UNITED STATES SECURITIES AND EXCHANGE COMMISSION
(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT | |
OF 1934 |
For the fiscal year endedJanuary 29, 2005 or
For the fiscal year ended January 28, 2006 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE | |
ACT OF 1934 | ||
For the transition period from to |
For the transition period fromto
Texas | 74-1790172 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) | |
5803 Glenmont Drive Houston, Texas | 77081-1701 (Zip Code) | |
(Address of Principal Executive Offices) |
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $.01 per share | New York Stock Exchange |
None
Document | Incorporated as to | |
Notice and Proxy Statement for the Annual Meeting of Shareholders scheduled to be held June | Part III: Items 10,11,12, 13 and 14 |
ITEM 1. BUSINESS
Item 1. | Business |
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• | opening additional Men’s Wearhouse, K&G and Moores stores in new and existing markets, | |
• | testing opportunities to market complementary products and services, | |
• | expanding our corporate apparel and uniform program, and | |
• | identifying strategic acquisition opportunities, including but not limited to international opportunities. |
As of January 29, 2005,28, 2006, we wereare operating 26 retail dry cleaning and laundry facilities.
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been opened.
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long-term relationships with our customers. At the Men’s Wearhouse, all customers who register for our “Perfect Fit” loyalty program are eligible to participate and earn points for purchases. At Moores, the loyalty program points are earned only on purchases made with the Moores private label credit card. Prior to September 2004, the loyalty program points at Men’s Wearhouse were also limited to purchases made with the Men’s Wearhouse private label credit card.
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sourcing program represented approximately 27%30%, 30% and 30%32%, respectively, of total inventory purchases for stores operating in the U.S. We expect that purchases through the direct sourcing program will represent approximately 32%35% of total U.S. purchases in 2005.2006. During 2002, 2003, 2004 and 2004,2005, our manufacturing operations at Golden Brand provided 43%34%, 34%32% and 32%23%, respectively, of inventory purchases for Moores stores and 8%9%, 10% and 9% during 2003, 2004 and 10% during 2002, 2003 and 2004,2005, respectively, of inventory purchases for Men’s Wearhouse stores.
We believe that our direct sourcing of product, with both owned and third party labels, has been and will continue to be a significant factor in our ability to improve our gross product margins.
Montreal.
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We believe that the unit demand for men’s tailored clothing has generally declined over the past decade.
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Employees
Item 1A. | Risk Factors |
• | obtain suitable store locations, | |
• | hire personnel, | |
• | establish distribution methods, and | |
• | advertise our brand names and our distinguishing characteristics to consumers who may not be familiar with them. |
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• | news announcements regarding quarterly or annual results of operations, | |
• | comparable store sales announcements, | |
• | acquisitions, | |
• | competitive developments, | |
• | litigation affecting the Company, or | |
• | market views as to the prospects of the retail industry generally. |
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Item 1B. | Unresolved Staff Comments |
ITEM 2. PROPERTIES
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Item 2. | Properties |
Men’s | ||||||||||||
United States | Wearhouse | K&G | Moores | |||||||||
California | 85 | |||||||||||
Texas | 42 | 12 | ||||||||||
Florida | 37 | 2 | ||||||||||
New York | 27 | 3 | ||||||||||
Pennsylvania | 23 | 3 | ||||||||||
Illinois | 22 | 5 | ||||||||||
Michigan | 20 | 6 | ||||||||||
Ohio | 19 | 5 | ||||||||||
Georgia | 17 | 6 | ||||||||||
Virginia | 17 | 2 | ||||||||||
Washington | 15 | 2 | ||||||||||
Massachusetts | 14 | 3 | ||||||||||
Maryland | 14 | 4 | ||||||||||
Colorado | 12 | 2 | ||||||||||
North Carolina | 12 | 2 | ||||||||||
New Jersey | 12 | 7 | ||||||||||
Arizona | 11 | |||||||||||
Missouri | 11 | 1 | ||||||||||
Minnesota | 9 | 2 | ||||||||||
Tennessee | 9 | 1 | ||||||||||
Wisconsin | 9 | 1 | ||||||||||
Connecticut | 8 | 2 | ||||||||||
Oregon | 8 | |||||||||||
Indiana | 7 | 1 | ||||||||||
Louisiana | 6 | 1 | ||||||||||
Alabama | 5 | 1 | ||||||||||
Utah | 5 | |||||||||||
Nevada | 5 | |||||||||||
New Mexico | 4 | |||||||||||
Kentucky | 4 | 1 | ||||||||||
Kansas | 3 | 1 | ||||||||||
Nebraska | 3 | |||||||||||
New Hampshire | 3 | |||||||||||
Oklahoma | 3 | |||||||||||
South Carolina | 3 | |||||||||||
Arkansas | 2 | |||||||||||
Delaware | 2 | |||||||||||
Iowa | 2 | |||||||||||
Idaho | 1 | |||||||||||
Maine | 1 | |||||||||||
Mississippi | 1 | |||||||||||
Rhode Island | 1 | |||||||||||
South Dakota | 1 | |||||||||||
West Virginia | 1 | |||||||||||
District of Columbia | 1 | |||||||||||
Canada | ||||||||||||
Ontario | 50 | |||||||||||
Quebec | 23 | |||||||||||
British Columbia | 14 | |||||||||||
Alberta | 12 | |||||||||||
Manitoba | 5 | |||||||||||
New Brunswick | 3 | |||||||||||
Nova Scotia | 3 | |||||||||||
Saskatchewan | 2 | |||||||||||
Newfoundland | 1 | |||||||||||
Prince Edward Island | 1 | |||||||||||
Total | 517 | 76 | 114 | |||||||||
Men’s | ||||||||||||
Wearhouse | K&G | Moores | ||||||||||
United States | ||||||||||||
California | 85 | |||||||||||
Texas | 45 | 10 | ||||||||||
Florida | 37 | 2 | ||||||||||
New York | 27 | 4 | ||||||||||
Illinois | 22 | 6 | ||||||||||
Pennsylvania | 22 | 3 | ||||||||||
Michigan | 20 | 5 | ||||||||||
Ohio | 19 | 4 | ||||||||||
Georgia | 17 | 6 | ||||||||||
Virginia | 17 | 2 | ||||||||||
Massachusetts | 15 | 4 | ||||||||||
Washington | 15 | 2 | ||||||||||
Maryland | 14 | 5 | ||||||||||
New Jersey | 13 | 6 | ||||||||||
Arizona | 12 | |||||||||||
Colorado | 12 | 2 | ||||||||||
North Carolina | 12 | 3 | ||||||||||
Missouri | 11 | 1 | ||||||||||
Minnesota | 9 | 2 | ||||||||||
Tennessee | 9 | 2 | ||||||||||
Wisconsin | 9 | 1 | ||||||||||
Connecticut | 8 | 2 | ||||||||||
Oregon | 8 | |||||||||||
Indiana | 7 | 1 | ||||||||||
Louisiana | 7 | 1 | ||||||||||
Utah | 6 | |||||||||||
Alabama | 5 | 1 | ||||||||||
Nevada | 5 | |||||||||||
Kentucky | 4 | 1 | ||||||||||
New Mexico | 4 | |||||||||||
Oklahoma | 4 | |||||||||||
Arkansas | 3 | |||||||||||
Kansas | 3 | 1 | ||||||||||
Nebraska | 3 | |||||||||||
New Hampshire | 3 | |||||||||||
South Carolina | 3 | |||||||||||
Delaware | 2 | |||||||||||
Iowa | 2 | |||||||||||
Idaho | 1 | |||||||||||
Maine | 1 | |||||||||||
Mississippi | 1 | |||||||||||
Rhode Island | 1 | |||||||||||
South Dakota | 1 | |||||||||||
West Virginia | 1 | |||||||||||
District of Columbia | 1 | |||||||||||
Canada | ||||||||||||
Ontario | 50 | |||||||||||
Quebec | 24 | |||||||||||
British Columbia | 15 | |||||||||||
Alberta | 12 | |||||||||||
Manitoba | 5 | |||||||||||
New Brunswick | 3 | |||||||||||
Nova Scotia | 3 | |||||||||||
Saskatchewan | 2 | |||||||||||
Newfoundland | 1 | |||||||||||
Prince Edward Island | 1 | |||||||||||
Total | 526 | 77 | 116 | |||||||||
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Each store is also staffed with an operations manager or other tuxedo rental specialist to facilitate the tuxedo rental process and enhance the customer’s experience in our store.
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locations.
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technology and merchandising personnel, 23,000 square feet is used as a distribution center for store fixtures and supplies and the remaining 42,000 square feet is used as a store.
The lease for the 94,700 square foot warehouse and distribution center in Montreal will expire in early 2005. Moores will not renew this lease. Instead, in 2004, Moores also purchased vacant land from the City of Montreal and constructed a 79,000 square foot facility on this land to function as its new warehouse and distribution center in Montreal, Quebec. This facility is comprised of 75,400 square feet of warehouse and distribution center operations and 3,600 square feet of office space. The newly constructed facility began operations in January 2005.
ITEM 3. LEGAL PROCEEDINGS
On April 18, 2003, a lawsuit was filed against the Company in the Superior Court of California for the County of Orange, Case No. 03CC00132 (the “Orange County Suit”). The Orange County Suit was brought as a purported class action and alleges several causes of action, each based on the factual allegation that in the State of California the Company misclassified its managers and assistant managers as exempt from the application of certain California labor statutes. Because of this alleged misclassification, the Orange County Suit alleges that the Company failed to pay overtime compensation and provide the required rest periods to such employees. The Orange County Suit seeks, among other things, declaratory and injunctive relief along with an accounting as to alleged wages, premium pay, penalties, interest and restitution allegedly due the class defendants. We believe that the Orange County Suit will be resolved in 2005; however, no assurance can be given that the anticipated resolution will be realized. We do not believe the ultimate resolution of the Orange County Suit will have a material adverse effect on our financial position, results of operations or cash flows.
On April 1, 2004, a lawsuit was filed against the Company in the Superior Court of California for the County of Los Angeles, Case No. BC313038 (the “PII Suit”). The PII Suit, which was brought as a purported class action, alleges two causes of action, each based on the factual allegation that the Company requests or requires, in conjunction with a customer’s use of his or her credit card, the customer to provide personal identification information which is recorded upon the credit card transaction form. The PII Suit seeks: (i) civil penalties pursuant to the California Civil Code; (ii) an order enjoining the Company from requesting or requiring that a customer provide personal identification information which is then recorded on the transaction form; (iii) permanent and preliminary injunctions against the Company requesting or requiring that a customer provide personal identification information which is then recorded on the transaction form; (iv) restitution of all funds allegedly acquired by means of any act or practice declared by the Court to be unlawful or fraudulent or to constitute a violation of the California Business and Professions Code; (v) attorney’s fees; and (vi) costs of suit. The Court has not yet decided whether the action may proceed as a class action. The Court has determined that the claim for restitution may not proceed. We have reached a tentative settlement; however, no assurance can be given that the Court will approve the settlement or that the anticipated resolution will be realized. We do not believe the ultimate resolution of the PII Suit will have a material adverse effect on our financial position, results of operations or cash flows.
In addition, weMoores leases a 230,000 square foot facility in Montreal, Quebec, comprised of approximately 13,000 square feet of office space, 37,600 square feet of warehouse space and 179,400 square feet of manufacturing space. Moores also leases 2,000 square feet of additional office space in Vancouver, British Columbia.
Item 3. | Legal Proceedings |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 4. | Submission of Matters to a Vote of Security Holders |
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ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDERMATTERS
Item 5. | Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
High | Low | |||||||
Fiscal Year 2003 | ||||||||
First quarter ended May 3, 2003 | $ | 17.05 | $ | 11.76 | ||||
Second quarter ended August 2, 2003 | 26.00 | 15.80 | ||||||
Third quarter ended November 1, 2003 | 30.90 | 23.95 | ||||||
Fourth quarter ended January 31, 2004 | 31.25 | 21.41 | ||||||
Fiscal Year 2004 | ||||||||
First quarter ended May 1, 2004 | $ | 28.14 | $ | 22.83 | ||||
Second quarter ended July 31, 2004 | 27.25 | 22.90 | ||||||
Third quarter ended October 30, 2004 | 31.94 | 24.88 | ||||||
Fourth quarter ended January 29, 2005 | 34.51 | 30.15 |
High Low $ 18.76 $ 15.22 18.17 15.27 21.29 16.59 23.01 20.10 $ 29.37 $ 21.67 37.44 27.33 Third quarter ended October 29, 2005 36.91 22.75 Fourth quarter ended January 28, 2006 34.85 23.67
(1) | The sales prices have been adjusted to reflect athree-for-two stock split effected as a 50% stock dividend on June 13, 2005. |
We have not paid
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ITEM 6. SELECTED FINANCIAL DATA
Item 6. | Selected Financial Data |
2000 (5) | 2001 (5) | 2002 (5) | 2003 (5) | 2004 | ||||||||||||||||
(as restated- | (as restated- | (as restated- | (as restated- | |||||||||||||||||
note 13) | note 13) | note 13) | note 13) | |||||||||||||||||
(Dollars and shares in thousands, except | ||||||||||||||||||||
per share and per square foot data) | ||||||||||||||||||||
Statement of Earnings Data: | ||||||||||||||||||||
Net sales | $ | 1,333,501 | $ | 1,273,154 | $ | 1,295,049 | $ | 1,392,680 | $ | 1,546,679 | ||||||||||
Gross margin | 514,404 | 450,049 | 454,239 | 513,446 | 603,004 | |||||||||||||||
Operating income | 140,896 | 72,779 | 69,300 | 81,783 | 118,088 | |||||||||||||||
Net earnings | 84,505 | 42,628 | 42,355 | 49,734 | 71,356 | |||||||||||||||
Net earnings per share of common stock: | ||||||||||||||||||||
Basic | $ | 2.02 | $ | 1.04 | $ | 1.04 | $ | 1.28 | $ | 1.98 | ||||||||||
Diluted | $ | 1.99 | $ | 1.03 | $ | 1.04 | $ | 1.27 | $ | 1.94 | ||||||||||
Weighted average shares outstanding | 41,769 | 40,997 | 40,590 | 38,789 | 36,029 | |||||||||||||||
Weighted average shares outstanding plus dilutive potential common shares | 42,401 | 41,446 | 40,877 | 39,295 | 36,813 | |||||||||||||||
Operating Information: | ||||||||||||||||||||
Percentage increase/(decrease) in comparable US store sales (1) | 3.3 | % | (10.2 | )% | (3.1 | )% | 6.1 | % | 7.3 | % | ||||||||||
Percentage increase/(decrease) in comparable Canadian store sales (1) | 8.3 | % | 4.2 | % | (2.1 | )% | (5.1 | )% | 7.1 | % | ||||||||||
Average square footage — all stores (2) | 6,520 | 7,046 | 7,174 | 7,411 | 7,497 | |||||||||||||||
Average sales per square foot of selling space (3) | $ | 406 | $ | 336 | $ | 319 | $ | 338 | $ | 368 | ||||||||||
Number of retail apparel stores (4) : | ||||||||||||||||||||
Open at beginning of the period | 614 | 651 | 680 | 689 | 693 | |||||||||||||||
Opened | 39 | 32 | 16 | 13 | 20 | |||||||||||||||
Acquired | 1 | ¾ | ¾ | ¾ | ¾ | |||||||||||||||
Closed | (3 | ) | (3 | ) | (7 | ) | (9 | ) | (6 | ) | ||||||||||
Open at end of the period | 651 | 680 | 689 | 693 | 707 | |||||||||||||||
Cash Flow Information: | ||||||||||||||||||||
Capital expenditures | $ | 81,312 | $ | 67,169 | $ | 47,380 | $ | 49,663 | $ | 85,392 | ||||||||||
Depreciation and amortization | 35,245 | 43,877 | 46,885 | 50,993 | 53,319 | |||||||||||||||
Purchase of treasury stock | 7,871 | 30,409 | 28,058 | 109,186 | 11,186 |
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(Dollars and shares in thousands, except | ||||||||||||||||||||
per share and per square foot data) | ||||||||||||||||||||
Statement of Earnings Data: | ||||||||||||||||||||
Net sales | $ | 1,273,154 | $ | 1,295,049 | $ | 1,392,680 | $ | 1,546,679 | $ | 1,724,898 | ||||||||||
Gross margin | 450,049 | 454,239 | 513,446 | 603,004 | 697,135 | |||||||||||||||
Operating income | 72,779 | 69,300 | 81,783 | 118,088 | 165,296 | |||||||||||||||
Net earnings | 42,628 | 42,355 | 49,734 | 71,356 | 103,903 | |||||||||||||||
Per Common Share Data(1): | ||||||||||||||||||||
Basic net earnings per share | $ | 0.69 | $ | 0.70 | $ | 0.85 | $ | 1.32 | $ | 1.93 | ||||||||||
Diluted net earnings per share | $ | 0.69 | $ | 0.69 | $ | 0.84 | $ | 1.29 | $ | 1.88 | ||||||||||
Weighted average common shares outstanding | 61,496 | 60,885 | 58,184 | 54,044 | 53,753 | |||||||||||||||
Weighted average shares outstanding plus dilutive potential common shares | 62,169 | 61,316 | 58,943 | 55,220 | 55,365 | |||||||||||||||
Operating Information: | ||||||||||||||||||||
Percentage increase/(decrease) in comparable US store sales(2) | (10.2 | )% | (3.1 | )% | 6.1 | % | 7.3 | % | 8.4 | % | ||||||||||
Percentage increase/(decrease) in comparable Canadian store sales(2) | 4.2 | % | (2.1 | )% | (5.1 | )% | 7.1 | % | 2.7 | % | ||||||||||
Average square footage — all stores(3) | 7,046 | 7,174 | 7,411 | 7,497 | 7,593 | |||||||||||||||
Average sales per square foot of selling space(4) | $ | 336 | $ | 319 | $ | 338 | $ | 368 | $ | 391 | ||||||||||
Number of retail apparel stores(5): | ||||||||||||||||||||
Open at beginning of the period | 651 | 680 | 689 | 693 | 707 | |||||||||||||||
Opened | 32 | 16 | 13 | 20 | 18 | |||||||||||||||
Closed | (3 | ) | (7 | ) | (9 | ) | (6 | ) | (6 | ) | ||||||||||
Open at end of the period | 680 | 689 | 693 | 707 | 719 | |||||||||||||||
Cash Flow Information: | ||||||||||||||||||||
Capital expenditures | $ | 67,169 | $ | 47,380 | $ | 49,663 | $ | 85,392 | $ | 66,499 | ||||||||||
Depreciation and amortization | 43,877 | 46,885 | 50,993 | 53,319 | 61,874 | |||||||||||||||
Purchase of treasury stock | 30,409 | 28,058 | 109,186 | 11,186 | 90,280 |
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February 2, | February 1, | January 31, | January 29, | January 28, | ||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Balance Sheet Information: | ||||||||||||||||||||
Cash and cash equivalents | $ | 38,644 | $ | 84,924 | $ | 132,146 | $ | 165,008 | $ | 200,226 | ||||||||||
Working capital | 303,539 | 326,060 | 357,045 | 388,229 | 491,527 | |||||||||||||||
Total assets | 728,976 | 780,104 | 878,127 | 993,322 | 1,123,274 | |||||||||||||||
Long-term debt | 37,740 | 38,709 | 131,000 | 130,000 | 205,251 | |||||||||||||||
Shareholders’ equity | 504,809 | 526,585 | 487,792 | 568,848 | 627,533 | |||||||||||||||
Cash dividends declared per share(6) | — | — | — | — | 0.05 |
February 3, | February 2, | February 1, | January 31, | January 29, | ||||||||||||||||
2001 (5) | 2002 (5) | 2003 (5) | 2004 (5) | 2005 | ||||||||||||||||
(as restated- | (as restated- | (as restated- | (as restated- | |||||||||||||||||
note 13) | note 13) | note 13) | note 13) | |||||||||||||||||
Balance Sheet Information: | ||||||||||||||||||||
Cash and cash equivalents | $ | 84,426 | $ | 38,644 | $ | 84,924 | $ | 132,146 | $ | 165,008 | ||||||||||
Working capital | 317,923 | 303,539 | 326,060 | 357,045 | 388,229 | |||||||||||||||
Total assets | 722,810 | 728,976 | 780,104 | 878,127 | 993,322 | |||||||||||||||
Long-term debt | 42,645 | 37,740 | 38,709 | 131,000 | 130,000 | |||||||||||||||
Shareholders’ equity | 490,521 | 504,809 | 526,585 | 487,792 | 568,848 |
(1) | All earnings per share and weighted average common share information have been adjusted to reflect athree-for-two stock split effected as a 50% stock dividend on June 13, 2005. | |
(2) | 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. | |
Average square footage — all stores is calculated by dividing the total square footage for all stores open at the end of the period by the number of stores open at the end of such period. | ||
Average sales per square foot of selling space is calculated by dividing total selling square footage for all stores open the entire year into total sales for those stores. | ||
Retail apparel stores include stores operating under our Men’s Wearhouse, K&G and Moores brands. | ||
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restatement of Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations as presented herein gives effect to the restatement of our consolidated financial statements for fiscal 2002 and 2003 for certain lease accounting adjustments. See Note 13 of Notes to Consolidated Financial Statements for a description of the adjustments.
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2006.
respectively.
Estimates
operating lease accounting.
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No impairment charges were recorded in 2005.
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employees, health care costs, number of claims and other factors, including industry trends and information provided to us by our insurance broker. We also use actuarial estimates with respect to workers’ compensation. If the number of claims or the costs associated with those claims were to increase significantly over our estimates, additional charges to earnings could be necessary to cover required payments.
Fiscal Year | ||||||||||||||||||||||||
Fiscal Year | 2003 | 2004 | 2005 | |||||||||||||||||||||
2002 | 2003 | 2004 | ||||||||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of goods sold, including buying, distribution and occupancy costs | 64.9 | 63.1 | 61.0 | 63.1 | 61.0 | 59.6 | ||||||||||||||||||
Gross margin | 35.1 | 36.9 | 39.0 | 36.9 | 39.0 | 40.4 | ||||||||||||||||||
Selling, general and administrative expenses | 29.7 | 31.0 | 31.4 | 31.0 | 31.4 | 30.8 | ||||||||||||||||||
Operating income | 5.4 | 5.9 | 7.6 | 5.9 | 7.6 | 9.6 | ||||||||||||||||||
Interest income | (0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||||||||||||
Interest expense | 0.2 | 0.3 | 0.4 | 0.3 | 0.4 | 0.3 | ||||||||||||||||||
Earnings before income taxes | 5.3 | 5.7 | 7.3 | 5.7 | 7.3 | 9.4 | ||||||||||||||||||
Provision for income taxes | 2.0 | 2.1 | 2.7 | 2.1 | 2.7 | 3.4 | ||||||||||||||||||
Net earnings | 3.3 | % | 3.6 | % | 4.6 | % | 3.6 | % | 4.6 | % | 6.0 | % | ||||||||||||
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(In millions) | Amount Attributed to | |||
$ | 108.3 | 8.4% and 2.7% increase in comparable sales for US and Canadian stores, respectively, in 2005 compared to 2004. | ||
18.8 | Net sales from 18 new stores opened in 2005. | |||
26.6 | Increase from net sales of 20 new stores opened in 2004, relocated stores and expanded stores not included in comparable sales. | |||
27.6 | Increase from other sales. | |||
(3.1 | ) | 6 closed stores in 2005 and 6 closed stores in 2004. | ||
$ | 178.2 | Total |
% | Attributed to | |
(0.4%) | Decrease in advertising expenses as a percentage of sales from 3.9% in 2004 to 3.5% in 2005. On an absolute dollar basis, advertising expense increased $1.1 million. | |
(0.1%) | Decrease in store salaries as a percentage of sales from 12.8% in 2004 to 12.7% in 2005 primarily due to leveraging of these costs from higher sales. Store salaries on an absolute dollar basis increased $20.6 million primarily due to increased commissions associated with higher sales and increased base salaries. | |
(0.1%) | Decrease in other SG&A expenses as a percentage of sales from 14.7% in 2004 to 14.6% in 2005, primarily due to leveraging fixed general and administrative costs from higher sales. On an absolute dollar basis, other SG&A expenses increased $25.2 million primarily as a result of continued growth in our tuxedo rental business and costs associated with the closure of our six R&D casual clothing/sportswear concept stores, offset in part by the absence in the current year of a $2.2 million asset impairment charge incurred in fiscal 2004. | |
(0.6%) | Total |
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Net Sales | ||||||||||||
Increase/ | ||||||||||||
Stores | 2003 | 2004 | (Decrease) | |||||||||
Stores opened in 2004 | $ | — | $ | 18.3 | $ | 18.3 | ||||||
Stores opened in 2003 | 12.0 | 34.9 | 22.9 | |||||||||
Stores opened before 2003 | 1,376.7 | 1,479.6 | 102.9 | |||||||||
1,388.7 | 1,532.8 | 144.1 | ||||||||||
Other | 4.0 | 13.9 | 9.9 | |||||||||
Total | $ | 1,392.7 | $ | 1,546.7 | $ | 154.0 | ||||||
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Selling, general and administrative (“
The following table presents a breakdown of 2002 and 2003 net sales of the Company from stores open in each of these periods (in millions):
Net Sales | ||||||||||||
Increase/ | ||||||||||||
Stores | 2002 | 2003 | (Decrease) | |||||||||
Stores opened in 2003 | $ | — | $ | 12.0 | $ | 12.0 | ||||||
Stores opened in 2002 | 24.6 | 36.1 | 11.5 | |||||||||
Stores opened before 2002 | 1,266.9 | 1,340.6 | 73.7 | |||||||||
1,291.5 | 1,388.7 | 97.2 | ||||||||||
Other | 3.5 | 4.0 | 0.5 | |||||||||
Total | $ | 1,295.0 | $ | 1,392.7 | $ | 97.7 | ||||||
The Company’s net sales increased $97.7 million, or 7.5%, to $1.393 billion for 2003 due mainly to a $78.8 million increase in clothing and alteration sales and an $18.3 million increase in tuxedo rental revenues. Our U.S. comparable store sales increased 6.1% as improvement was experienced in nearly all product categories. At our core
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Men’s Wearhouse brand, a 14.9% increase in unit suit sales helped drive increases in other product categories as well as in alteration sales. In addition, our tuxedo rental business continued to grow following its rollout to nearly all of the Men’s Wearhouse stores in early 2002 with tuxedo rental revenues increasing from 2.5% of total net sales in 2002 to 3.7% in 2003. Store traffic also increased, not only from our tuxedo rental customers, but also from efforts started in 2002 to increase our mix of opening price point product and to increase our penetration into the traditional clothing market. In Canada, comparable store sales for 2003 decreased 5.1% from 2002 due mainly to unusually severe and extended winter weather conditions during the first quarter, a shorter summer sale period during the second quarter and softer demand overall in the Canadian men’s apparel market experienced throughout 2003. However, this decrease was more than offset by the foreign currency exchange rate translation effect from the strengthening of the Canadian dollar.
Gross margin increased $59.2 million, or 13.0%, to $513.4 million in 2003. As a percentage of sales, gross margin increased from 35.1% in 2002 to 36.9% in 2003. This increase in gross margin percentage resulted mainly from continued growth in our tuxedo rental business, which carries a significantly higher incremental gross margin impact than our clothing sales, and from higher cumulative mark-ups that produced higher clothing product margins. The gross margin percentage was also increased as occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation, decreased modestly as a percentage of sales from 2002 to 2003. However, on an absolute dollar basis, occupancy costs increased by 5.3% from 2002 to 2003 due mainly to higher rent expense from our increased store count and renewals of existing leases at higher rates and increased depreciation.
Selling, general and administrative (“SG&A”) expenses, as a percentage of sales, were 31.0% in 2003 compared to 29.7% in 2002, with SG&A expenditures increasing by $46.7 million or 12.1% to $431.7 million. On an absolute dollar basis, advertising increased by $2.8 million, store salaries increased by $15.3 million and other SG&A increased by $28.6 million. As a percentage of sales, advertising expense decreased from 4.6% to 4.5%, store salaries increased from 12.1% to 12.3% and other SG&A expenses increased from 13.0% to 14.2%. On an absolute dollar basis, the principal components of SG&A expenses increased primarily due to (i) the elimination of media spending reductions imposed in 2002, (ii) increased commissions and bonuses due to higher sales, (iii) increased store and warehouse salaries, benefits and other costs associated with a 47% increase in unit tuxedo rentals, (iv) increased non-store salaries, benefits and other costs related to our expansion strategies and (v) higher insurance costs. SG&A expenses were reduced by the recognition of a $4.4 million deferred pretax gain from the sale, in March 2002, of certain technology assets to an unrelated company regularly engaged in the development and licensing of software to the retail industry (see “Other Matters” herein). However, the gain recognized in 2003 was more than offset by $2.9 million in costs related to store closures, $2.5 million in costs related to the write-off of certain technology assets and $3.7 million in litigation costs related to certain California lawsuits.
Interest expense, net of interest income, increased from $1.3 million in 2002 to $2.5 million in 2003. Weighted average borrowings outstanding increased $30.2 million from the prior year to $70.0 million in 2003, and the weighted average interest rate on outstanding indebtedness decreased from 4.9% to 4.6%. The increase in the weighted average borrowings was due primarily to the issuance of $130.0 million of 3.125% Notes in a private placement on October 21, 2003. A portion of the proceeds from the Notes was used to repay the balance outstanding on our Canadian credit facility. The decrease in the weighted average interest rate was due primarily to the lower interest rate on the Notes. Interest expense was offset by interest income from the investment of excess cash of $1.0 million in 2002 and $1.5 million in 2003. See further discussion of the Notes in Note 3 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources” herein.
Our effective income tax rate for the year ended January 31, 2004 was 37.3% compared to 37.7% for the prior year. The effective tax rate was higher than the statutory federal rate of 35% primarily due to the effect of state income taxes.
These factors resulted in 2003 net earnings of $49.7 million or 3.6% of net sales, compared with 2002 net earnings of $42.4 million or 3.3% of net sales.
Liquidity and Capital Resources
In January 2003,
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per annum equal to, at our option,using the agent’s prime rate or the reserve adjusted LIBOR rateapplicable indices plus a varying interest rate margin up to 2.25%1.125%. The Credit Agreement also provides for fees applicable to unused commitments ranging from 0.275%0.100% to 0.500%0.175%. The effective interest rate for the Canadian term loan was 4.4% at January 28, 2006. As of January 29, 2005,28, 2006, there were no
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revolving credit facility and there was US$75.3 million outstanding under the Canadian term loan.
28, 2006.
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following:
(In millions) | Amount Attributed to | |||
$ | 98.0 | Increase in cash and short-term investments, due primarily to Canadian term loan borrowings of approximately US$75.0 million and increased net earnings. | ||
10.4 | Increase in inventories due to square footage growth of 2.9%. | |||
7.1 | Decrease in accounts payable due to amount and timing of 2005 payables as compared to the same items for 2004. | |||
(9.0 | ) | Increase in accrued expenses due to increased accruals for bonuses, unredeemed gift certificates and dividend payable. | ||
(3.2 | ) | Other items. | ||
$ | 103.3 | Total |
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increased $21.6 million and $13.7 million, respectively, as sales increased and we continued our normal buying patterns. The increase in accounts payable and accrued expenses of $35.5 million and $28.1 million in 2003 and 2004, respectively, was due to the increased inventorieshigher inventory purchases as well as higher bonuses earned as a result of increased sales and, in 2003, higher insurance costs. In 2004, the increase in accounts payable and accrued expenses was also due to the expansion of our Men’s Wearhouse customer loyalty program and increased customer purchases of gift cards. Other assets increased in each of the years primarily due to increased investment in tuxedo rental product. Income taxes payable decreased in 2002 mainly due to a lower effective tax rate associated with the mix of federal and state earnings in 2002; the increase in income taxes payableincreased in 2003 resulted from increased earnings and the timing of tax payments, offset in part by a further reduction in the effective tax rate. The decrease in income taxes payable in 2004 was2005 due primarily to increased estimated tax payments made during the year duemainly to increased earnings and the timing of previousrequired tax payments.
2002 | 2003 | 2004 | ||||||||||
New store construction | $ | 6.2 | $ | 8.1 | $ | 14.3 | ||||||
Relocation and remodeling of existing stores | 25.1 | 15.8 | 18.9 | |||||||||
Information technology | 8.4 | 11.5 | 10.7 | |||||||||
Distribution facilities | 3.4 | 12.2 | 30.5 | |||||||||
Other | 4.3 | 2.1 | 11.0 | |||||||||
Total | $ | 47.4 | $ | 49.7 | $ | 85.4 | ||||||
2003 2004 2005 New store construction $ 8.1 $ 14.3 $ 13.4 Relocation and remodeling of existing stores 15.8 18.9 30.3 Information technology 11.5 10.7 10.6 Distribution facilities 12.2 30.5 11.1 Other 2.1 11.0 1.1 Total $ 49.7 $ 85.4 $ 66.5
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In connection with our share repurchase programs, we from time to time issued put option contracts and received premiums for doing so, with the premiums being added to our capital in excess$17.65. As of par and effectively reducing theJanuary 28, 2006, a total of 1,652,850 shares at a cost of $43.0 million were repurchased in open market transactions under this program at an average price per share of $26.00.
last three fiscal years:
2003 | 2004 | 2005 | ||||||||||
Shares repurchased (in thousands) | 6,263.9 | 633.6 | 3,199.8 | |||||||||
Total costs (in millions) | $ | 109.2 | $ | 11.2 | $ | 90.3 | ||||||
Average price per share | $ | 17.43 | $ | 17.65 | $ | 28.21 |
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of the store purchase and the Facility purchase arewere comparable to what would have been available to us from unaffiliated third parties at the time such agreements were entered into.
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Payments Due by Period | ||||||||||||||||||||
<1 | 1-3 | 3-5 | > 5 | |||||||||||||||||
(In millions) | Total | Year | Years | Years | Years | |||||||||||||||
Contractual obligations | ||||||||||||||||||||
Long-term debt (a) | $ | 130.0 | $ | — | $ | — | $ | — | $ | 130.0 | ||||||||||
Capital lease obligations (b) | 2.4 | 0.7 | 0.9 | 0.4 | 0.4 | |||||||||||||||
Operating lease base rentals (b) | 461.0 | 95.4 | 155.1 | 110.0 | 100.5 | |||||||||||||||
Purchase obligations (c) | 9.0 | 9.0 | — | — | — | |||||||||||||||
Total contractual obligations | $ | 602.4 | $ | 105.1 | $ | 156.0 | $ | 110.4 | $ | 230.9 | ||||||||||
Payments Due by Period | ||||||||||||||||||||
<1 | 1-3 | 3-5 | > 5 | |||||||||||||||||
(In millions) | Total | Year | Years | Years | Years | |||||||||||||||
Contractual obligations | ||||||||||||||||||||
Long-term debt(a) | $ | 205.3 | $ | — | $ | — | $ | — | $ | 205.3 | ||||||||||
Capital lease obligations(b) | 3.2 | 0.9 | 1.3 | 0.7 | 0.3 | |||||||||||||||
Operating lease base rentals(b) | 521.0 | 104.6 | 179.6 | 127.5 | 109.3 | |||||||||||||||
Purchase obligations(c) | 1.2 | 1.2 | — | — | — | |||||||||||||||
Other contractual obligations(d) | 33.0 | 12.3 | 20.7 | — | — | |||||||||||||||
Total contractual obligations | $ | 763.7 | $ | 119.0 | $ | 201.6 | $ | 128.2 | $ | 314.9 | ||||||||||
(a) | Long-term debt includes our $130.0 million of 3.125% |
(b) | We lease retail business locations, office and warehouse facilities, copier equipment and automotive equipment under various noncancelable capital and operating leases. Leases on retail business locations specify minimum base 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. Our future lease obligations would change if we exercised these renewal options and if we entered into additional lease agreements. See Note 10 of Notes to Consolidated Financial Statements for more information. |
(c) | Included in purchase obligations are our forward exchange contracts. At January | |
(d) | Other contractual obligations consist primarily of manufacturing contracts to purchase inventory. |
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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 involves risk and uncertainty. These forward-looking statements may include, but are not limited to, future capital expenditures, acquisitions (including the amount and nature thereof), future sales, earnings, margins, costs, number and costs of store openings, demand for clothing, market trends in the retail clothing business, currency fluctuations, inflation and various economic and business trends. Forward-looking statements may be made by management orally or in writing, including, but not limited to, this Management’s Discussion and Analysis of Financial Condition and Results of Operations section and other sections of our filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, domestic and international economic activity and inflation, our successful execution of internal operating plans and new store and new market expansion plans, performance issues with key suppliers, severe weather, foreign currency fluctuations, government export and import policies and legal proceedings. Future results will also be dependent upon our ability to continue to identify and complete successful expansions and penetrations into existing and new markets and our ability to integrate such expansions with our existing operations.
Expansion into more fashion-oriented merchandise categories or into complementary products and services may present greater risks. We are continuously assessing opportunities to expand complementary products and services related to our traditional business, such as corporate apparel sales and retail dry cleaning establishments. We may expend both capital and personnel resources on such business opportunities which may or may not be successful.
Our business is particularly sensitive to economic conditions and consumer confidence. Consumer confidence is often adversely impacted by many factors including local, regional or national economic conditions, continued threats of terrorism, acts of war and other uncertainties. We believe that a decrease in consumer spending will affect us more than other retailers because men’s discretionary spending for items like tailored apparel tends to slow faster than other retail purchases.
According to industry sources, sales in the men’s tailored clothing market generally have declined over the past several years and increased only modestly in 2004. We believe that this trend is attributable primarily to: (1) men allocating less of their income to tailored clothing and (2) certain employers relaxing their dress codes. We believe that this trend in sales has contributed, and will continue to contribute, to a consolidation among retailers of men’s tailored clothing. Although we have been able to increase our share of the men’s tailored clothing market, we may not be able to continue to expand our sales volume or maintain our profitability within our segment of the retailing industry.
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ITEM
Quantitative and Qualitative Disclosures about Market Risk
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. | Financial Statements and Supplementary Data |
In reaching its conclusion that the internal control over financial reporting was effective as of January 29, 2005, management carefully considered the facts and circumstances surrounding the restatement of the Company’s previously issued financial statements.
A control deficiency in monitoring compliance with generally accepted accounting principles in the area of accounting for operating leases with scheduled rent increases, the related period of amortization of leasehold improvements and the classification of leasehold incentives received was detected during our assessment process that resulted in cumulative, non-cash adjustments that would have been material to the financial performance of fiscal 2004. As a result, management decided to restate previously issued financial statements (as more fully described in Note 13 to the consolidated financial statements) for the effect of the correction on the prior period results.
The impact of this correction on the periods subject to restatement was immaterial. Substantially all of the adjustment related to periods prior to fiscal 2002, and the correcting cumulative adjustment was also immaterial to shareholders’ equity as of February 2, 2002. As a result, management concluded that this control deficiency was not a material weakness.
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As discussed in Note 13, the accompanying fiscal 2003 and 2002 consolidated financial statements have been restated.
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January 31, | January 29, | |||||||
2004 | 2005 | |||||||
(as restated- | ||||||||
note 13) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 132,146 | $ | 165,008 | ||||
Accounts receivable, net | 17,919 | 20,844 | ||||||
Inventories | 388,956 | 406,225 | ||||||
Other current assets | 31,028 | 34,920 | ||||||
Total current assets | 570,049 | 626,997 | ||||||
PROPERTY AND EQUIPMENT, AT COST: | ||||||||
Land | 6,205 | 8,878 | ||||||
Buildings | 29,739 | 50,511 | ||||||
Leasehold improvements | 196,490 | 219,250 | ||||||
Furniture, fixtures and equipment | 241,742 | 275,822 | ||||||
474,176 | 554,461 | |||||||
Less accumulated depreciation and amortization | (250,353 | ) | (294,393 | ) | ||||
Net property and equipment | 223,823 | 260,068 | ||||||
GOODWILL | 43,867 | 55,824 | ||||||
OTHER ASSETS, net | 40,388 | 50,433 | ||||||
TOTAL | $ | 878,127 | $ | 993,322 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 115,828 | $ | 132,212 | ||||
Accrued expenses | 71,132 | 82,923 | ||||||
Income taxes payable | 26,044 | 23,633 | ||||||
Total current liabilities | 213,004 | 238,768 | ||||||
LONG-TERM DEBT | 131,000 | 130,000 | ||||||
DEFERRED TAXES AND OTHER LIABILITIES | 46,331 | 55,706 | ||||||
Total liabilities | 390,335 | 424,474 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 3 and Note 10) | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Preferred stock, $.01 par value, 2,000,000 shares authorized, no shares issued | — | — | ||||||
Common stock, $.01 par value, 100,000,000 shares authorized, 43,054,815 and 43,593,587 shares issued | 431 | 436 | ||||||
Capital in excess of par | 205,636 | 218,327 | ||||||
Retained earnings | 442,074 | 513,430 | ||||||
Accumulated other comprehensive income | 10,357 | 17,477 | ||||||
Total | 658,498 | 749,670 | ||||||
Treasury stock, 6,979,423 and 7,358,079 shares at cost | (170,706 | ) | (180,822 | ) | ||||
Total shareholders’ equity | 487,792 | 568,848 | ||||||
TOTAL | $ | 878,127 | $ | 993,322 | ||||
January 29, January 28, 2005 2006 CURRENT ASSETS: Cash and cash equivalents $ 165,008 $ 200,226 Short-term investments — 62,775 Accounts receivable, net 20,844 19,276 Inventories 406,225 416,603 Other current assets 34,920 30,732 Total current assets 626,997 729,612 PROPERTY AND EQUIPMENT, AT COST: Land 8,878 9,122 Buildings 50,511 54,515 Leasehold improvements 219,250 244,300 Furniture, fixtures and equipment 275,822 304,020 554,461 611,957 Less accumulated depreciation and amortization (294,393 ) (342,371 ) Net property and equipment 260,068 269,586 GOODWILL 55,824 57,601 OTHER ASSETS, net 50,433 66,475 TOTAL $ 993,322 $ 1,123,274 CURRENT LIABILITIES: Accounts payable $ 132,212 $ 125,064 Accrued expenses 82,923 91,935 Income taxes payable 23,633 21,086 Total current liabilities 238,768 238,085 LONG-TERM DEBT 130,000 205,251 DEFERRED TAXES AND OTHER LIABILITIES 55,706 52,405 Total liabilities 424,474 495,741 COMMITMENTS AND CONTINGENCIES (Note 3 and Note 10) SHAREHOLDERS’ EQUITY: Preferred stock, $.01 par value, 2,000,000 shares authorized, no shares issued — — Common stock, $.01 par value, 100,000,000 shares authorized, 65,389,951 and 67,237,824 shares issued 436 671 Capital in excess of par 218,327 255,214 Retained earnings 513,430 614,680 Accumulated other comprehensive income 17,477 26,878 Total 749,670 897,443 Treasury stock, 11,037,119 and 14,169,241 shares at cost (180,822 ) (269,910 ) Total shareholders’ equity 568,848 627,533 TOTAL $ 993,322 $ 1,123,274
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CONSOLIDATED STATEMENTS OF EARNINGS
For the Years EndedFebruary 1, 2003, January 31, 2004, and January 29, 2005 and January 28, 2006
(In thousands, except per share amounts)
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
(as restated- | (as restated- | |||||||||||
note 13) | note 13) | |||||||||||
Net sales | $ | 1,295,049 | $ | 1,392,680 | $ | 1,546,679 | ||||||
Cost of goods sold, including buying, distribution and occupancy costs | 840,810 | 879,234 | 943,675 | |||||||||
Gross margin | 454,239 | 513,446 | 603,004 | |||||||||
Selling, general and administrative expenses | 384,939 | 431,663 | 484,916 | |||||||||
Operating income | 69,300 | 81,783 | 118,088 | |||||||||
Interest income | (981 | ) | (1,495 | ) | (1,526 | ) | ||||||
Interest expense | 2,242 | 4,006 | 5,899 | |||||||||
Earnings before income taxes | 68,039 | 79,272 | 113,715 | |||||||||
Provision for income taxes | 25,684 | 29,538 | 42,359 | |||||||||
Net earnings | $ | 42,355 | $ | 49,734 | $ | 71,356 | ||||||
Net earnings per share: | ||||||||||||
Basic | $ | 1.04 | $ | 1.28 | $ | 1.98 | ||||||
Diluted | $ | 1.04 | $ | 1.27 | $ | 1.94 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 40,590 | 38,789 | 36,029 | |||||||||
Diluted | 40,877 | 39,295 | 36,813 | |||||||||
Fiscal Year 2003 2004 2005 Net sales $ 1,392,680 $ 1,546,679 $ 1,724,898 Cost of goods sold, including buying, distribution and occupancy costs 879,234 943,675 1,027,763 Gross margin 513,446 603,004 697,135 Selling, general and administrative expenses 431,663 484,916 531,839 Operating income 81,783 118,088 165,296 Interest income (1,495 ) (1,526 ) (3,280 ) Interest expense 4,006 5,899 5,888 Earnings before income taxes 79,272 113,715 162,688 Provision for income taxes 29,538 42,359 58,785 Net earnings $ 49,734 $ 71,356 $ 103,903 Net earnings per share: Basic $ 0.85 $ 1.32 $ 1.93 Diluted $ 0.84 $ 1.29 $ 1.88 Weighted average common shares outstanding: Basic 58,184 54,044 53,753 Diluted 58,943 55,220 55,365
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME
For the Years EndedFebruary 1, 2003, January 31, 2004, and January 29, 2005 and January 28, 2006
(In thousands, except shares)
Accumulated | ||||||||||||||||||||||||
Capital | Other | |||||||||||||||||||||||
Common | in Excess | Retained | Comprehensive | Treasury | ||||||||||||||||||||
Stock | of Par | Earnings | (Loss) Income | Stock | Total | |||||||||||||||||||
BALANCE — February 2, 2002 (as previously reported) | $ | 424 | $ | 191,888 | $ | 355,128 | $ | (3,198 | ) | $ | (34,359 | ) | $ | 509,883 | ||||||||||
Cumulative effect on prior years of restatement (note 13) | — | — | (5,143 | ) | 69 | — | (5,074 | ) | ||||||||||||||||
BALANCE — February 2, 2002 (as restated-note 13) | 424 | 191,888 | 349,985 | (3,129 | ) | (34,359 | ) | 504,809 | ||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net earnings (as restated-note 13) | — | — | 42,355 | — | — | 42,355 | ||||||||||||||||||
Translation adjustment (as restated-note 13) | — | — | — | 2,397 | — | 2,397 | ||||||||||||||||||
Change in derivative fair value | — | — | — | 822 | — | 822 | ||||||||||||||||||
Total comprehensive income (as restated-note 13) | 45,574 | |||||||||||||||||||||||
Common stock issued to stock discount plan — 51,359 shares | 1 | 761 | — | — | — | 762 | ||||||||||||||||||
Common stock issued upon exercise of stock options — 165,105 shares | 1 | 2,272 | — | — | — | 2,273 | ||||||||||||||||||
Tax benefit recognized upon exercise of stock options | — | 624 | — | — | — | 624 | ||||||||||||||||||
Proceeds from sale of put option contracts | — | 601 | — | — | — | 601 | ||||||||||||||||||
Treasury stock purchased — 1,480,000 shares | — | — | — | — | (28,058 | ) | (28,058 | ) | ||||||||||||||||
BALANCE — February 1, 2003 (as restated-note 13) | 426 | 196,146 | 392,340 | 90 | (62,417 | ) | 526,585 | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net earnings (as restated-note 13) | — | — | 49,734 | — | — | 49,734 | ||||||||||||||||||
Translation adjustment (as restated-note 13) | — | — | — | 9,708 | — | 9,708 | ||||||||||||||||||
Change in derivative fair value | — | — | — | 559 | — | 559 | ||||||||||||||||||
Total comprehensive income (as restated- note 13) | 60,001 | |||||||||||||||||||||||
Common stock issued to stock discount plan — 48,195 shares | 1 | 742 | — | — | — | 743 | ||||||||||||||||||
Common stock issued upon exercise of stock options — 421,441 shares | 4 | 7,573 | — | — | — | 7,577 | ||||||||||||||||||
Tax benefit recognized upon exercise of stock options | — | 1,572 | — | — | — | 1,572 | ||||||||||||||||||
Treasury stock issued to profit sharing plan - 41,841 shares | — | (397 | ) | — | — | 897 | 500 | |||||||||||||||||
Treasury stock purchased — 4,175,900 shares | — | — | — | — | (109,186 | ) | (109,186 | ) | ||||||||||||||||
BALANCE —January 31, 2004 (as restated-note 13) | 431 | 205,636 | 442,074 | 10,357 | (170,706 | ) | 487,792 | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net earnings | — | — | 71,356 | — | — | 71,356 | ||||||||||||||||||
Translation adjustment | — | — | — | 7,371 | — | 7,371 | ||||||||||||||||||
Change in derivative fair value | — | — | — | (251 | ) | — | (251 | ) | ||||||||||||||||
Total comprehensive income | 78,476 | |||||||||||||||||||||||
Common stock issued to stock discount plan — 49,211 shares | — | 1,120 | — | — | — | 1,120 | ||||||||||||||||||
Common stock issued upon exercise of stock options — 489,561 shares | 5 | 9,751 | — | — | — | 9,756 | ||||||||||||||||||
Tax benefit recognized upon exercise of stock options | — | 1,768 | — | — | — | 1,768 | ||||||||||||||||||
Amortization of deferred compensation | — | 122 | — | — | — | 122 | ||||||||||||||||||
Treasury stock issued to profit sharing plan – 43,744 shares | — | (70 | ) | — | — | 1,070 | 1,000 | |||||||||||||||||
Treasury stock purchased — 422,400 shares | — | — | — | — | (11,186 | ) | (11,186 | ) | ||||||||||||||||
BALANCE — January 29, 2005 | $ | 436 | $ | 218,327 | $ | 513,430 | $ | 17,477 | $ | (180,822 | ) | $ | 568,848 | |||||||||||
Accumulated Capital Other Common in Excess Retained Comprehensive Treasury Stock of Par Earnings Income Stock Total BALANCE — February 1, 2003 $ 426 $ 196,146 $ 392,340 $ 90 $ (62,417 ) $ 526,585 Comprehensive income: Net earnings — — 49,734 — — 49,734 Translation adjustment — — — 9,708 — 9,708 Change in derivative fair value — — — 559 — 559 Total comprehensive income 60,001 Common stock issued to stock discount plan — 72,293 shares 1 742 — — — 743 Common stock issued upon exercise of stock options — 632,162 shares 4 7,573 — — — 7,577 Tax benefit recognized upon exercise of stock options — 1,572 — — — 1,572 Treasury stock issued to profit sharing plan — 62,762 shares — (397 ) — — 897 500 Treasury stock purchased — 6,263,850 shares — — — — (109,186 ) (109,186 ) BALANCE — January 31, 2004 431 205,636 442,074 10,357 (170,706 ) 487,792 Comprehensive income: Net earnings — — 71,356 — — 71,356 Translation adjustment — — — 7,371 — 7,371 Change in derivative fair value — — — (251 ) — (251 ) Total comprehensive income 78,476 Common stock issued to stock discount plan — 73,817 shares — 1,120 — — — 1,120 Common stock issued upon exercise of stock options — 734,342 shares 5 9,751 — — — 9,756 Tax benefit recognized upon exercise of stock options — 1,768 — — — 1,768 Amortization of deferred compensation — 122 — — — 122 Treasury stock issued to profit sharing plan — 65,616 shares — (70 ) — — 1,070 1,000 Treasury stock purchased — 633,600 shares — — — — (11,186 ) (11,186 ) BALANCE — January 29, 2005 436 218,327 513,430 17,477 (180,822 ) 568,848 Comprehensive income: Net earnings — — 103,903 — — 103,903 Translation adjustment — — — 9,826 — 9,826 Change in derivative fair value — — — (425 ) — (425 ) Total comprehensive income 113,304 Stock dividend — 50% 223 (223 ) — — — — Cash dividends declared — $0.05 per share — — (2,653 ) — — (2,653 ) Common stock issued to stock discount plan — 65,596 shares — 1,427 — — — 1,427 Common stock issued upon exercise of stock options — 1,667,477 shares 12 22,823 — — — 22,835 Tax benefit recognized upon exercise of stock options — 9,646 — — — 9,646 Amortization of deferred compensation — 2,906 — — — 2,906 Treasury stock issued to profit sharing plan — 67,628 shares — 308 — — 1,192 1,500 Treasury stock purchased — 3,199,750 Shares — — — — (90,280 ) (90,280 ) BALANCE — January 28, 2006 $ 671 $ 255,214 $ 614,680 $ 26,878 $ (269,910 ) $ 627,533
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35
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years EndedFebruary 1, 2003, January 31, 2004, and January 29, 2005 and January 28, 2006
(In thousands)
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
(as restated- | (as restated- | |||||||||||
note 13) | note 13) | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net earnings | $ | 42,355 | $ | 49,734 | $ | 71,356 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 46,885 | 50,993 | 53,319 | |||||||||
Deferred compensation and rent expense | (1,939 | ) | (1,670 | ) | (1,373 | ) | ||||||
Gain on sale of assets | — | (4,381 | ) | — | ||||||||
Loss on impairment of assets | — | 2,515 | 2,169 | |||||||||
Deferred tax provision | 7,468 | 342 | 5,222 | |||||||||
(Increase) decrease in accounts receivable | (3,596 | ) | 2,809 | (2,579 | ) | |||||||
(Increase) decrease in inventories | 17,338 | (21,624 | ) | (13,709 | ) | |||||||
Increase in other assets | (9,998 | ) | (8,570 | ) | (12,419 | ) | ||||||
Increase in accounts payable and accrued expenses | 19,613 | 35,491 | 28,060 | |||||||||
Increase (decrease) in income taxes payable | (4,951 | ) | 14,076 | (903 | ) | |||||||
Increase in other liabilities | 1,809 | 15 | 836 | |||||||||
Net cash provided by operating activities | 114,984 | 119,730 | 129,979 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Capital expenditures | (47,380 | ) | (49,663 | ) | (85,392 | ) | ||||||
Net proceeds from sale of assets | 6,812 | — | — | |||||||||
Net assets acquired | — | (4,500 | ) | (11,000 | ) | |||||||
Investment in trademarks, tradenames and other assets | (2,619 | ) | (1,644 | ) | (556 | ) | ||||||
Net cash used in investing activities | (43,187 | ) | (55,807 | ) | (96,948 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Proceeds from issuance of common stock | 3,035 | 8,320 | 10,876 | |||||||||
Proceeds from issuance of debt | — | 130,000 | — | |||||||||
Bank borrowings | 39,624 | — | — | |||||||||
Principal payments on debt | (40,743 | ) | (44,931 | ) | (1,000 | ) | ||||||
Deferred financing costs | (1,075 | ) | (3,916 | ) | (276 | ) | ||||||
Proceeds from sale of put option contracts | 601 | — | — | |||||||||
Purchase of treasury stock | (28,058 | ) | (109,186 | ) | (11,186 | ) | ||||||
Net cash used in financing activities | (26,616 | ) | (19,713 | ) | (1,586 | ) | ||||||
Effect of exchange rate changes | 1,099 | 3,012 | 1,417 | |||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 46,280 | 47,222 | 32,862 | |||||||||
Balance at beginning of period | 38,644 | 84,924 | 132,146 | |||||||||
Balance at end of period | $ | 84,924 | $ | 132,146 | $ | 165,008 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 1,945 | $ | 2,091 | $ | 4,671 | ||||||
Income taxes | $ | 25,582 | $ | 15,863 | $ | 38,820 | ||||||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||
Additional capital in excess of par resulting from tax benefit recognized upon exercise of stock options | $ | 624 | $ | 1,572 | $ | 1,768 | ||||||
Treasury stock contributed to employee stock plan | $ | — | $ | 500 | $ | 1,000 | ||||||
Note payable issued as partial consideration for assets acquired | $ | — | $ | 1,000 | $ | — | ||||||
Fiscal Year 2003 2004 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 49,734 $ 71,356 $ 103,903 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 50,993 53,319 61,874 Deferred compensation and rent expense (1,670 ) (1,373 ) 234 Gain on sale of assets (4,381 ) — — Loss on impairment of assets 2,515 2,169 — Deferred tax provision 342 5,222 2,983 (Increase) decrease in accounts receivable 2,809 (2,579 ) 1,660 Increase in inventories (21,624 ) (13,709 ) (5,994 ) Increase in other assets (8,570 ) (12,419 ) (16,477 ) Increase (decrease) in accounts payable and accrued expenses 35,491 28,060 (725 ) Increase (decrease) in income taxes payable 14,076 (903 ) 6,987 Increase in other liabilities 15 836 116 Net cash provided by operating activities 119,730 129,979 154,561 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (49,663 ) (85,392 ) (66,499 ) Net assets acquired (4,500 ) (11,000 ) — — — (106,850 ) — — 44,075 Investment in trademarks, tradenames and other assets (1,644 ) (556 ) (141 ) Net cash used in investing activities (55,807 ) (96,948 ) (129,415 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 8,320 10,876 24,262 Proceeds from issuance of debt 130,000 — — Bank borrowings — — 71,695 Principal payments on debt (44,931 ) (1,000 ) — Deferred financing costs (3,916 ) (276 ) (556 ) Purchase of treasury stock (109,186 ) (11,186 ) (90,280 ) Net cash provided by (used in) financing activities (19,713 ) (1,586 ) 5,121 Effect of exchange rate changes 3,012 1,417 4,951 INCREASE IN CASH AND CASH EQUIVALENTS 47,222 32,862 35,218 Balance at beginning of period 84,924 132,146 165,008 Balance at end of period $ 132,146 $ 165,008 $ 200,226 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 2,091 $ 4,671 $ 4,600 Income taxes $ 15,863 $ 38,820 $ 50,105 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Cash dividends declared $ — $ — $ 2,653 Additional capital in excess of par resulting from tax benefit recognized upon exercise of stock options $ 1,572 $ 1,768 $ 9,646 Treasury stock contributed to employee stock plan $ 500 $ 1,000 $ 1,500 Note payable issued as partial consideration for assets acquired $ 1,000 $ — $ —
31
36
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. | Summary of Significant Accounting Policies |
taxes and our operating lease accounting.
37
32
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
38
33
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
obligation.
In December 2002, the Financial Refer to “Recently Issued Accounting Standards Board (“FASB”) issuedPronouncements” below for a discussion of Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation–Transition and Disclosure”123 (revised 2004), “Share-Based Payment” (“SFAS No. 148”123R”). This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosures required by SFAS No. 148 are included below.
Fiscal Year | ||||||||||||||||||||||||
Fiscal Year | 2003 | 2004 | 2005 | |||||||||||||||||||||
2002 | 2003 | 2004 | ||||||||||||||||||||||
Net earnings, as reported | $ | 42,355 | $ | 49,734 | $ | 71,356 | $ | 49,734 | $ | 71,356 | $ | 103,903 | ||||||||||||
Add: Stock-based compensation, net of tax included in reported net earnings | — | — | 77 | — | 77 | 1,894 | ||||||||||||||||||
Deduct: Stock-based compensation, net of tax determined under fair-value based method | (2,977 | ) | (2,460 | ) | (3,017 | ) | (2,460 | ) | (3,017 | ) | (4,663 | ) | ||||||||||||
Pro forma net earnings | $ | 39,378 | $ | 47,274 | $ | 68,416 | $ | 47,274 | $ | 68,416 | $ | 101,134 | ||||||||||||
Net earnings per share: | ||||||||||||||||||||||||
As reported: | ||||||||||||||||||||||||
Basic | $ | 1.04 | $ | 1.28 | $ | 1.98 | $ | 0.85 | $ | 1.32 | $ | 1.93 | ||||||||||||
Diluted | $ | 1.04 | $ | 1.27 | $ | 1.94 | $ | 0.84 | $ | 1.29 | $ | 1.88 | ||||||||||||
Pro forma: | ||||||||||||||||||||||||
Basic | $ | 0.97 | $ | 1.22 | $ | 1.90 | $ | 0.81 | $ | 1.27 | $ | 1.88 | ||||||||||||
Diluted | $ | 0.96 | $ | 1.20 | $ | 1.86 | $ | 0.80 | $ | 1.24 | $ | 1.83 |
34
39
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Risk-free interest rates | 4.29 | % | 3.14 | % | 3.55 | % | ||||||
Expected lives | 6 years | 6 years | 6 years | |||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Expected volatility | 54.14 | % | 54.75 | % | 50.93 | % |
The effects Fiscal Year 2003 2004 2005 Risk-free interest rates 3.14% 3.55% 4.09% Expected lives 6 years 6 years 6 years Dividend yield 0% 0% 0% Expected volatility 54.75% 50.93% 48.24%
Refer
May 31, 2005. All share and per share information included in the accompanying consolidated financial statements and related notes have been restated to reflect the stock split.
In connection with our share repurchase programs, as described in Note 6, we from time to time issued put option contracts and received premiums for doing so, with the premiums being added to our capital in excess of par. Under these contracts, the contract counterparties had the option to require us to purchase a specific number of shares of our common stock at specific strike prices per share on specific dates. See Note 6 for additional disclosures regarding our put option contracts.
Accounting for the Effect of Contingently Convertible Debt on Diluted Earnings per Share —In September 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share” (“EITF 04-8”), and the FASB ratified the consensus in October 2004. The EITF’s consensus states that shares of common stock contingently issuable pursuant to contingent convertible debt instruments should be included in diluted earnings per share computations, if dilutive, regardless of whether the contingent feature has been met. EITF 04-8 is effective for fiscal years ending after December 15, 2004 and must be applied retroactively. Our $130.0 million 3.125% Convertible Senior Notes due 2023 (“Notes”) are contingently convertible into shares of common stock initially at a conversion rate of 23.3187
35
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
shares of common stock per $1,000 principal amount of Notes and may, at our option, be settled in cash or a combination of cash and common stock. However, on January 28, 2005, we entered into a supplemental indenture relating to the Notes and irrevocably elected to settle the principal amount at issuance of such Notes in 100% cash when they become convertible and are surrendered by the holders thereof. Due to this election, the adoption of EITF 04-8 did not have a material impact on our financial position, results of operations or cash flows. See Note 3 for further information regarding the Notes.
respectively.
40
2. EARNINGS PER SHARE
41
2. | Earnings Per Share |
36
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table reconciles the earnings and shares used in the basic and diluted EPS computationsweighted average common shares outstanding and the related net earnings per share (in thousands, except per share amounts):
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Net earnings | $ | 42,355 | $ | 49,734 | $ | 71,356 | ||||||
Weighted average number of common shares outstanding | 40,590 | 38,789 | 36,029 | |||||||||
Basic earnings per share | $ | 1.04 | $ | 1.28 | $ | 1.98 | ||||||
Weighted average number of common shares outstanding | 40,590 | 38,789 | 36,029 | |||||||||
Assumed exercise of stock options | 287 | 506 | 784 | |||||||||
As adjusted | 40,877 | 39,295 | 36,813 | |||||||||
Diluted earnings per share | $ | 1.04 | $ | 1.27 | $ | 1.94 | ||||||
Fiscal Year | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Net earnings | $ | 49,734 | $ | 71,356 | $ | 103,903 | ||||||
Basic weighted average common shares outstanding | 58,184 | 54,044 | 53,753 | |||||||||
Effect of dilutive securities: | ||||||||||||
Convertible notes | — | — | 266 | |||||||||
Stock options and equity-based compensation | 759 | 1,176 | 1,346 | |||||||||
Diluted weighted average common shares outstanding | 58,943 | 55,220 | 55,365 | |||||||||
Net earnings per share: | ||||||||||||
Basic | $ | 0.85 | $ | 1.32 | $ | 1.93 | ||||||
Diluted | $ | 0.84 | $ | 1.29 | $ | 1.88 | ||||||
3. LONG-TERM DEBT
42
In January 2003,
3. | Long-Term Debt |
revolving credit facility and there was US$75.3 million outstanding under the Canadian term loan.
28, 2006.
37
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
occurrence of specified corporate transactions. Upon conversion of the Notes, in lieu of delivering common stock we may, at our election, deliver cash or a combination of cash and common stock. However, on January 28, 2005, we entered into a supplemental indenture relating to the Notes and irrevocably elected to settle the principal amount at issuance of such Notes in 100% cash when they become convertible and are surrendered by the holders thereof. The Notes are general senior unsecured obligations, ranking on parity in right of payment with all our existing and future unsecured senior indebtedness and our other general unsecured obligations, and senior in right of payment with all our future subordinated indebtedness. The Notes are effectively subordinated to all of our senior secured indebtedness and all indebtedness and liabilities of our subsidiaries. See Note 11 regarding a subsequent event that affects the conversion rate and conversion price of the Notes.
43
4. INCOME TAXES
28, 2006.
4. | Income Taxes |
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Current tax expense: | ||||||||||||
Federal | $ | 10,246 | $ | 17,889 | $ | 27,067 | ||||||
State | 1,010 | 1,081 | 2,078 | |||||||||
Foreign | 6,960 | 10,226 | 7,992 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
Federal and state | 5,868 | 3,098 | 3,333 | |||||||||
Foreign | 1,600 | (2,756 | ) | 1,889 | ||||||||
Total | $ | 25,684 | $ | 29,538 | $ | 42,359 | ||||||
Fiscal Year 2003 2004 2005 Current tax expense: Federal $ 17,889 $ 27,067 $ 46,050 State 1,081 2,078 3,567 Foreign 10,226 7,992 6,185 Deferred tax expense (benefit): Federal and state 3,098 3,333 1,206 Foreign (2,756 ) 1,889 1,777 Total $ 29,538 $ 42,359 $ 58,785
38
44
requires explanatory disclosures from companies that have not yet completed the evaluation. The Company is currently evaluating the effects of the repatriation provision and their impact on our consolidated financial statements. We do not expect to complete this evaluation before the end of 2005. The range of possible amounts of unremitted earnings that may be repatriated under this provision, if any, and the related potential income taxes cannot be reasonably estimated until this evaluation is complete.
Fiscal Year | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit | 1.3 | 2.3 | 1.7 | |||||||||
Foreign and Other | 1.4 | — | 0.6 | |||||||||
37.7 | % | 37.3 | % | 37.3 | % | |||||||
At January 31, 2004, we had net deferred tax liabilities of $5.1 million with $14.5 million classified as other current assets and $19.6 million classified as other liabilities (noncurrent). Fiscal Year 2003 2004 2005 Federal statutory rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal benefit 2.3 1.7 2.7 Taxes from earnings repatriation under the Jobs Creation Act — — 2.4 Reversal of tax accruals — — (2.7 ) Foreign tax rate differential and other — 0.6 (1.3 ) 37.3 % 37.3 % 36.1 %
2023.
January 29, | January 28, | |||||||||||||||
January 31, | January 29, | 2005 | 2006 | |||||||||||||
2004 | 2005 | |||||||||||||||
Deferred tax assets: | ||||||||||||||||
Accrued rent and other expenses | $ | 9,028 | $ | 10,750 | $ | 10,750 | $ | 14,912 | ||||||||
Accrued compensation | 2,016 | 2,969 | 2,969 | 4,185 | ||||||||||||
Accrued inventory markdowns | 595 | 1,283 | 1,283 | 1,387 | ||||||||||||
Deferred intercompany profits | 3,399 | 3,212 | 3,212 | 4,196 | ||||||||||||
Unused state operating loss carryforwards | 1,609 | 1,294 | 1,294 | 491 | ||||||||||||
Unused foreign tax credits | 873 | 665 | 665 | — | ||||||||||||
Other | 620 | 178 | 178 | 322 | ||||||||||||
18,140 | 20,351 | 20,351 | 25,493 | |||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Capitalized inventory costs | (3,483 | ) | (4,044 | ) | (4,044 | ) | (6,336 | ) | ||||||||
Property and equipment | (17,289 | ) | (20,751 | ) | (20,751 | ) | (23,041 | ) | ||||||||
Intangibles | (1,781 | ) | (2,499 | ) | (2,499 | ) | (3,265 | ) | ||||||||
Deferred interest | (674 | ) | (3,182 | ) | (3,182 | ) | (5,911 | ) | ||||||||
(23,227 | ) | (30,476 | ) | (30,476 | ) | (38,553 | ) | |||||||||
Net deferred tax liabilities | $ | (5,087 | ) | $ | (10,125 | ) | $ | (10,125 | ) | $ | (13,060 | ) | ||||
39
45
5. OTHER ASSETS AND ACCRUED EXPENSES
5. | Other Assets and Accrued Expenses |
January 31, | January 29, | |||||||
2004 | 2005 | |||||||
Trademarks, tradenames and other intangibles | $ | 9,475 | $ | 9,733 | ||||
Accumulated amortization | (2,450 | ) | (3,307 | ) | ||||
7,025 | 6,426 | |||||||
Tuxedo rental assets, deposits and other | 33,363 | 44,007 | ||||||
Total | $ | 40,388 | $ | 50,433 | ||||
Accrued expenses consist of the following (in thousands): | ||||||||
Accrued salary, bonus and vacation | $ | 24,041 | $ | 27,967 | ||||
Sales, payroll and property taxes payable | 10,725 | 11,826 | ||||||
Unredeemed gift certificates | 13,096 | 16,062 | ||||||
Accrued workers compensation and medical costs | 8,919 | 8,252 | ||||||
Other | 14,351 | 18,816 | ||||||
Total | $ | 71,132 | $ | 82,923 | ||||
6. CAPITAL STOCK, STOCK OPTIONS AND BENEFIT PLANS
January 29, January 28, 2005 2006 Trademarks, tradenames and other intangibles $ 9,733 $ 9,733 Accumulated amortization (3,307 ) (4,261 ) 6,426 5,472 Tuxedo rental assets, deposits and other 44,007 61,003 Total $ 50,433 $ 66,475 Accrued expenses consist of the following (in thousands): Accrued salary, bonus and vacation $ 27,967 $ 29,707 Sales, payroll and property taxes payable 11,826 12,343 Unredeemed gift certificates 16,062 19,404 Accrued workers compensation and medical costs 8,252 8,873 Other 18,816 21,608 Total $ 82,923 $ 91,935
6. | Capital Stock, Stock Options and Benefit Plans |
2003.
46
40
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
$17.65.
Average | ||||||||||||
Price Per | ||||||||||||
Shares | Cost | Share | ||||||||||
Repurchases under the June 2004 program in open market transactions | 1,503,750 | $ | 40,490 | $ | 26.93 | |||||||
Repurchases under the May 2005 program in open market transactions | 1,696,000 | 49,790 | 29.36 | |||||||||
Total shares repurchased during fiscal 2005 | 3,199,750 | $ | 90,280 | $ | 28.21 | |||||||
Treasury | ||||
Shares | ||||
Balance, February 1, 2003 | 4,268,047 | |||
Treasury stock issued to profit sharing plan | (62,762 | ) | ||
Purchases of treasury stock | 6,263,850 | |||
Balance, January 31, 2004 | 10,469,135 | |||
Treasury stock issued to profit sharing plan | (65,616 | ) | ||
Purchases of treasury stock | 633,600 | |||
Balance, January 29, 2005 | 11,037,119 | |||
Treasury stock issued to profit sharing plan | (67,628 | ) | ||
Purchases of treasury stock | 3,199,750 | |||
Balance, January 28, 2006 | 14,169,241 | |||
47
41
48
Weighted | ||||||||||||
Shares Under | Average | Options | ||||||||||
Option | Exercise Price | Exercisable | ||||||||||
Options outstanding, February 2, 2002 | 2,793,207 | $ | 20.80 | 1,594,171 | ||||||||
Granted | 500,800 | $ | 20.42 | |||||||||
Exercised | (165,105 | ) | $ | 13.77 | ||||||||
Forfeited | (125,115 | ) | $ | 21.66 | ||||||||
Options outstanding, February 1, 2003 | 3,003,787 | $ | 21.09 | 1,797,834 | ||||||||
Granted | 608,125 | $ | 17.23 | |||||||||
Exercised | (421,441 | ) | $ | 17.98 | ||||||||
Forfeited | (75,533 | ) | $ | 20.73 | ||||||||
Options outstanding, January 31, 2004 | 3,114,938 | $ | 20.76 | 1,444,494 | ||||||||
Granted | 245,000 | $ | 29.28 | |||||||||
Exercised | (489,561 | ) | $ | 19.93 | ||||||||
Forfeited | (115,189 | ) | $ | 18.44 | ||||||||
Options outstanding, January 29, 2005 | 2,755,188 | $ | 21.76 | 1,347,475 | ||||||||
Shares Under Weighted Average Options Option Exercise Price Exercisable Options outstanding, February 1, 2003 4,505,681 $ 14.06 2,696,751 Granted 912,188 $ 11.48 Exercised (632,162 ) $ 11.99 Forfeited (113,300 ) $ 13.82 Options outstanding, January 31, 2004 4,672,407 $ 13.84 2,166,741 Granted 367,500 $ 19.52 Exercised (734,342 ) $ 13.28 Forfeited (172,783 ) $ 12.29 Options outstanding, January 29, 2005 4,132,782 $ 14.51 2,021,213 Granted 21,000 $ 31.54 Exercised (1,667,477 ) $ 13.69 Forfeited (479,760 ) $ 14.17 Options outstanding, January 28, 2006 2,006,545 $ 15.58 935,516
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Remaining | Average | Average | ||||||||||||||||||
Range of | Number | Contractual | Exercise | Number | Exercise | |||||||||||||||
Exercise Prices | Outstanding | Life | Price | Exercisable | Price | |||||||||||||||
$ 11.90 to 18.00 | 687,070 | 4.9 Years | $ | 14.22 | 379,819 | $ | 15.57 | |||||||||||||
18.00 to 21.50 | 795,104 | 5.7 Years | 21.24 | 352,218 | 21.19 | |||||||||||||||
21.50 to 24.00 | 783,837 | 6.6 Years | 23.21 | 338,776 | 23.44 | |||||||||||||||
24.00 to 50.00 | 489,177 | 6.2 Years | 30.87 | 276,662 | 31.17 | |||||||||||||||
$ 11.90 to 50.00 | 2,755,188 | 5.8 Years | $ | 21.76 | 1,347,475 | $ | 22.22 | |||||||||||||
Options Outstanding Options Exercisable Weighted- Average Weighted- Weighted- Remaining Average Average Range of Number Contractual Exercise Number Exercise Outstanding Life Price Exercisable Price $ 7.97 to 10.00 214,526 6.9 Years $ 8.52 54,027 $ 8.55 10.00 to 18.00 1,464,668 5.4 Years 14.77 781,385 14.77 18.00 to 21.50 92,497 7.1 Years 20.64 28,750 20.14 21.50 to 34.64 234,854 6.9 Years 25.13 71,354 29.53 $ 7.97 to 34.64 2,006,545 5.9 Years $ 15.58 935,516 $ 15.70
49
42
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
49,211 65,596 shares, respectively, under the ESDP, the weighted-average fair value of which was $14.82, $15.41$10.27, $15.18 and $22.77$21.76 per share, respectively. As of January 29, 2005, 1,105,83628, 2006, 1,593,159 shares were reserved for future issuance under the ESDP.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
7. | Goodwill and Other Intangible Assets |
Balance, February 1, 2003 | $ | 36,607 | ||
Goodwill of acquired business | 4,550 | |||
Translation adjustment | 2,710 | |||
Balance, January 31, 2004 | 43,867 | |||
Goodwill of acquired business | 10,538 | |||
Translation adjustment | 1,419 | |||
Balance, January 29, 2005 | $ | 55,824 | ||
Balance, January 31, 2004 $ 43,867 Goodwill of acquired business 10,538 Translation adjustment 1,419 Balance, January 29, 2005 55,824 Translation adjustment 1,777 Balance, January 28, 2006 $ 57,601
50
January 31, | January 29, | |||||||
2004 | 2005 | |||||||
Trademarks, tradenames and other intangibles | $ | 9,475 | $ | 9,733 | ||||
Accumulated amortization | (2,450 | ) | (3,307 | ) | ||||
Net total | $ | 7,025 | $ | 6,426 | ||||
January 29, January 28, 2005 2006 Trademarks, tradenames and other intangibles $ 9,733 $ 9,733 Accumulated amortization (3,307 ) (4,261 ) Net total $ 6,426 $ 5,472
8. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
2009 and $628,000 for the fiscal year 2010.
8. | Accounting for Derivative Instruments and Hedging |
43
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. RELATED PARTY TRANSACTIONS
9. | Related Party Transactions |
51
10. COMMITMENTS AND CONTINGENCIES
10. | Commitments and Contingencies |
Operating | Capital | |||||||
Fiscal Year | Leases | Leases | ||||||
2005 | $ | 95,417 | $ | 717 | ||||
2006 | 82,690 | 534 | ||||||
2007 | 72,358 | 412 | ||||||
2008 | 61,213 | 275 | ||||||
2009 | 48,815 | 122 | ||||||
Thereafter | 100,526 | 368 | ||||||
Total | $ | 461,019 | 2,428 | |||||
Amounts representing interest | (761 | ) | ||||||
Capital lease obligations | $ | 1,667 | ||||||
Operating Capital Leases Leases 2006 $ 104,589 $ 878 2007 95,289 744 2008 84,316 601 2009 71,721 440 2010 55,811 268 Thereafter 109,346 278 Total $ 521,072 3,209 Amounts representing interest (710 ) Capital lease obligations $ 2,499
44
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
On April 18, 2003, a lawsuit was filed against the Company in the Superior Court of California for the County of Orange, Case No. 03CC00132 (the “Orange County Suit”). The Orange County Suit was brought as a purported class action and alleges several causes of action, each based on the factual allegation that in the State of California the Company misclassified its managers and assistant managers as exempt from the application of certain California labor statutes. Because of this alleged misclassification, the Orange County Suit alleges that the Company failed to pay overtime compensation and provide the required rest periods to such employees. The Orange County Suit seeks, among other things, declaratory and injunctive relief along with an accounting as to alleged wages, premium pay, penalties, interest and restitution allegedly due the class defendants.
On April 1, 2004, a lawsuit was filed against the Company in the Superior Court of California for the County of Los Angeles, Case No. BC313038 (the “PII Suit”). The PII Suit, which was brought as a purported class action, alleges two causes of action, each based on the factual allegation that the Company requests or requires, in conjunction with a customer’s use of his or her credit card, the customer to provide personal identification information which is recorded upon the credit card transaction form. The PII Suit seeks: (i) civil penalties pursuant to the California Civil Code; (ii) an order enjoining the Company from requesting or requiring that a customer provide personal identification information which is then recorded on the transaction form; (iii) permanent and preliminary injunctions against the Company requesting or requiring that a customer provide personal identification information which is then recorded on the transaction form; (iv) restitution of all funds allegedly acquired by means of any act or practice declared by the Court to be unlawful or fraudulent or to constitute a violation of the California Business and Professions Code; (v) attorney’s fees; and (vi) costs of suit. The court has not yet decided whether the action may proceed as a class action. The Court has determined that the claim for restitution may not proceed. We have reached a tentative settlement; however, no assurance can be given that the court will approve the settlement or that the anticipated resolution will be realized. We do not believe the ultimate resolution of the PII Suit will have a material adverse effect on our financial position, results of operations or cash flows.
In addition, we are involved in various routine legal proceedings, including ongoing litigation, incidental to the conduct of our business. Management believes that none of these matters will have a material adverse effect on our financial position, results of operations or cash flows.
11. SUBSEQUENT EVENT
On March 4, 2005, we entered into a Succession Agreement with Eric J. Lane, former President and Chief Operating Officer and current Executive Vice President of the Company. Eric J. Lane, voluntarily and at his request, stepped down as President and Chief Operating Officer effective February 1, 2005 and will serve as an Executive Vice President of the Company through July 31, 2005.
On March 8, 2005, we committed to a course of action in connection with the termination of operations in our R&D retail concept “Eddie Rodriguez”. We have determined that there will be no further investments made in Eddie Rodriguez and that the six stores operating as of January 29, 2005 will be wound down over the course of fiscal 2005.
45
52
12. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
11. | Subsequent Event |
12. | Quarterly Results of Operations (Unaudited) |
Fiscal 2003 | ||||||||||||||||
Quarters Ended | ||||||||||||||||
May 3, | August 2, | November 1, | January 31, | |||||||||||||
2003 | 2003 | 2003 | 2004 | |||||||||||||
(as restated- | (as restated- | (as restated- | (as restated- | |||||||||||||
note 13) | note 13) | note 13) | note 13) | |||||||||||||
Net sales | $ | 313,122 | $ | 334,292 | $ | 322,613 | $ | 422,653 | ||||||||
Gross margin | 111,091 | 122,807 | 118,321 | 161,227 | ||||||||||||
Net earnings | $ | 10,936 | $ | 11,353 | $ | 8,840 | $ | 18,605 | ||||||||
Net earnings per share: | ||||||||||||||||
Basic | $ | 0.28 | $ | 0.29 | $ | 0.23 | $ | 0.50 | ||||||||
Diluted | $ | 0.28 | $ | 0.29 | $ | 0.22 | $ | 0.49 |
Fiscal 2004 | ||||||||||||||||
Quarters Ended | ||||||||||||||||
May 1, | July 31, | October 30, | January 29, | |||||||||||||
2004 | 2004 | 2004 | 2005 | |||||||||||||
(as restated- | (as restated- | (as restated- | ||||||||||||||
note 13) | note 13) | note 13) | ||||||||||||||
Net sales | $ | 360,729 | $ | 369,480 | $ | 357,795 | $ | 458,675 | ||||||||
Gross margin | 137,810 | 145,456 | 139,356 | 180,382 | ||||||||||||
Net earnings | $ | 15,055 | $ | 18,380 | $ | 12,878 | $ | 25,043 | ||||||||
Net earnings per share: | ||||||||||||||||
Basic | $ | 0.42 | $ | 0.51 | $ | 0.36 | $ | 0.69 | ||||||||
Diluted | $ | 0.41 | $ | 0.50 | $ | 0.35 | $ | 0.67 |
As previously reported: Fiscal 2004 Quarters Ended May 1, July 31, October 30, January 29, 2004 2004 2004 2005 Net sales $ 360,729 $ 369,480 $ 357,795 $ 458,675 Gross margin 137,810 145,456 139,356 180,382 Net earnings $ 15,055 $ 18,380 $ 12,878 $ 25,043 Net earnings per share: Basic $ 0.28 $ 0.34 $ 0.24 $ 0.46 Diluted $ 0.27 $ 0.33 $ 0.23 $ 0.45
Fiscal 2003 | ||||||||||||||||
Quarters Ended | ||||||||||||||||
May 3, | August 2, | November 1, | January 31, | |||||||||||||
2003 | 2003 | 2003 | 2004 | |||||||||||||
Net sales | $ | 313,122 | $ | 334,292 | $ | 322,613 | $ | 422,653 | ||||||||
Gross margin | 111,219 | 122,936 | 118,438 | 161,350 | ||||||||||||
Net earnings | $ | 11,012 | $ | 11,448 | $ | 9,055 | $ | 18,511 | ||||||||
Net earnings per share: | ||||||||||||||||
Basic | $ | 0.28 | $ | 0.29 | $ | 0.23 | $ | 0.50 | ||||||||
Diluted | $ | 0.28 | $ | 0.29 | $ | 0.23 | $ | 0.49 |
Fiscal 2004 Quarters Ended | ||||||||||||
May 1, | July 31, | October 30, | ||||||||||
2004 | 2004 | 2004 | ||||||||||
Net sales | $ | 360,729 | $ | 369,480 | $ | 357,795 | ||||||
Gross margin | 137,872 | 145,444 | 139,365 | |||||||||
Net earnings | $ | 15,096 | $ | 18,214 | $ | 12,574 | ||||||
Net earnings per share: | ||||||||||||
Basic | $ | 0.42 | $ | 0.51 | $ | 0.35 | ||||||
Diluted | $ | 0.41 | $ | 0.50 | $ | 0.34 |
Fiscal 2005 Quarters Ended April 30, July 30, October 29, January 28, 2005 2005 2005 2006 Net sales $ 411,649 $ 423,576 $ 392,695 $ 496,978 Gross margin 165,783 168,296 157,829 205,227 Net earnings $ 22,704 $ 24,386 $ 24,079 $ 32,734 Net earnings per share: Basic $ 0.42 $ 0.45 $ 0.45 $ 0.62 Diluted $ 0.41 $ 0.43 $ 0.44 $ 0.60
46
53
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. RESTATEMENT OF FINANCIAL STATEMENTS
Like many other companies in the retail and restaurant industries, we recently reviewed our accounting treatment for leases and depreciation of related leasehold improvements. Following our review, we determined to restate our prior financial statements for fiscal 2002 and 2003. Although we do not consider that these errors resulted in a material misstatement of our consolidated financial statements for any previously reported annual period, the aggregate effect of correcting the errors in the fourth quarter of fiscal 2004 would have had a material effect on our results of operations for that year.
Historically, when accounting for leases, we recorded rent expense on a straight-line basis over the initial non-cancelable lease term, with the term commencing generally when the store opened. We depreciated leasehold improvements on those properties over the lesser of the useful life of the asset or an average period, ranging from eight to 15 years for different leasehold groups, which represented the initial non-cancelable lease term plus periods of expected renewal. Landlord incentives received for reimbursement of leasehold improvements were netted against the amount recorded for the leasehold improvements.
We have conformed our lease terms used for recording straight-line rent and depreciation of leasehold improvements to include renewal option periods where the renewal appears reasonably assured. The lease terms commence when we take possession with the right to control use of the leased premises. We have also adopted a policy of capitalizing rent amounts allocated to the construction period for leased properties as leasehold improvements. Landlord incentives received for reimbursement of leasehold improvements are recorded as deferred rent and amortized as a reduction to rent expense over the term of the lease. We have restated our fiscal 2002 and 2003 consolidated financial statements for these lease accounting matters. We have also restated our quarterly financial results for fiscal 2003 and 2004 as shown in Note 12.
The restatement adjustments decreased net earnings by $0.1 million and $0.3 million in fiscal 2002 and 2003, respectively. The cumulative effect of these accounting changes is a reduction to retained earnings of $5.1 million as of the beginning of fiscal 2002. The restatement did not have any impact on our previously reported net cash flows or our sales or comparable store sales.
Fiscal Year 2003 | ||||||||||||
As Previously | ||||||||||||
(In thousands, except per share amounts) | Reported | Adjustment | As Restated | |||||||||
Consolidated Balance Sheet: | ||||||||||||
Other current assets | $ | 30,858 | $ | 170 | $ | 31,028 | ||||||
Property and equipment, net | 215,064 | 8,759 | 223,823 | |||||||||
Total assets | 869,198 | 8,929 | 878,127 | |||||||||
Income taxes payable | 26,096 | (52 | ) | 26,044 | ||||||||
Deferred taxes and other liabilities | 31,682 | 14,649 | 46,331 | |||||||||
Retained earnings | 447,566 | (5,492 | ) | 442,074 | ||||||||
Accumulated other comprehensive income | 10,533 | (176 | ) | 10,357 | ||||||||
Total shareholders’ equity | 493,460 | (5,668 | ) | 487,792 | ||||||||
Consolidated Statement of Earnings: | ||||||||||||
Cost of goods sold, including buying, distribution and occupancy costs | $ | 878,737 | $ | 497 | $ | 879,234 | ||||||
Gross margin | 513,943 | (497 | ) | 513,446 | ||||||||
Selling, general and administrative expenses | 431,695 | (32 | ) | 431,663 | ||||||||
Operating income | 82,248 | (465 | ) | 81,783 | ||||||||
Earnings before income taxes | 79,737 | (465 | ) | 79,272 | ||||||||
Provision for income taxes | 29,711 | (173 | ) | 29,538 | ||||||||
Net earnings | 50,026 | (292 | ) | 49,734 | ||||||||
Basic earnings per share (1) | 1.29 | (0.008 | ) | 1.28 | ||||||||
Diluted earnings per share (1) | 1.27 | (0.007 | ) | 1.27 | ||||||||
Consolidated Statement of Cash Flows: | ||||||||||||
Cash provided by operating activities | $ | 118,767 | $ | 963 | $ | 119,730 | ||||||
Cash used in investing activities | (54,844 | ) | (963 | ) | (55,807 | ) |
47
THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Fiscal Year 2002 | ||||||||||||
As Previously | ||||||||||||
(In thousands, except per share amounts) | Reported | Adjustment | As Restated | |||||||||
Consolidated Statement of Earnings: | ||||||||||||
Cost of goods sold, including buying, distribution and occupancy costs | $ | 840,701 | $ | 109 | $ | 840,810 | ||||||
Gross margin | 454,348 | (109 | ) | 454,239 | ||||||||
Selling, general and administrative expenses | 384,956 | (17 | ) | 384,939 | ||||||||
Operating income | 69,392 | (92 | ) | 69,300 | ||||||||
Earnings before income taxes | 68,131 | (92 | ) | 68,039 | ||||||||
Provision for income taxes | 25,719 | (35 | ) | 25,684 | ||||||||
Net earnings | 42,412 | (57 | ) | 42,355 | ||||||||
Basic earnings per share (1) | 1.04 | (0.001 | ) | 1.04 | ||||||||
Diluted earnings per share (1) | 1.04 | (0.001 | ) | 1.04 | ||||||||
Consolidated Statement of Cash Flows: | ||||||||||||
Cash provided by operating activities | $ | 113,026 | $ | 1,958 | $ | 114,984 | ||||||
Cash used in investing activities | (41,229 | ) | (1,958 | ) | (43,187 | ) |
48
ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. | Controls and Procedures |
ITEM 9B. OTHER INFORMATION
Item 9B. | Other Information |
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Item 10. | Directors and Executive Officers of the Company |
21, 2006.
ITEM 11. EXECUTIVE COMPENSATION
Item 11. | Executive Compensation |
49
54
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Number of | Weighted- | Number of Securities | ||||||||||
Securities to be | Average | Remaining Available for | ||||||||||
Issued Upon | Exercise | Future Issuance Under | ||||||||||
Exercise of | Price of | Equity Compensation | ||||||||||
Outstanding | Outstanding | Plans (excluding | ||||||||||
Options | Options | securities in column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity Compensation Plans Approved by Security Holders | 1,424,526 | 21.49 | 1,047,328 | |||||||||
Equity Compensation Plans Not Approved by Security Holders (1) | 1,330,662 | 25.05 | 137,124 | |||||||||
Total | 2,755,188 | 21.76 | 1,184,452 | |||||||||
Number of | Weighted- | Number of Securities | ||||||||||
Securities to be | Average | Remaining Available for | ||||||||||
Issued Upon | Exercise | Future Issuance Under | ||||||||||
Exercise of | Price of | Equity Compensation | ||||||||||
Outstanding | Outstanding | Plans (Excluding | ||||||||||
Options | Options | securities in column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity Compensation Plans Approved by Security Holders | 1,346,603 | 10.04 | 1,496,106 | |||||||||
Equity Compensation Plans Not Approved by Security Holders(1) | 1,172,830 | 15.13 | 237,772 | |||||||||
Total | 2,519,433 | 12.41 | 1,733,878 | |||||||||
(1) | The Company has adopted the 1998 Key Employee Stock Option Plan (the “1998 Plan”) which, as amended, provides for the grant of options to purchase up to |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. | Certain Relationships and Related Transactions |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Item 14. | Principal Accountant Fees and Services |
50
55
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 15. | Exhibits and Financial Statement Schedules |
28, 2006
28, 2006
28, 2006
28, 2006
Balance at | Charged to | Charged to | Deductions | Balance at | ||||||||||||||||||||
Beginning | Costs | Other | from | Translation | End of | |||||||||||||||||||
of Period | and Expenses | Accounts (4) | Reserve (2) | Adjustment | Period | |||||||||||||||||||
Allowance for uncollectible accounts (1) : | ||||||||||||||||||||||||
Year ended February 1, 2003 | $ | 322 | $ | 225 | $ | — | $ | (106 | ) | $ | — | $ | 441 | |||||||||||
Year ended January 31, 2004 | 441 | 360 | — | (411 | ) | 3 | 393 | |||||||||||||||||
Year ended January 29, 2005 | 393 | 300 | — | (289 | ) | 1 | 405 | |||||||||||||||||
Allowance for sales returns (1) (3) : | ||||||||||||||||||||||||
Year ended February 1, 2003 | $ | 325 | $ | — | $ | — | $ | — | $ | — | $ | 325 | ||||||||||||
Year ended January 31, 2004 | 325 | (53 | ) | 92 | — | — | 364 | |||||||||||||||||
Year ended January 29, 2005 | 364 | (96 | ) | 158 | — | — | 426 | |||||||||||||||||
Inventory reserves (1) : | ||||||||||||||||||||||||
Year ended February 1, 2003 | $ | 10,560 | $ | (3,551 | ) | $ | — | $ | — | $ | 125 | $ | 7,134 | |||||||||||
Year ended January 31, 2004 | 7,134 | (588 | ) | — | — | 311 | 6,857 | |||||||||||||||||
Year ended January 29, 2005 | 6,857 | 48 | — | — | 192 | 7,097 |
Balance at | Charged to | Charged to | Deductions | Balance at | ||||||||||||||||||||
Beginning | Costs and | Other | from | Translation | End of | |||||||||||||||||||
of Period | Expenses | Accounts(4) | Reserve(2) | Adjustment | Period | |||||||||||||||||||
Allowance for uncollectible accounts(1): | ||||||||||||||||||||||||
Year ended January 31, 2004 | $ | 441 | $ | 360 | $ | — | $ | (411 | ) | $ | 3 | $ | 393 | |||||||||||
Year ended January 29, 2005 | 393 | 300 | — | (289 | ) | 1 | 405 | |||||||||||||||||
Year ended January 28, 2006 | 405 | 145 | — | (276 | ) | 2 | 276 | |||||||||||||||||
Allowance for sales returns(1)(3): | ||||||||||||||||||||||||
Year ended January 31, 2004 | $ | 325 | $ | (53 | ) | $ | 92 | $ | — | $ | — | $ | 364 | |||||||||||
Year ended January 29, 2005 | 364 | (96 | ) | 158 | — | — | 426 | |||||||||||||||||
Year ended January 28, 2006 | 426 | (67 | ) | 39 | — | — | 398 | |||||||||||||||||
Inventory reserves(1): | ||||||||||||||||||||||||
Year ended January 31, 2004 | $ | 7,134 | $ | (588 | ) | $ | — | $ | — | $ | 311 | $ | 6,857 | |||||||||||
Year ended January 29, 2005 | 6,857 | 48 | — | — | 192 | 7,097 | ||||||||||||||||||
Year ended January 28, 2006 | 7,097 | 449 | — | — | 298 | 7,844 |
(1) | The allowance for uncollectible accounts, the allowance for sales returns and the inventory reserves are evaluated at the end of each fiscal quarter and adjusted based on the evaluation. |
(2) | Consists primarily of write-offs of bad debt. | |
(3) | Allowance for sales returns is included in accrued expenses. | |
(4) | Deducted from net sales. |
51
3. Exhibits
52
56
Exhibit | ||||||
Number | Exhibit | |||||
3 | .1 | — | Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 30, 1994). | |||
3 | .2 | — | By-laws, as amended (incorporated by reference from Exhibit 3.2 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 1, 1997). | |||
3 | .3 | — | Articles of Amendment to the Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 31, 1999). | |||
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 Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
4 | .4 | — | Articles of Amendment to the Restated Articles of Incorporation (included as Exhibit 3.3). | |||
4 | .5 | — | Amended and Restated Credit Agreement, dated as of December 21, 2005, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. as Canadian Agent. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on December 27, 2005). | |||
4 | .6 | — | Term Sheet Agreement dated as of January 29, 2003 evidencing the uncommitted CAN$10 million facility of National City Bank, Canada Branch to Golden Brand Clothing (Canada) Ltd. (incorporated by reference from Exhibit 4.7 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 1, 2003). | |||
4 | .7 | — | Indenture (including form of note) dated October 21, 2003 among the Company and JPMorgan Chase Bank, as trustee, relating to the Company’s 3.125% Convertible Senior Notes due 2023 (incorporated by reference from Exhibit 4.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended November 1, 2003). | |||
4 | .8 | — | Registration Rights Agreement dated October 21, 2003 among the Company and Bear Stearns & Co. Inc., Wachovia Capital Markets, LLC, J.P. Morgan Securities Inc., Fleet Securities, Inc. (incorporated by reference from Exhibit 4.2 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended November 1, 2003). | |||
4 | .9 | — | Supplemental Indenture dated January 28, 2005, by and between the Company and JPMorgan Chase Bank, National Association (incorporated by reference from Exhibit 4.1 to the Company’s Current Report onForm 8-K filed with the Commission on January 28, 2005). | |||
*10 | .1 | — | 1992 Stock Option Plan (incorporated by reference from Exhibit 10.5 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
*10 | .2 | — | First Amendment to 1992 Stock Option Plan (incorporated by Reference from Exhibit 10.9 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-60516)). | |||
*10 | .3 | — | 1992 Non-Employee Director Stock Option Plan (As Amended and Restated Effective January 1, 2004), including the forms of stock option agreement and restricted stock award agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on March 18, 2005). | |||
*10 | .4 | — | Stock Agreement dated as of March 23, 1992, between the Company and George Zimmer (incorporated by reference from Exhibit 10.13 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
*10 | .5 | — | 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 onForm 10-K for the fiscal year ended January 28, 1995). | |||
*10 | .6 | — | 1996 Long-Term Incentive Plan (As Amended and Restated Effective March 29, 2004), including the forms of stock option agreement, restricted stock award agreement and deferred stock unit award agreement (incorporated by reference from Exhibit 10.2 to the Company’s Current Report onForm 8-K filed with the Commission on March 18, 2005). | |||
57
Exhibit | ||||||
Number | Exhibit | |||||
*10 | .7 | — | 1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 10.18 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 31, 1998). | |||
*10 | .8 | — | First Amendment to 1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement onForm S-8 (registrationNo.333-80033)). | |||
*10 | .9 | — | Second Amendment to 1998 Key Employee Stock Option Plan (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 29, 2000). | |||
*10 | .10 | — | Split-Dollar Agreement and related Split-Dollar Collateral Assignment dated May 25, 1995, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.26 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .11 | — | Split-Dollar Agreement and related Split-Dollar Collateral Assignment dated May 25, 1995, between the Company, David H. Edwab and George Zimmer, Co-Trustee of the David H. Edwab 1995 Irrevocable Trust (incorporated by reference from Exhibit 10.27 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .12 | — | First Amendment to Split-Dollar Agreement dated January 17, 2002, between the Company, David H. Edwab and George Zimmer, Trustee of the David H. Edwab 1995 Irrevocable Trust (incorporated by reference from Exhibit 10.28 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .13 | — | Second Amended and Restated Employment Agreement effective as of October 1, 2005, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on November 14, 2005). | |||
10 | .14 | — | Aircraft Lease Agreement dated August 20, 2004, by and between Regal Aviation LLC and MW Sky LLC (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 31, 2004). | |||
*10 | .15 | — | 2004 Long-Term Incentive Plan (incorporated by reference from Exhibit 10.1 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 29, 2005). | |||
21 | .1 | — | Subsidiaries of the Company (filed herewith). | |||
23 | .1 | — | Consent of Deloitte & Touche LLP, independent auditors (filed herewith). | |||
31 | .1 | — | Certification of Annual Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith). | |||
31 | .2 | — | Certification of Annual Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith). | |||
32 | .1 | — | Certification of Annual Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith). | |||
32 | .2 | — | Certification of Annual Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith). |
* | ||||
Management Compensation or Incentive Plan |
5358
SIGNATURES
By | ||||
/s/ | ||||
George Zimmer | ||||
13, 2006
Signature | Title | Date | ||||
/s/ George Zimmer | Chairman of the Board, Chief Executive Officer and Director | April | ||||
/s/ Neill P. Davis Neill P. Davis | Executive Vice President, Chief Financial Officer and | April 13, 2006 | ||||
/s/ | ||||||
Diana M. Wilson | Senior Vice President and Principal Accounting Officer | April | ||||
/s/ David H. Edwab | Vice Chairman of the Board and Director | April | ||||
/s/ Rinaldo S. Brutoco Rinaldo S. Brutoco | Director | April 13, 2006 | ||||
/s/ Michael L. Ray | Director | April | ||||
/s/ Sheldon I. Stein Sheldon I. Stein | Director | April 13, 2006 | ||||
/s/ Kathleen Mason | Director | April | ||||
Deepak Chopra | Director | April 13, 2006 | ||||
/s/ William B. Sechrest | Director | April | ||||
13, 2006 |
54
Exhibit Index
60
59
Exhibit | ||||||
Number | Exhibit | |||||
3 | .1 | — | Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 30, 1994). | |||
3 | .2 | — | By-laws, as amended (incorporated by reference from Exhibit 3.2 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 1, 1997). | |||
3 | .3 | — | Articles of Amendment to the Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 31, 1999). | |||
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 Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
4 | .4 | — | Articles of Amendment to the Restated Articles of Incorporation (included as Exhibit 3.3). | |||
4 | .5 | — | Amended and Restated Credit Agreement, dated as of December 21, 2005, by and among The Men’s Wearhouse, Inc., Moores The Suit People Inc., Golden Brand Clothing (Canada) Ltd., the financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. as Canadian Agent. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on December 27, 2005). | |||
4 | .6 | — | Term Sheet Agreement dated as of January 29, 2003 evidencing the uncommitted CAN$10 million facility of National City Bank, Canada Branch to Golden Brand Clothing (Canada) Ltd. (incorporated by reference from Exhibit 4.7 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 1, 2003). | |||
4 | .7 | — | Indenture (including form of note) dated October 21, 2003 among the Company and JPMorgan Chase Bank, as trustee, relating to the Company’s 3.125% Convertible Senior Notes due 2023 (incorporated by reference from Exhibit 4.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended November 1, 2003). | |||
4 | .8 | — | Registration Rights Agreement dated October 21, 2003 among the Company and Bear Stearns & Co. Inc., Wachovia Capital Markets, LLC, J.P. Morgan Securities Inc., Fleet Securities, Inc. (incorporated by reference from Exhibit 4.2 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended November 1, 2003). | |||
4 | .9 | — | Supplemental Indenture dated January 28, 2005, by and between the Company and JPMorgan Chase Bank, National Association (incorporated by reference from Exhibit 4.1 to the Company’s Current Report onForm 8-K filed with the Commission on January 28, 2005). | |||
*10 | .1 | — | 1992 Stock Option Plan (incorporated by reference from Exhibit 10.5 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
*10 | .2 | — | First Amendment to 1992 Stock Option Plan (incorporated by Reference from Exhibit 10.9 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-60516)). | |||
*10 | .3 | — | 1992 Non-Employee Director Stock Option Plan (As Amended and Restated Effective January 1, 2004), including forms of stock option agreement and restricted stock award agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on March 18, 2005). | |||
*10 | .4 | — | Stock Agreement dated as of March 23, 1992, between the Company and George Zimmer (incorporated by reference from Exhibit 10.13 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 33-45949)). | |||
*10 | .5 | — | 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 onForm 10-K for the fiscal year ended January 28, 1995). | |||
*10 | .6 | — | 1996 Long-Term Incentive Plan (As Amended and Restated Effective March 29, 2004), including the forms of stock option agreement, restricted stock award agreement and deferred stock unit award agreement (incorporated by reference from Exhibit 10.20 to the Company’s Current Report onForm 8-K filed with the Commission on March 18, 2005). | |||
Exhibit | ||||||
Number | Exhibit | |||||
*10 | .7 | — | 1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 10.18 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 31, 1998). | |||
*10 | .8 | — | First Amendment to 1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement onForm S-8 (registrationNo. 333-80033)). | |||
*10 | .9 | — | Second Amendment to 1998 Key Employee Stock Option Plan (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 29, 2000). | |||
*10 | .10 | — | Split-Dollar Agreement and related Split-Dollar Collateral Assignment dated May 25, 1995, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.26 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .11 | — | Split-Dollar Agreement and related Split-Dollar Collateral Assignment dated May 25, 1995, between the Company, David H. Edwab and George Zimmer, Co-Trustee of the David H. Edwab 1995 Irrevocable Trust (incorporated by reference from Exhibit 10.27 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .12 | — | First Amendment to Split-Dollar Agreement dated January 17, 2002, between the Company, David H. Edwab and George Zimmer, Trustee of the David H. Edwab 1995 Irrevocable Trust (incorporated by reference from Exhibit 10.28 to the Company’s Annual Report onForm 10-K for the fiscal year ended February 2, 2002). | |||
*10 | .13 | — | Second Amended and Restated Employment Agreement effective as of October 1, 2005, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Commission on November 14, 2005). | |||
10 | .14 | — | Aircraft Lease Agreement dated August 20, 2004, by and between Regal Aviation LLC and MW Sky LLC (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 31, 2004). | |||
*10 | .15 | — | 2004 Long-Term Incentive Plan (incorporated by reference from Exhibit 10.1 to the Company’s Annual Report onForm 10-K for the fiscal year ended January 29, 2005). | |||
21 | .1 | — | Subsidiaries of the Company (filed herewith). | |||
23 | .1 | — | Consent of Deloitte & Touche LLP, independent auditors (filed herewith). | |||
31 | .1 | — | Certification of Annual Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith). | |||
31 | .2 | — | Certification of Annual Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith). | |||
32 | .1 | — | Certification of Annual Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith). | |||
32 | .2 | — | Certification of Annual Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith). |
* | ||||
Management Compensation or Incentive Plan |
61