<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2000 or
-------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------
Commission file number 1-16097
THE MEN'S WEARHOUSE, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 74-1790172
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081-1701
(Address of Principal Executive Offices) (Zip Code)
(713) 592-7200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
The number of shares of common stock of the Registrant, par value $.01 per
share, outstanding at December 8, 2000 was 41,853,519. In addition, there were
256,855 Exchangeable Shares outstanding at December 8, 2000.
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<PAGE> 2
REPORT INDEX
<TABLE>
<CAPTION>
PART AND ITEM NO. PAGE NO.
----------------- --------
<S> <C>
PART I - Financial Information
Item 1 - Financial Statements
General Information...................................................................... 1
Consolidated Balance Sheets as of October 30, 1999 (unaudited), October 28, 2000 2
(unaudited) and January 29, 2000.......................................................
Consolidated Statements of Earnings for the Three and Nine Months Ended October 30,
1999 (unaudited) and October 28, 2000 (unaudited)...................................... 3
Consolidated Statements of Cash Flows for the Nine Months Ended October 30, 1999
(unaudited) and October 28, 2000 (unaudited)........................................... 4
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................................... 6
Item 3 - Qualitative and Quantitative Disclosures about Market Risk...................... 10
PART II - Other Information
Item 6 - Exhibits and Reports on Form 8-K................................................ 11
</TABLE>
<PAGE> 3
PART I, FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GENERAL INFORMATION
The consolidated financial statements herein include the accounts of
The Men's Wearhouse, Inc. and its subsidiaries (the "Company") and have been
prepared without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). As applicable under such regulations,
certain information and footnote disclosures have been condensed or omitted. The
Company believes that the presentation and disclosures herein are adequate to
make the information not misleading, and the financial statements reflect all
elimination entries and normal adjustments which are necessary for a fair
statement of the results for the three and nine months ended October 30, 1999
and October 28, 2000.
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements for
the year ended January 29, 2000 and the related notes thereto included in the
Company's 1999 Annual Report on Form 10-K filed with the SEC.
1
<PAGE> 4
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 30, OCTOBER 28, JANUARY 29,
ASSETS 1999 2000 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash.......................................................... $ 14,779 $ 21,194 $ 77,798
Inventories................................................... 368,087 403,023 319,940
Other current assets.......................................... 23,520 24,336 25,727
--------------- --------------- ---------------
Total current assets....................................... 406,386 448,553 423,465
--------------- --------------- ---------------
PROPERTY AND EQUIPMENT, NET..................................... 129,910 170,896 138,426
OTHER ASSETS, Net............................................... 48,804 50,564 49,304
--------------- --------------- ---------------
TOTAL................................................. $ 585,100 $ 670,013 $ 611,195
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................. $ 95,967 $ 106,304 $ 76,420
Accrued expenses.............................................. 39,560 40,189 53,301
Current portion of long-term debt............................. 2,549 2,454 2,594
Income taxes payable.......................................... 1,417 13,328 10,899
--------------- --------------- ---------------
Total current liabilities.................................. 139,493 162,275 143,214
LONG-TERM DEBT.................................................. 57,272 42,347 46,697
OTHER LIABILITIES............................................... 9,200 12,678 12,311
--------------- --------------- ---------------
Total liabilities.......................................... 205,965 217,300 202,222
--------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock............................................... -- -- --
Common stock.................................................. 397 418 409
Capital in excess of par...................................... 183,480 186,224 182,662
Retained earnings............................................. 196,708 273,592 227,191
Accumulated comprehensive (loss) income....................... (102) (894) 59
---------------- ---------------- ---------------
Total...................................................... 380,483 459,340 410,321
Treasury stock, at cost....................................... (1,348) (6,627) (1,348)
---------------- ---------------- ----------------
Total shareholders' equity................................. 379,135 452,713 408,973
--------------- --------------- ---------------
TOTAL................................................. $ 585,100 $ 670,013 $ 611,195
=============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 5
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------- ----------------------------
OCTOBER 30, OCTOBER 28, OCTOBER 30, OCTOBER 28,
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ................................................... $ 272,836 $ 304,198 $ 788,268 $ 886,579
Cost of goods sold, including buying and occupancy costs .... 173,243 189,018 503,945 556,434
------------ ------------ ------------ ------------
Gross margin ................................................ 99,593 115,180 284,323 330,145
Selling, general and administrative expenses ................ 76,755 86,210 220,065 252,122
Combination expenses:
Transaction costs ........................................ -- -- 7,707 --
Duplicate facility costs ................................. -- -- 6,070 --
Merger related litigation costs .......................... -- -- 930 --
------------ ------------ ------------ ------------
Operating income ............................................ 22,838 28,970 49,551 78,023
Interest expense, net ....................................... 919 711 2,178 946
------------ ------------ ------------ ------------
Earnings before income taxes ................................ 21,919 28,259 47,373 77,077
Provision for income taxes .................................. 8,947 11,251 21,899 30,676
------------ ------------ ------------ ------------
Earnings before extraordinary item .......................... 12,972 17,008 25,474 46,401
Extraordinary item, net of tax .............................. -- -- 2,912 --
------------ ------------ ------------ ------------
Net earnings ................................................ $ 12,972 $ 17,008 $ 22,562 $ 46,401
============ ============ ============ ============
Net earnings per basic share:
Earnings before extraordinary item ........................ $ 0.31 $ 0.41 $ 0.61 $ 1.11
Extraordinary item, net of tax ............................ -- -- (0.07) --
------------ ------------ ------------ ------------
$ 0.31 $ 0.41 $ 0.54 $ 1.11
============ ============ ============ ============
Net earnings per diluted share:
Earnings before extraordinary item ........................ $ 0.31 $ 0.40 $ 0.60 $ 1.10
Extraordinary item, net of tax ............................ -- -- (0.07) --
------------ ------------ ------------ ------------
$ 0.31 $ 0.40 $ 0.53 $ 1.10
============ ============ ============ ============
Weighted average shares outstanding:
Basic ..................................................... 41,848 41,768 41,841 41,744
============ ============ ============ ============
Diluted ................................................... 42,277 42,614 42,441 42,365
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------
OCTOBER 30, OCTOBER 28,
1999 2000
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ..................................................... $ 22,562 $ 46,401
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Extraordinary item, net of tax ................................ 2,912 --
Depreciation and amortization ................................. 21,985 24,919
Deferred tax provision (benefit) .............................. -- (978)
Stock option compensation expense ............................. 889 --
Duplicate facility cost ....................................... 3,417 --
Increase in inventories ....................................... (64,496) (85,332)
Increase in other assets ...................................... (1,685) (957)
Increase in accounts payable and accrued expenses ............. 30,199 20,272
Increase (decrease) in income taxes payable ................... (6,225) 3,155
Increase (decrease) in other liabilities ...................... (768) 391
------------ ------------
Net cash provided by operating activities ................ 8,790 7,871
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net ........................................ (28,918) (55,814)
Investment in trademarks, tradenames and other assets ............ (356) (1,805)
Maturities of short-term securities .............................. 8,525 --
Purchase of short-term securities ................................ (2,500) --
Purchase of minority interests ................................... (2,135) --
------------ ------------
Net cash used in investing activities .................... (25,384) (57,619)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and other equity
instruments....................................................... 1,671 3,634
Bank borrowings .................................................. 65,046 --
Principal payments on long-term debt ............................. (64,179) (1,904)
Deferred financing and merger costs .............................. (623) --
Tax payments related to options exercised ........................ (304) (575)
Purchase of treasury stock ....................................... (1,273) (7,871)
------------ ------------
Net cash provided by (used in) financing activities ...... 338 (6,716)
------------ ------------
Effect of exchange rate changes on cash ............................ 23 (140)
------------ ------------
DECREASE IN CASH ................................................... (16,233) (56,604)
CASH:
Beginning of period .............................................. 31,012 77,798
------------ ------------
End of period .................................................... $ 14,779 $ 21,194
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 7
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES--
The consolidated financial statements include the accounts of The Men's
Wearhouse, Inc. and its subsidiaries (the "Company"). There have been no
significant changes in the accounting policies of the Company during the periods
presented. For a description of these policies, see Note 1 of Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended January 29, 2000.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." SAB
101 summarizes certain of the SEC's views in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101,
as amended, is effective beginning in the fourth quarter of 2000. Management
currently believes that this new accounting pronouncement should not have any
material effect on the Company's consolidated financial statements.
2. EARNINGS PER SHARE--
Basic earnings per share ("EPS") is computed using the weighted average
number of common shares outstanding during the period and net earnings. Diluted
EPS gives effect to the potential dilution which would have occurred if
additional shares were issued for stock options exercised under the treasury
stock method.
3. COMPREHENSIVE INCOME AND SUPPLEMENTAL CASH FLOWS--
The Company's comprehensive income, which encompasses net earnings and
currency translation adjustments, is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------- ---------------------------
OCTOBER 30, OCTOBER 28, OCTOBER 30, OCTOBER 28,
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings $ 12,972 $ 17,008 $ 22,562 $ 46,401
Currency translation adjustments, net of tax 91 (660) 131 (953)
------------ ------------ ------------ ------------
Comprehensive income $ 13,063 $ 16,348 $ 22,693 $ 45,448
============ ============ ============ ============
</TABLE>
The Company paid cash during the first three quarters of 1999 of $3.3
million for interest and $29.8 million for taxes, compared with $2.5 million for
interest and $29.2 million for taxes during the first three quarters of 2000.
The Company had non-cash investing and financing activities resulting from the
issuance of treasury stock to the employee stock ownership plan of $2.0 million
and $2.5 million in the first three quarters of 1999 and 2000, respectively, and
from the tax benefit recognized upon exercise of stock options of $0.3 million
and $0.6 million, respectively.
5
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
For supplemental information, it is suggested that "Management's
Discussion and Analysis of Financial Condition and Results of Operations" be
read in conjunction with the corresponding section included in the Company's
Annual Report on Form 10-K for the year ended January 29, 2000. References
herein to years are to the Company's 52-week or 53-week fiscal year which ends
on the Saturday nearest January 31 in the following calendar year. For example,
references to "2000" mean the 53-week fiscal year ending February 3, 2001.
In large part, changes in net sales and operating results are impacted
by the number of stores operating during the fiscal period. The following table
presents information with respect to stores in operation during each of the
respective fiscal periods.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED YEAR ENDED
------------------------------- ------------------------------ ----------------
OCTOBER 30, OCTOBER 28, OCTOBER 30, OCTOBER 28, JANUARY 29,
1999 2000 1999 2000 2000
-------------- -------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Stores open at beginning of period 589 623 579 614 579
Opened 13 16 36 28 54
Closed -- -- (13) (3) (19)
---- ---- ---- ---- -----
Stores open at end of period 602 639 602 639 614
==== ==== ==== ==== =====
Stores open at end of period:
U.S. --
Men's Wearhouse 437 464 437 464 450
K&G/SuitMax/Suit Warehouse 52 62 52 62 51
---- ---- ---- ---- -----
489 526 489 526 501
Canada-- Moores 113 113 113 113 113
---- ---- ---- ---- -----
602 639 602 639 614
==== ==== ==== ==== =====
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended October 30, 1999 and October 28, 2000
The Company's net sales were $304.2 million for the quarter ended October
28, 2000, a $31.4 million or 11.5% increase over the same prior year period.
This increase was due primarily to sales resulting from the increased number of
stores and increased sales at existing stores. Sales from U.S. stores
represented 89.4% of total sales in the third quarter of 2000, compared with
88.4% of total sales in the third quarter of 1999. Comparable store sales (which
are calculated primarily by excluding the net sales of a store for any month of
one period if the store was not open throughout the same month of the prior
period) increased 5.0% for the U.S. stores from the same prior year quarter,
while comparable store sales for the Canadian stores increased 1.9% from the
same prior year quarter.
Gross margin increased 15.7% over the same prior year quarter to $115.2
million in the third quarter of 2000. As a percentage of sales, gross margin
increased from 36.5% in the third quarter of 1999 to 37.9% in the third quarter
of 2000. This increase in gross margin predominantly resulted from a decrease in
product costs as a percentage of sales.
Selling, general and administrative ("SG&A") expenses increased as a
percentage of sales from 28.1% for the quarter ended October 30, 1999 to 28.3%
for the quarter ended October 28, 2000, and SG&A expenditures increased by $9.5
million to $86.2 million. On an absolute dollar basis, the principal components
of SG&A expenses increased primarily due to the Company's growth. Advertising
expense decreased from 6.0% to 5.0% of net sales, while store salaries increased
from 11.0% to 11.4% of net sales and other SG&A expenses increased from 11.1% to
12.0% of net sales.
6
<PAGE> 9
Interest expense, net of interest income, decreased from $.9 million in the
third quarter of 1999 to $.7 million in the third quarter of 2000. Weighted
average borrowings outstanding decreased from $64.7 million in the prior year to
$48.6 million in the third quarter of 2000, and the weighted average interest
rate on outstanding indebtedness increased from 6.2% to 8.0%. The decrease in
the weighted average borrowings was due primarily to reduced borrowings under
the Company's credit facilities. The increase in the weighted average interest
rate was due primarily to increases in the LIBOR rate.
The Company's effective income tax rate decreased from 40.8% for the third
quarter of 1999 to 39.8% for the third quarter of 2000. The effective tax rate
was higher than the statutory U.S. federal rate of 35% primarily due to the
effect of state income taxes, the nondeductibility of a portion of meal and
entertainment expenses and, in 1999, nondeductible transaction costs.
Nine Months Ended October 30, 1999 and October 28, 2000
The Company's net sales were $886.6 million for the nine months ended
October 28, 2000, a $98.3 million or 12.5% increase over the same prior year
period. This increase was due primarily to sales resulting from the increased
number of stores and increased sales at existing stores. Sales from U.S. stores
represented 89.0% of total sales in the first three quarters of 2000, compared
with 88.6% of total sales in the same period of 1999. Comparable store sales
increased 5.5% for the U.S. stores from the same prior year period, while
comparable store sales for the Canadian stores increased 7.2% from the same
prior year period.
Gross margin increased 16.1% over the same prior year period to $330.1
million for the first nine months of 2000. As a percentage of sales, gross
margin increased from 36.1% for the first three quarters of 1999 to 37.2% in the
first three quarters of 2000. This increase in gross margin predominantly
resulted from a decrease in product costs as a percentage of sales.
Selling, general and administrative ("SG&A") expenses increased as a
percentage of sales from 27.9% for the first nine months of 1999 to 28.4% for
the first nine months of 2000, and SG&A expenditures increased by $32.1 million
to $252.1 million. On an absolute dollar basis, the principal components of SG&A
expenses increased primarily due to the Company's growth. Advertising expense
decreased from 5.9% to 5.3% of net sales, while store salaries increased from
10.9% to 11.3% of net sales and other SG&A expenses increased from 11.2% to
11.9% of net sales.
As a result of the Moores and K&G combinations, the Company recorded
transaction costs of $7.7 million, duplicative stores closing costs of $6.1
million and litigation costs of $0.9 million in the first nine months of 1999.
The transaction costs were composed primarily of investment banking fees,
professional fees and contract termination payments, while the duplicative store
closing costs consisted primarily of lease termination payments and the
write-off of fixed assets associated with the closing of duplicate store sites
in existing markets. The litigation charge resulted from the settlement of a
lawsuit filed by a former K&G employee related to his employment relationship
with K&G. In addition, the Company recorded an extraordinary charge of $2.9
million, net of a $1.4 million tax benefit, related to the write-off of deferred
financing costs and prepayment penalties for the refinancing of approximately
US$57 million of Moores' indebtedness.
Interest expense, net of interest income, decreased from $2.2 million for
the first nine months of 1999 to $0.9 million in the first nine months of 2000.
Weighted average borrowings outstanding decreased from $63.9 million in the
prior year to $51.3 million in the first nine months of 2000, and the weighted
average interest rate on outstanding indebtedness increased from 6.5% to 7.3%.
The decrease in the weighted average borrowings was due primarily to reduced
borrowings under the Company's credit facilities. The increase in the weighted
average interest rate was due primarily to increases in the LIBOR rate.
The Company's effective income tax rate decreased from 46.2% for the nine
months ended October 30, 1999 to 39.8% for the nine months ended October 28,
2000. The effective tax rate was higher than the statutory U.S. federal rate of
35% primarily due to the effect of state income taxes, the nondeductibility of a
portion of meal and entertainment expenses and, in 1999, nondeductible
transaction costs.
7
<PAGE> 10
The Company's earnings before extraordinary item, as reported and excluding
the effect of non-recurring charges, were as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------
OCTOBER 30, OCTOBER 28,
1999 2000
----------- -----------
<S> <C> <C>
Earnings before extraordinary item, as reported $ 25,474 $ 46,401
Transaction costs, net of tax benefit of $633 7,074 --
Duplicative store closing costs, net of tax benefit of $2,471 3,599 --
Litigation costs, net of tax benefit of $372 558 --
----------- -----------
Earnings before extraordinary item and non-recurring charges $ 36,705 $ 46,401
=========== ===========
Diluted earnings per share before extraordinary
item, as reported $ 0.60 $ 1.10
=========== ===========
Diluted earnings per share before extraordinary
item and non-recurring charges $ 0.86 $ 1.10
=========== ===========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7.9 million in the first nine
months of 2000 compared with $8.8 million in the first nine months of 1999.
These amounts primarily represent net earnings before extraordinary items plus
depreciation, amortization and other non-cash charges, and increases in accounts
payable and accrued expenses, offset by increases in inventories. Inventories
increased $85.3 million and $64.5 million for the three quarters ended October
28, 2000 and October 30, 1999, respectively, due to seasonal inventory buildup
and the addition of inventory for new stores and stores expected to be opened in
the following quarter.
Working capital was $286.3 million at October 28, 2000, which is up from
$280.3 million at January 29, 2000 and $266.9 million at October 30, 1999.
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 long-term borrowings in preparation for the fourth quarter selling
season.
Cash used in investing activities was $57.6 million and $25.4 million
for the first three quarters of 2000 and 1999, respectively. Cash used in
investing activities was primarily comprised of capital expenditures relating
primarily to stores opened, remodeled or relocated during the period or under
construction at the end of the period and infrastructure technology investments.
The Company has a revolving credit agreement with a group of banks (the
"Credit Agreement") that provides for borrowing of up to $125 million through
February 5, 2004. Advances under the Credit Agreement bear interest at a rate
per annum equal to, at the Company's option, the agent's prime rate or the
reserve adjusted LIBOR rate plus an interest rate margin varying between .75% to
1.25%. The Credit Agreement provides for fees applicable to unused commitments
of .125% to .225%. In addition, the Company entered into two Canadian credit
facilities in conjunction with the combination with Moores. These facilities
include a revolving credit agreement which provides for borrowings up to Can$30
million (US$20 million) through February 5, 2004 and a term credit agreement
under which the Company borrowed Can$75 million (US$50 million) in February
1999. The term credit borrowing is payable in quarterly installments of Can$0.9
million (US$0.6 million) beginning in May 1999, with the remaining unpaid
principal payable on February 5, 2004. Covenants and interest rates are
substantially similar to those contained in the Company's Credit Agreement.
Borrowings outstanding under these agreements were used to repay approximately
US$57 million in outstanding indebtedness of Moores and to fund operating and
other requirements of Moores. As of October 28, 2000, there was $44.8 million
outstanding under these credit agreements.
8
<PAGE> 11
The Credit Agreement contains certain restrictive and financial covenants,
including the requirement to maintain a minimum level of net worth and certain
financial ratios. The Credit Agreement also prohibits payment of cash dividends
on the common stock of the Company. The Company is in compliance with the
covenants in the Credit Agreement.
In the fourth quarter of 1999, the Board of Directors authorized a stock
repurchase program for up to 1,000,000 shares of the Company's common stock.
Under this authorization, the Company may purchase shares from time to time in
the open market, depending on market price and other considerations. During the
first three quarters of 2000, the Company purchased 335,000 shares of its common
stock at a cost of $7.9 million. In addition, on July 25, 2000, the Company
issued an option contract that gave the contract counterparty the option to
require the Company to purchase 250,000 shares of its common stock at a
specified strike price per share on October 25, 2000. The Company received a
premium of $0.4 million for issuing the contract. The option expired unexercised
on October 25, 2000.
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
(primarily the Euro). The Company generally enters into forward exchange
contracts to reduce the risk of currency fluctuations related to such
commitments. The majority of the forward exchange contracts are with six
financial institutions. Therefore, the Company is exposed to credit risk in the
event of nonperformance by these parties. However, due to the creditworthiness
of these major financial institutions, full performance is anticipated. 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.
9
<PAGE> 12
ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to exposure from fluctuations in U.S. dollar/Euro
exchange rates. The Company utilizes foreign currency forward exchange contracts
to limit exposure to changes in currency exchange rates (see "Management's
Discussion and Analysis of Financial Information and Results of Operations -
Liquidity and Capital Resources"). At October 28, 2000 the Company had 23
contracts maturing in varying increments to purchase an aggregate notional
amount of $20.3 million in foreign currency. These forward contracts do not
extend beyond February 2002. Unrealized pretax losses on these forward contracts
totaled approximately $3.3 million at October 28, 2000.
Moores conducts its business in Canadian dollars. The exchange rate between
Canadian dollars and U.S. dollars has fluctuated over the last ten years. If the
value of the Canadian dollar against the U.S. dollar weakens, then the revenues
and earnings of the Company's Canadian operations will be reduced when they are
translated to U.S. dollars and the value of the Company's Canadian net assets in
U.S. dollars may decline.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
capital expenditures, acquisitions (including the amount and nature thereof),
future sales, earnings, margins, costs, number and costs of store openings,
demand for clothing, market trends in the retail clothing business, currency
fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including but not limited to, the Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other section included
herein of the Company's filings with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on a
variety of factors including, but not limited to, domestic and international
economic activity and inflation, the Company's successful execution of internal
operating plans and new store and new market expansion plans, performance issues
with key suppliers, severe weather, foreign currency fluctuations, government
export and import policies and legal proceedings. Future results will also be
dependent upon the ability of the Company to continue to identify and complete
successful expansions and penetrations into existing and new markets and its
ability to integrate such expansions with the Company's existing operations.
10
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<S> <C>
10.1 -- The Men's Wearhouse, Inc. Employee Stock Discount Plan, as amended and restated
effective as of January 1, 2001 (filed herewith).
27.1 -- Financial Data Schedule (filed herewith).
</TABLE>
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, The Men's Wearhouse, Inc., has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: December 12, 2000 THE MEN'S WEARHOUSE, INC.
By /s/ NEILL P. DAVIS
-------------------------------------------------
Neill P. Davis
Senior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)
11
