company a fee compensating the Company for its
reasonable expenses in furnishing such exhibits.
(B) REPORTS ON FORM 8-K.
There were no reports filed by the Company on Form 8-K during the fourth
quarter period ended February 1, 1997.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE MEN'S WEARHOUSE, INC.
By /s/ GEORGE ZIMMER
-----------------------------------
George Zimmer
Chairman of the Board and
Chief Executive Officer
Dated: April 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GEORGE ZIMMER Chairman of the Board, Chief April 29, 1997
- ----------------------------------------------------- Executive Officer and Director
George Zimmer
/s/ DAVID EDWAB President, Treasurer and Director April 29, 1997
- -----------------------------------------------------
David Edwab
/s/ GARY G. CKODRE Vice President -- Finance and April 29, 1997
- ----------------------------------------------------- Principal Financial and Accounting
Gary G. Ckodre Officer
/s/ RICHARD E. GOLDMAN Executive Vice President and April 29, 1997
- ----------------------------------------------------- Director
Richard E. Goldman
/s/ ROBERT E. ZIMMER Senior Vice President -- Real April 29, 1997
- ----------------------------------------------------- Estate and Director
Robert E. Zimmer
/s/ JAMES E. ZIMMER Senior Vice President -- April 29, 1997
- ----------------------------------------------------- Merchandising and Director
James E. Zimmer
/s/ HARRY M. LEVY Senior Vice President -- Planning April 29, 1997
- ----------------------------------------------------- and Systems, Chief Information
Harry M. Levy Officer and Director
/s/ RINALDO BRUTOCO Director April 29, 1997
- -----------------------------------------------------
Rinaldo Brutoco
/s/ MICHAEL L. RAY Director April 29, 1997
- -----------------------------------------------------
Michael L. Ray
/s/ SHELDON I. STEIN Director April 29, 1997
- -----------------------------------------------------
Sheldon I. Stein
</TABLE>
34
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Restated Articles of Incorporation (incorporated by
reference from Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter ended July 30, 1994).
3.2 -- By-laws, as amended.
4.1 -- Restated Articles of Incorporation (included as Exhibit
3.1).
4.2 -- By-laws (included as Exhibit 3.2).
4.3 -- Form of Common Stock certificate (incorporated by
reference from Exhibit 4.3 to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-
45949)).
*4.4 -- Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab, including the
First Amendment thereto dated as of September 30, 1991
(incorporated by reference from Exhibit 4.4 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
*4.5 -- Second Amendment effective as of January 1, 1993, to
Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab (incorporated by
reference from Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*4.6 -- Second [sic] Amendment dated as of April 12, 1994, to
Employment Agreement dated as of January 31, 1991
(incorporated by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995).
*4.7 -- Option Issuance Agreement dated as of September 30, 1991,
by and between the Company and David H. Edwab
(incorporated by reference from Exhibit 4.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
*4.8 -- First Amendment to Option Issuance Agreement dated April
22, 1992, but effective as of September 30, 1991
(incorporated by reference from Exhibit 4.7 to the
Registrant's Registration Statement on Form S-8
(Registration No. 33-48109)).
*4.9 -- Second Amendment to Option Issuance Agreement dated
effective as of January 1, 1993 (incorporated by
reference from Exhibit 4.8 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*4.10 -- First [sic] Amendment to Option Issuance Agreement dated
as of April 12, 1994 (incorporated by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1995).
4.11 -- Indenture dated March 1, 1996, between the Company and
Texas Commerce Bank National Association, as trustee
including Form of Note (incorporated by reference from
Exhibit 4.1 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended May 4, 1996).
*10.1 -- Employment Agreement dated as of January 31, 1991,
including the First Amendment thereto dated as of
September 30, 1991 by and between the Company and David
H. Edwab (included as Exhibit 4.4).
*10.2 -- Second Amendment effective as of January 1, 1993, to
Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab (included as
Exhibit 4.5).
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.3 -- Second [sic] Amendment dated as of April 12, 1994, to
Employment Agreement dated as of January 31, 1991
(incorporated by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995).
*10.4 -- Option Issuance Agreement dated as of September 30, 1991,
by and between the Company and David H. Edwab (included
as Exhibit 4.7).
*10.5 -- First Amendment to Option Issuance Agreement dated April
22, 1992, but effective as of September 30, 1991
(included as Exhibit 4.8).
*10.6 -- Second Amendment to Option Issuance Agreement dated
effective as of January 1, 1993 (included as Exhibit
4.9).
*10.7 -- First [sic] Amendment to Option Issuance Agreement dated
as of April 12, 1994 (incorporated by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1995).
*10.8 -- 1992 Stock Option Plan (incorporated by reference from
Exhibit 10.5 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-45949)).
*10.9 -- First Amendment to 1992 Stock Option Plan (incorporated
by reference from Exhibit 10.9 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
*10.10 -- Non-Employee Director Stock Option Plan (incorporated by
reference from Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-45949)).
*10.11 -- First Amendment to Non-Employee Director Stock Option
Plan (incorporated by reference from Exhibit 10.16 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
10.12 -- Commercial Lease dated September 1, 1995, by and between
the Company and Zig Zag, A Joint Venture (incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter ended May 4, 1996).
10.13 -- Commercial Lease dated April 5, 1989, by and between the
Company and Preston Road Partnership (incorporated by
reference from Exhibit 10.10 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-45949)).
*10.14 -- Stock Agreement dated as of March 23, 1992, between the
Company and George Zimmer (incorporated by reference from
Exhibit 10.13 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-45949)).
*10.15 -- Split-Dollar Agreement and related Split-Dollar
Collateral Assignment dated November 25, 1994 between the
Company, George Zimmer and David Edwab, Co-Trustee of the
Zimmer 1994 Irrevocable Trust (incorporated by reference
to Exhibit 10.20 to the Company's Annual Report on Form
10-K for the fiscal year ended January 28, 1995).
10.16 -- Second Amended and Restated Credit Agreement dated as of
March 14, 1995, by and among the Company, NationsBank
N.A. of Texas, N.A., as Agent, and NationsBank of Texas,
N.A., Union Bank and Wells Fargo Bank, N.A. (incorporated
by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended January 28,
1995).
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.17 -- First Amendment to Second Amended and Restated Credit
Agreement dated as of August 5, 1996, by and among the
Company, NationsBank N.A. of Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Union Bank and Wells Fargo
Bank, N.A. (incorporated by reference from Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
Quarter ended August 3, 1996).
10.18 -- Second Amendment to Second Amended and Restated Credit
Agreement dated as of November 8, 1996, by and among the
Company, NationsBank N.A. of Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Union Bank and Wells Fargo
Bank, N.A.
*10.19 -- 1996 Stock Option Plan (incorporated by reference from
Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended August 3, 1996).
*10.20 -- Second Amendment to Non-Employee Director Stock Option
Plan (incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the
Quarter ended August 3, 1996).
10.21 -- Indenture dated March 1, 1996, between the Company and
Texas Commerce Bank National Association, as trustee
(included as exhibit 4.12).
11.1 -- Statement of Computation of Net Earnings Per Share.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP , independent auditors.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Management Compensation or Incentive Plan
<PAGE> 1
EXHIBIT 3.2
THE MEN'S WEARHOUSE, INC.
- - - - - - -
BYLAWS
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 3, 1997)
ARTICLE I
OFFICES
SECTION 1.01. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the corporation shall be located in Houston, Texas, and the office
of its transfer agent or registrar shall be located in Glendale, California.
SECTION 1.02. OTHER OFFICES. The corporation may also have offices
at such other places both within and without the State of Texas as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.01. TIME AND PLACE OF MEETINGS. Meetings of shareholders
for any purpose may be held at such time and place within or without the State
of Texas as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2.02. ANNUAL MEETING. The annual meeting of shareholders
shall be held annually at such date and time as shall be designated from time
to time by the board of directors and stated in the notice of meeting.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the
shareholders for any purpose or purposes may be called by the chairman of the
board or the president and shall be called by the president or secretary at the
request in writing of a majority of the board of directors, or at the request
in writing of shareholders owning at least ten percent of all the shares
entitled to vote at the meetings. A request for a special meeting shall state
the purpose or purposes of the proposed meeting, and business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice.
SECTION 2.04. NOTICE OF MEETING. Written notice stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which
<PAGE> 2
the meeting is called, shall be delivered not less than ten nor more than sixty
days before the date of the meeting, either personally or by mail, by or at the
direction of the chairman of the board, the president, the secretary, or the
officer or persons calling the meeting, to each shareholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the corporation.
SECTION 2.05. QUORUM. The holders of a majority of the shares
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the articles of incorporation. If, however, a quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
After an adjournment, at any reconvened meeting any business may be transacted
that might have been transacted if the meeting had been held in accordance with
the original notice thereof, provided a quorum shall be present or represented
thereat.
SECTION 2.06. VOTE REQUIRED. With respect to any matter, other
than the election of directors or a matter for which a different vote is
required by law or the articles of incorporation, the affirmative vote of the
holders of a majority of the shares entitled to vote on that matter and
represented in person or by proxy at a meeting of shareholders at which a
quorum is present, shall decide such matter. Unless otherwise required by law
or by the articles of incorporation, directors shall be elected by a plurality
of the votes cast by the holders of shares entitled to vote in the election of
directors at a meeting of shareholders at which a quorum is present.
SECTION 2.07. VOTING; PROXIES. Each outstanding share having
voting power shall be entitled to one vote on each matter submitted to a vote
at a meeting of shareholders. Any shareholder may vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the shareholder
shall be treated as an execution in writing for purposes of this Section 2.07.
SECTION 2.08. ACTION WITHOUT MEETING. Any action required to, or
which may, be taken at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken shall be signed by
the holder or holders of all the shares entitled to vote with respect to the
action that is the subject of the consent.
-2-
<PAGE> 3
ARTICLE III
DIRECTORS
SECTION 3.01. POWERS. The powers of the corporation shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors.
SECTION 3.02. NUMBER, ELECTION AND TERM. The number of directors
that shall constitute the whole board of directors shall be not less than one.
Such number of directors shall from time to time be fixed and determined by
resolution adopted by the directors or the shareholders and shall be set forth
in the notice of any meeting of shareholders held for the purpose of electing
directors. The directors shall be elected at the annual meeting of
shareholders, except as provided in Section 3.03 of these bylaws, and each
director elected shall hold office until his successor shall be elected and
qualify. Directors need not be residents of Texas or shareholders of the
corporation.
SECTION 3.03. VACANCIES. Any vacancy occurring in the board of
directors may be filled by a majority of the remaining directors though less
than a quorum of the board of directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
SECTION 3.04. CHANGE IN NUMBER. The number of directors may be
increased or decreased from time to time as provided in these bylaws but no
decrease shall have the effect of shortening the term of any incumbent
director. Any directorship to be filled by reason of an increase in the number
of directors may be filled by election at an annual or special meeting of
shareholders or may be filled by the board of directors for a term of office
continuing only until the next election of one or more directors by the
shareholders; provided, however, that the board of directors may not fill more
than two such directorships during the period between any two successive annual
meetings of shareholders.
SECTION 3.05. REMOVAL. Any director may be removed for cause at
any special meeting of shareholders duly called and held for such purpose. At
any meeting of shareholders called expressly for the purpose of removing a
director or directors, such director or directors may be removed only for cause
by a vote of a majority of the shares of stock of the corporation then entitled
to vote at an election of directors.
SECTION 3.06. PLACE OF MEETINGS. Meetings of the board of
directors, regular or special, may be held either within or without the State
of Texas.
SECTION 3.07. REGULAR MEETINGS. The first meeting of each newly
elected board of directors shall be held at such time and place as shall be
fixed by the vote of the shareholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event
that the shareholders fail to fix the time and place of such first meeting, it
shall be held without notice immediately following the
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annual meeting of shareholders, and at the same place, unless by the unanimous
consent of the directors then elected and serving such time or place shall be
changed.
SECTION 3.08. NOTICE OF REGULAR MEETINGS. Regular meetings of the
board of directors may be held upon such notice, or without notice, and at such
time and at such place as shall from time to time be determined by the board.
SECTION 3.09. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by the chairman of the board of directors or the
president and shall be called by the secretary on the written request of two
directors. Notice of each special meeting of the board of directors shall be
given to each director at least two days before the date of the meeting.
SECTION 3.10. WAIVER AND REQUIREMENTS OF NOTICE. Attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
except where a director attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Except as may be otherwise provided by law or by the
articles of incorporation or by these bylaws, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 3.11. QUORUM; VOTE REQUIRED. At all meetings of the board
of directors a majority of the directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, unless otherwise specifically provided by law, the articles of
incorporation or these bylaws. If a quorum shall not be present at any meeting
of directors, the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 3.12. COMMITTEES. The board of directors, by resolution
passed by a majority of the full board, may from time to time designate a
member or members of the board to constitute committees that shall in each case
consist of one or more directors and may designate one or more of its members
as alternate members of any committee, who may, subject to any limitations
imposed by the board of directors, replace absent or disqualified members at
any meeting of that committee. Any such committee shall have and may exercise
such powers as the board may determine and specify in the respective
resolutions appointing them. A majority of all the members of any such
committee may determine its action and fix the time and place of its meetings,
unless the board of directors shall otherwise provide. The board of directors
shall have power at any time to change the number, subject as aforesaid, and
members of any such committee, to fill vacancies and to discharge any such
committee.
SECTION 3.13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at a meeting of the board of directors or any committee
may be taken without a meeting if a consent in writing, setting forth the
action so taken, is signed by all the members of the board of directors or
committee, as the case may be.
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SECTION 3.14. COMPENSATION. By resolution of the board of
directors, the directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors, or a meeting of a committee thereof,
and may be paid a fixed sum for attendance at each meeting of the board of
directors, or a meeting of a committee thereof, or a stated salary as director.
No such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
ARTICLE IV
NOTICES
SECTION 4.01. FORM OF NOTICE; DELIVERY. Any notice to directors or
shareholders shall be in writing and shall be delivered personally or mailed to
the directors or shareholders at their respective addresses appearing on the
books of the corporation. Notice by mail shall be deemed to be given at the
time when the same shall be deposited in the United States mail, postage
prepaid. Notice to directors may also be given by telegram, telex, cablegram,
facsimile or other similar transmission.
SECTION 4.02. WAIVER. Whenever any notice is required to be given
under the provisions of the statutes or of the articles of incorporation or of
these bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE V
OFFICERS
SECTION 5.01. OFFICERS. The officers of the corporation shall be
elected by the board of directors and shall consist of a chairman of the board,
a president and a secretary and may consist of a chief operating officer, one
or more vice presidents, a treasurer, an assistant treasurer and an assistant
secretary, who need not be members of the board of directors. Two or more
offices may be held by the same person.
SECTION 5.02. ADDITIONAL OFFICERS. The board of directors may
appoint such other officers and assistant officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall have such
authority and exercise such powers and perform such duties as shall be
determined from time to time by the board by resolution not inconsistent with
these bylaws.
SECTION 5.03. COMPENSATION. The salaries and terms of employment
of the chairman of the board, the president and the chief operating officer, if
any, of the corporation shall be fixed by the board of directors. The board of
directors shall have the power to cause the corporation to enter into contracts
for the employment and compensation of officers for such terms as the board
deems advisable.
SECTION 5.04. TERM; REMOVAL; VACANCIES. The officers of the
corporation shall hold office until their successors are elected or appointed
and qualify, or until their
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death or until their resignation or removal from office. Any officer elected
or appointed by the board of directors may be removed at any time by the board,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment of an officer or agent shall
not of itself create contract rights. Any vacancy occurring in any office of
the corporation by death, resignation, removal or otherwise shall be filled by
the board of directors.
SECTION 5.05. CHIEF EXECUTIVE OFFICER. The chairman of the board
shall be the chief executive officer of the corporation, unless the board of
directors designates the president as the chief executive officer of the
corporation. The chief executive officer shall preside at all meetings of
shareholders, shall have general and active management of the business of the
corporation, and shall see that all resolutions of the board of directors are
carried into effect. The board of directors may change the designation of
chief executive officer at any time, but no such change shall constitute
removal of any person from the office of chairman of the board or president, as
the case may be. If the chairman of the board shall be chief executive
officer, then in the absence or disability of the chairman of the board, the
president shall perform the duties and have the authority of the chief
executive officer. If the president shall have been last designated as chief
executive officer, then in the absence or disability of the president, the
chairman of the board shall perform the duties and have the authority of the
chief executive officer.
SECTION 5.06. CHAIRMAN OF THE BOARD. The chairman of the board, if
one is elected, shall preside at all meetings of the board of directors and
shall have such other powers and duties as may from time to time be prescribed
by the board of directors, upon written directions given to him pursuant to
resolutions duly adopted by the board of directors. The chairman of the board
shall be the chief executive officer of the corporation, except as set forth in
Section 5.05 of these bylaws
SECTION 5.07. VICE CHAIRMAN OF THE BOARD. The vice chairman of the
board, if one is elected, shall, in the absence or disability of the chairman
of the board, perform the duties and have the authority and exercise the powers
of the chairman of the board. He shall perform such other duties and have such
other authority and powers as the board of directors may from time to time
prescribe or as the chairman of the board may from time to time delegate.
SECTION 5.08. PRESIDENT. The president shall have general
supervision over strategic planning and implementation, administration and the
accounting and finance operations of the corporation, and shall see that all
resolutions of the board of directors are carried into effect. The president
shall be the principal executive officer of the corporation for purposes of all
filings by the corporation with the Securities and Exchange Commission. Unless
the board of directors shall have designated a particular vice president of the
corporation as principal financial officer, the president shall also be the
principal financial officer of the corporation for purposes of all filings by
the corporation with the Securities and Exchange Commission. The president
shall have such other duties as may be determined from time to time by
resolution of the board of directors not inconsistent with these bylaws. If
the president shall have been last designated as chief executive officer, he
also shall have the authority and perform the
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duties appertaining to that designation, as specified in Section 5.05 of these
bylaws. The president, in the absence or incapacity of the chief operating
officer, shall also perform the duties of that office.
SECTION 5.08A. CHIEF OPERATING OFFICER. The chief operating officer
of the corporation, if one is elected, shall report to the chief executive
officer and the president of the corporation and shall have general supervision
of the day-to-day operation of retail activities of the corporation and shall
perform such duties, and shall have such other authority and powers, as the
president, the chief executive officer or the board of directors may from time
to time prescribe. The chief operating officer, with the approval of either
the chief executive officer or the president, shall have authority to execute
instruments, documents, agreements and contracts, in the name of the
corporation, to the same extent as the president or any vice president of the
corporation.
SECTION 5.09. VICE PRESIDENTS. The vice presidents in the order of
their seniority, unless otherwise determined by the board of directors, shall,
in the absence or disability of the president, perform the duties and have the
authority and exercise the powers of the president. They shall perform such
other duties and have such other authority and powers as the board of directors
may from time to time prescribe or as the chairman of the board or the
president may from time to time delegate. The board of directors may, at the
time of election of any vice president of the corporation, designate such vice
president a "senior vice president" or "executive vice president" of the
corporation or designate such vice president by reference to a principal
business function, such as "finance" or "administration".
SECTION 5.10. SECRETARY. The secretary shall attend all meetings
of the board of directors and all meetings of shareholders and record all of
the proceedings of the meetings of the board of directors and of the
shareholders in a minute book to be kept for that purpose and shall perform
like duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the shareholders and special meetings of
the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation and, when
authorized by the board of directors, shall affix the same to any instrument
requiring it and, when so affixed, it shall be attested by his signature or by
the signature of an assistant secretary or of the treasurer. The secretary
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe or as the chairman of the board or
the president may from time to time delegate.
SECTION 5.11. ASSISTANT SECRETARIES. The assistant secretaries in
the order of their seniority, unless otherwise determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary. They shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe or as the chairman of the board or the president may from time
to time delegate.
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SECTION 5.12. TREASURER. The treasurer, if one is elected, shall
have custody of the corporate funds and securities and shall keep full and
accurate accounts and records of receipts, disbursements and other transactions
in books belonging to the corporation, and shall deposit all moneys and other
valuable effects in the name and to the credit of the corporation in such
depositories as may be designated from time to time by the board of directors.
The treasurer shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and
shall render the president and the board of directors, at its regular meetings,
or when the president or board of directors so requires, an account of all his
transactions as treasurer and of the financial condition of the corporation.
The treasurer shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe or as the chairman of the
board or the president may from time to time delegate. If required by the
board of directors, the treasurer shall give the corporation a bond of such
type, character and amount as the board of directors may require.
SECTION 5.13. ASSISTANT TREASURERS. The assistant treasurers in
the order of their seniority, unless otherwise determined by the board of
directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe or the chairman of the board or the president may from time to
time delegate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
SECTION 6.01. CERTIFICATES. The shares of the corporation shall be
represented by certificates signed by the president or a vice president and the
secretary or an assistant secretary of the corporation, and may be sealed with
the seal of the corporation or a facsimile thereof.
SECTION 6.02. FACSIMILE SIGNATURES. The signatures of the
president or a vice president and the secretary or an assistant secretary upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the corporation or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
SECTION 6.03. LOST CERTIFICATES. The board of directors may direct
a new certificate to be issued in place of any certificate theretofore issued
by the corporation alleged to have been lost or destroyed. When authorizing
such issue of a new certificate, the board of directors, in its discretion and
as a condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient and may require such indemnities as it deems
adequate to protect the corporation from any
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claim that may be made against it with respect to any such certificate alleged
to have been lost or destroyed.
SECTION 6.04. TRANSFERS. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto and the old certificate canceled and the transaction recorded upon the
transfer records of the corporation.
SECTION 6.05. FIXING RECORD DATES. For the purpose of determining
shareholders (i) entitled to notice of or to vote at any meeting of
shareholders, or, after an adjournment thereof, at any reconvened meeting, (ii)
entitled to receive a distribution (other than a distribution involving a
purchase or redemption by the corporation of any of its own shares) or a share
dividend or (iii) for any other proper purpose (other than determining
shareholders entitled to consent to action by shareholders proposed to be taken
without a meeting of shareholders), the board of directors may fix in advance a
date as the record date for any such determination of shareholders, such date
in any case to be not more than sixty days and, in the case of a meeting of
shareholders, not less than ten days, prior to the date on which the particular
action requiring such determination of shareholders, is to be taken. If no
record date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders entitled to receive
a distribution (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend, the date on
which notice of the meeting is mailed or the date on which the resolution of
the board of directors declaring such distribution or share dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section 6.05, such
determination shall apply to any adjournment thereof. The stock transfer books
shall not be closed for the foregoing or any other purpose.
SECTION 6.06. FIXING RECORD DATES FOR CONSENTS TO ACTION. Unless a
record date shall have previously been fixed or determined, whenever action by
shareholders is proposed to be taken by consent in writing without a meeting of
shareholders, the board of directors may fix a record date for the purpose of
determining shareholders entitled to consent to that action which record date
shall not precede, and shall not be more than ten days after, the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors and
prior action of the board of directors is not required by law, the record date
for determining shareholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written consent setting forth
the action taken proposed to be taken is delivered to the corporation in the
manner required by Section 2.08 of these bylaws. If no record date shall have
been fixed by the board of directors and prior action of the board of directors
is required by law, the record date for determining shareholders entitled to
consent to action in writing without a meeting shall be at the close of
business on the date on which the board of directors adopts a resolution taking
such prior action.
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SECTION 6.07. REGISTERED SHAREHOLDERS. Except as otherwise
required by law, the corporation shall be entitled to regard the person in
whose name any shares are registered in the share transfer records at any
particular time as the owner of those shares at that time for purposes of
voting those shares, receiving distributions, share dividends or notices in
respect thereof, transferring those shares, exercising rights of dissent with
respect to those shares, exercising or waiving any preemptive right with
respect to those shares, entering into agreements with respect to those shares
or giving proxies with respect to those shares. Except as otherwise required
by law, neither the corporation nor any of its officers, directors, employees
or agents shall be liable for regarding that person as the owner of those
shares at that time for those purposes, regardless of whether that person does
not possess a certificate for those shares.
SECTION 6.08. LIST OF SHAREHOLDERS. The officer or agent having
charge of the transfer books for shares shall make, at least ten days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of each
and the number of shares held by each, which list, for a period of ten days
prior to such meeting, shall be kept on file at the registered office or
principal place of business of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting. The original share ledger or transfer book, or a duplicate
thereof, shall be prima facie evidence as to who are the shareholders entitled
to examine such list or share ledger or transfer book or to vote at any meeting
of the shareholders.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. DISTRIBUTIONS AND SHARE DIVIDENDS. Subject to the
provisions of the articles of incorporation relating thereto, if any,
distributions and share dividends may be declared by the board of directors, in
its discretion, at any regular or special meeting, pursuant to law. Subject to
any provisions of the articles of incorporation, distributions may be made by
the transfer of money or other property (except the corporation's own shares or
rights to acquire such shares) or by the issuance of indebtedness of the
corporation, and share dividends may be paid in the corporation's own
authorized but unissued shares or in treasury shares.
SECTION 7.02. RESERVE FUNDS. Before payment of any distribution or
share dividend, there may be set aside out of any funds of the corporation
available for distributions or share dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund for meeting contingencies, or for equalizing distributions or
share dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive
to the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
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SECTION 7.03. CHECKS. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
SECTION 7.04. FISCAL YEAR. The fiscal year of the corporation
shall end on the last Saturday nearest to January 31 of each year.
SECTION 7.05. SEAL. The corporate seal shall be in such form as
may be prescribed by the board of directors. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
SECTION 7.06. BOOKS AND RECORDS. The corporation shall keep books
and records of account and shall keep minutes of the proceedings of its
shareholders, its board of directors and each committee of its board of
directors. The corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of the original issuance of shares issued by the corporation and a
record of each transfer of those shares that have been presented to the
corporation for registration of transfer. Such records shall contain the names
and addresses of all past and current shareholders of the corporation and the
number and class of shares issued by the corporation shares held by each of
them. Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 7.07. INVALID PROVISIONS. If any provision of these bylaws
is held to be illegal, invalid, or unenforceable under present or future laws,
such provision shall be fully severable; these bylaws shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision there shall be added
automatically as a part of these bylaws a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
SECTION 7.08. HEADINGS. The headings used in these bylaws are for
reference purposes only and do not affect in any way the meaning or
interpretation of these bylaws.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1 of the Texas Business Corporation Act (the "Article")
permits the corporation to indemnify its present and former directors and
officers to the extent and under the circumstances set forth therein. In
addition, in some instances, indemnification is required by the Article. The
corporation hereby elects to and does hereby indemnify all such persons to the
fullest extent permitted or required by the Article promptly upon request of
any such person making a request for indemnity
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hereunder. Such obligation to so indemnify and to so make such determinations
may be specifically enforced by resort to any court of competent jurisdiction.
Further, the corporation shall pay or reimburse the reasonable expenses of such
persons covered hereby in advance of the final disposition of any proceeding to
the fullest extent permitted by the Article and subject to the conditions
thereof.
A person's right to request, or entitlement to claim, indemnification,
payment or reimbursement pursuant to this Article VIII shall not be deemed
exclusive of any other right to request, or entitlement to claim,
indemnification, payment or reimbursement pursuant to any contract of insurance
or any other law, contract, arrangement or understanding.
ARTICLE IX
AMENDMENTS
These bylaws may be altered, amended, or repealed or new bylaws may be
adopted by the affirmative vote of a majority of the whole board of directors
at any regular or special meeting; provided, that these bylaws may not be
altered, amended, or repealed so as to be inconsistent with law or any
provision of the articles of incorporation.
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EXHIBIT 10.18
SECOND AMENDMENT
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of November 8, 1996 ("Amendment"), by and among THE MEN'S
WEARHOUSE, INC., a Texas corporation ("Borrower"), the banks listed on the
signature pages hereof (each individually a "Bank" and collectively the
"Banks"), and NATIONSBANK OF TEXAS, N.A. (in its individual capacity,
"NationsBank") as Agent (in its capacity as Agent, the "Agent") for the Banks
to the Second Amended and Restated Credit Agreement, dated as of March 14, 1995
(as amended, "Second Restated Credit Agreement"), by and among the Borrower,
the Bank and the Agent. Terms used herein and not otherwise defined shall have
the meanings assigned to them in the Second Restated Credit Agreement;
WHEREAS, the Borrower, the Banks and the Agent are parties to
the Second Restated Credit Agreement;
WHEREAS, the Borrower proposes to form a new Subsidiary, Value
Priced Clothing, Inc., a corporation to be incorporated under the laws of the
State of California ("NewCo"), to be directly and wholly-owned by the Borrower;
WHEREAS, the Borrower proposes to make an initial loan of
$9,000,000 to NewCo (the "Loan") and make an initial $8,500,000 capital
contribution to NewCo (the "Investment");
WHEREAS, it is proposed that NewCo shall use the proceeds of
the Loan and the Investment to purchase certain assets of C&R Clothiers, Inc.
(the "Acquisition") as well as make other Investments; and
WHEREAS, the Borrower, the Banks and the Agent desire to amend
certain provisions of the Second Restated Credit Agreement in connection with
the Acquisition;
NOW, THEREFORE, in consideration of the premises and
consideration of the mutual promises set forth herein and other good valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. Section 8.02 of the Second Restated Credit Agreement
is hereby amended to include the following new Subsection:
(i) Unsecured Debt of Value Priced Clothing, Inc.
to the Borrower, provided that the terms and
provisions thereof shall be subject to
Section 8.08.
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2. Section 8.05 of the Second Restated Credit Agreement
is hereby amended to include the following new Subsection:
(i) capital contributions, loans and advances
from the Borrower to Value Priced Clothing,
Inc. (provided that the terms and provisions
of any such loans and advances shall be
subject to Section 8.08).
3. This Amendment shall become effective as of the date
hereof subject to the condition precedent that the Agent shall have received
the following in sufficient copies for each Bank:
(a) this Amendment, duly executed by the parties
hereto;
(b) a Guaranty in the form required by Section
7.07, dated as of the date hereof, duly executed by NewCo;
(c) a Certificate of the Secretary of NewCo,
dated as of the date hereof certifying (1) the names and true
signatures of the officers of NewCo authorized to sign each Loan
Document to which NewCo is a party and the notices and other documents
to be delivered by NewCo pursuant to any such Loan Document; (2) the
By-laws and Articles of Incorporation of NewCo as in effect on the
date of such certification; and (3) the resolutions of the Board of
Directors of NewCo approving and authorizing the execution, delivery
and performance by NewCo of each Loan Document to which NewCo is a
party, the notices and other documents to be delivered by NewCo
pursuant to any such Loan Document, and the transactions contemplated
thereunder; and
(d) Certificates of appropriate officials as to
the existence and good standing of NewCo in its jurisdiction of
incorporation and any and all other jurisdictions which require NewCo
to be qualified therein and where the failure to be so qualified would
have a Material Adverse Effect.
4. In order to induce the Agent and each Bank to enter
into this Amendment, the Borrower represents and warrants that as of the date
hereof, and after giving effect to the Acquisition and the terms and conditions
hereof:
(a) the representations and warranties contained
in Article IV of the Second Restated Credit Agreement are, and shall
be, true and correct at and as of such dates; and
2
<PAGE> 3
(b) no Default or Event of Default exists, or
will exist, at and as of such dates.
5. The Second Restated Credit Agreement as amended
hereby is hereby ratified and confirmed in all respects. Any reference to the
Second Restated Credit Agreement in any Loan Document shall be deemed to be a
reference to the Second Restated Credit Agreement as amended hereby. The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
the Agent or any Bank under the Second Restated Credit Agreement or any other
Loan Document nor constitute a waiver of any provision of the Second Restated
Credit Agreement or any other Loan Document.
6. This Amendment is a Loan Document, and all provisions
in the Second Restated Credit Agreement pertaining to Loan Documents apply
hereto.
7. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but
one and the same agreement.
8. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas and any applicable laws of the
United States of America in all respects, including construction, validity and
performance.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first above written.
THE MEN'S WEARHOUSE, INC.
By: /s/ GARY G. CKODRE
----------------------------------
Name: Gary G. Ckodre
Title: Vice President
NATIONSBANK OF TEXAS, N.A.,
Agent
By: /s/ RICHARD L. NICHOLS, JR.
----------------------------------
Name: Richard L. Nichols, Jr.
Title: Vice President
3
<PAGE> 4
NATIONS BANK OF TEXAS, N.A.,
in its individual capacity
By: /s/ RICHARD L. NICHOLS, JR.
----------------------------------
Name: Richard L. Nichols, Jr.
Title: Vice President
UNION BANK
By: /s/ RUSSELL A. COLOMBO
----------------------------------
Name: Russell A. Colombo
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ VALERIE B. CARLSON
----------------------------------
Name: Valerie B. Carlson
Title: Vice President
The undersigned Guarantors of indebtedness of the Borrower under the
Second Restated Credit Agreement hereby acknowledge the execution and delivery
of this Third Amendment to Second Amended and Restated Credit Agreement.
TMW TEXAS RETAIL L.P.
By: TMW Texas General, Inc.,
its general partner
By: /s/ GARY G. CKODRE
----------------------------------
Name: Gary G. Ckodre
Title: Assistant Treasurer
4
<PAGE> 5
TMW TEXAS LIMITED, INC.
By: /s/ GARY G. CKODRE
----------------------------------
Name: Gary G. Ckodre
Title: Assistant Treasurer
TMW TEXAS GENERAL, INC.
By: /s/ GARY G. CKODRE
----------------------------------
Name: Gary G. Ckodre
Title: Assistant Treasurer
5
<PAGE> 1
EXHIBIT 11.1
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF NET EARNINGS PER SHARE
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Shares outstanding - beginning of period 18,119,000 18,985,000 20,820,000
Shares issued during period - weighted average:
Public offerings 645,000 821,000 -
Options exercised 30,000 61,000 65,000
Contribution to Employee Stock Plan 16,000 28,000 18,000
Common stock equivalents - weighted average:
Shares issuable upon exercise of stock
options granted (treasury stock method) 353,000 331,000 290,000
----------- ----------- -----------
Weighted average number of common and common
equivalent shares 19,163,000 20,226,000 21,193,000
=========== =========== ===========
Net earnings applicable to common stock $12,108,000 $16,508,000 $21,143,000
=========== =========== ===========
Primary and fully diluted earnings per share $ .63 $ .82 $ 1.00
=========== =========== ===========
</TABLE>
Note: The number of shares shown above have been retroactively adjusted to
reflect the effect of the 50% stock dividend effected on November 15,
1995.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
OF
THE MEN'S WEARHOUSE, INC.
TMW Texas Retail L.P.
TMW Texas Limited, Inc.
TMW Texas General, Inc.
Value Priced Clothing, Inc.
Value Priced Clothing II, Inc.
Value Priced Liquidators, Inc.
The Men's Wearhouse Nevada, Inc.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 333-01564 on Form S-3, Registration Statement No. 33-48108, Registration
Statement No. 33-48109, Post-Effective Amendment No. 1 to Registration Statement
No. 33-48110, Post-Effective Amendment No. 1 to Registration Statement No.
33-48111, Registration Statement No. 33-61792, Registration Statement No.
333-21109, Registration Statement No. 333-21121 and Registration Statement No.
33-74692 of The Men's Wearhouse, Inc. on Form S-8 of our report dated March 5,
1997 appearing in this Annual Report on Form 10-K of The Men's Wearhouse, Inc.
for the year ended February 1, 1997.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
May 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 34,113
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 164,140
<CURRENT-ASSETS> 208,304
<PP&E> 111,051
<DEPRECIATION> 40,029
<TOTAL-ASSETS> 295,478
<CURRENT-LIABILITIES> 71,467
<BONDS> 57,500
0
0
<COMMON> 210
<OTHER-SE> 158,919
<TOTAL-LIABILITY-AND-EQUITY> 295,478
<SALES> 483,547
<TOTAL-REVENUES> 483,547
<CGS> 295,181
<TOTAL-COSTS> 295,181
<OTHER-EXPENSES> 150,232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,146
<INCOME-PRETAX> 35,988
<INCOME-TAX> 14,845
<INCOME-CONTINUING> 21,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,143
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
