PART I

~~ITEM 1. BUSINESS~~

Item 1. Business

General

The Men’s Wearhouse began operations in 1973 as a partnership and was incorporated as The Men’s Wearhouse, Inc. (the “Company”) under the laws of Texas in May 1974. Our principal corporate and executive offices are located at 5803 Glenmont Drive, Houston, Texas77081-1701 (telephone number 713/592-7200), and at 40650 Encyclopedia Circle, Fremont, California94538-2453 (telephone number 510/657-9821), respectively. Unless the context otherwise requires, “Company”, “we”, “us” and “our” refer to The Men’s Wearhouse, Inc. and its wholly owned or controlled subsidiaries.

Our website address iswww.menswearhouse.com. Through the investor relations section of our website, we provide free access to our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The SEC also maintains a website that contains the Company’s filings atwww.sec.gov.

The Company

We are one of the largest specialty retailers of men’s suits in the United States and Canada. At January ~~29, 2005,~~28, 2006, our U.S. operations included ~~593~~603 retail apparel stores in 44 states and the District of Columbia, primarily operating under the brand names of Men’s Wearhouse and K&G Fashion Superstores, with approximately 23% of our locations in Texas and California. At January ~~29, 2005,~~28, 2006, our Canadian operations included ~~114~~116 retail apparel stores in 10 provinces operating under the brand name of Moores Clothing for Men. Below is a brief description of our brands:

Men’s Wearhouse

Under the Men’s Wearhouse brand, we target middle and upper-middle income men by offering quality merchandise at everyday low prices. In addition to value, we believe we provide a superior level of customer service. Men’s Wearhouse stores offer a broad selection of designer, brand name and private label merchandise at prices we believe are typically 20% to 30% below the regular prices found at traditional department and specialty stores. Our merchandise includes suits, sport coats, slacks, formal wear, business casual, sportswear, outerwear, dress shirts, shoes and accessories. We concentrate on business attire that is characterized by infrequent and more predictable fashion changes. Therefore, we believe we are not as exposed to trends typical of more fashion-forward apparel retailers, where significant markdowns and promotional pricing are more common. At January ~~29, 2005,~~28, 2006, we operated ~~517~~526 Men’s Wearhouse stores in 44 states and the District of Columbia. These stores are referred to as “Men’s Wearhouse stores” or “traditional stores”.

We also began a tuxedo rental program in selected Men’s Wearhouse stores during 1999 and now offer tuxedo rentals in substantially all of our Men’s Wearhouse stores. We believe this program generates incremental business for us without significant incremental personnel or real estate costs and broadens our customer base by drawing first-time and younger customers into our stores.

K&G

Under the K&G brand, we target the more price sensitive customer. At January ~~29, 2005,~~28, 2006, we operated 7677 K&G stores in 25 states, which include four stores operating under the name The Suit Warehouse (in the metropolitan Detroit area)~~. Forty-three~~ and one store in Louisiana that is currently closed due to the impact of Hurricane Katrina. Fifty-two of the K&G stores offer ladies’ career apparel that is also targeted to the more price sensitive customer.

We believe that K&G’s more value-oriented superstore approach appeals to certain customers in the apparel market. K&G offers first-quality, current-season apparel and accessories comparable in quality to that of traditional department and specialty stores, at everyday low prices we believe are typically 30% to 70% below the regular prices charged by such stores. K&G’s merchandising strategy emphasizes broad assortments across all major

categories, including tailored clothing, casual sportswear, dress furnishings, footwear and accessories. This merchandise selection, which includes brand name as well as private label merchandise, positions K&G to attract a wide range of customers in each of its markets. As with the Men’s Wearhouse brand, K&G’s philosophy of delivering everyday value distinguishes K&G from other retailers that adopt a more promotional pricing strategy.

Moores

Under the Moores brand, we target middle and upper-middle income men in Canada by offering quality merchandise at everyday low prices. Moores is one of Canada’s leading specialty retailers of men’s suits, with ~~114~~116 retail apparel stores in 10 Canadian provinces at January ~~29, 2005.~~28, 2006. Similar to the Men’s Wearhouse stores, Moores stores offer a broad selection of quality merchandise at prices we believe are typically 20% to 30% below the regular prices charged by traditional Canadian department and specialty stores. Moores focuses on conservative, basic tailored apparel that we believe limits exposure to changes in fashion trends and the need for significant markdowns. Moores’ merchandise consists of suits, sport coats, slacks, business casual, dress shirts, sportswear, outerwear, shoes and accessories.

In October 2003, we extended our tuxedo rental program to our Moores stores. During the first quarter of fiscal 2004, we completed the rollout of this program and began to offer tuxedo rentals at all of our Moores stores.

Moores distinguishes itself from other Canadian retailers of menswear by manufacturing a significant portion of the tailored clothing for sale in its stores. Moores conducts its manufacturing operations through its wholly owned subsidiary, Golden Brand Clothing (Canada) Ltd. (“Golden Brand”), which is the second largest manufacturer of men’s suits and sport coats in Canada. Golden Brand’s manufacturing facility in Montreal, Quebec, includes a cutting room, fusing department, pant shop and coat shop. At full capacity, the coat shop can produce 13,000 units per week and the pant shop can produce 23,000 units per week. Beginning in 1999, Golden Brand also manufactures product for Men’s Wearhouse stores.

Expansion Strategy

Our expansion strategy includes:

	~~Our expansion strategy includes:~~

	•	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.

In general terms, we consider a geographic area served by a common group of television stations as a single market.

On a limited basis, we have acquired store locations, inventories, customer lists, trademarks and tradenames from existing menswear retailers in both new and existing markets. We may do so again in the future. At present, in ~~2005~~2006 we plan to open approximately 1521 new Men’s Wearhouse stores ~~six~~and 15 new K&G stores, ~~and two Moores~~to close four Men’s Wearhouse stores, to ~~close two K&G stores and to~~ expandand/or relocate approximately 2418 existing Men’s Wearhouse stores ~~six~~and seven existing K&G ~~stores and eight existing Moores~~ stores and to continue expansion in subsequent years. We believe that our ability to increase the number of traditional stores in the United States above ~~550~~600 will be limited. However, we believe that additional growth opportunities exist through improving and diversifying the merchandise mix, relocating stores, expanding our K&G brand and adding complementary products and services.

In connection with our strategy of testing opportunities to market complementary products and services, in December 2003 and in September 2004 we acquired the assets and operating leases for 13 and 11, respectively, retail dry cleaning and laundry facilities operating in the Houston, Texas area. We launched a rebranding campaign for these facilities in March 2005. At present, in ~~2005~~2006 we plan to open five retail dry cleaning and laundry facilities ~~and relocate one facility.~~in the Houston, Texas area. We may open or acquire additional facilities on a limited basis in ~~2005~~2006 as we continue to test market and evaluate the feasibility of developing a national retail dry cleaning and laundry line of business.

As of January ~~29, 2005,~~28, 2006, we ~~were~~are operating 26 retail dry cleaning and laundry facilities.

During fiscal year 2004, we opened six new casual clothing/sportswear concept stores ~~that were opened during 2004~~ in order to test an expanded, more fashion-oriented merchandise concept for men and women. ~~These stores are approximately 3,000 to 3,500 square feet and are located in high-end regional malls. They target the 25 to 35 year old customer with Latin-inspired store designs and offerings.~~ In March 2005, it was determined that no further investments would be made into these fashion-oriented test concept stores and that the six stores ~~operating at January 29, 2005 will~~opened in 2004 would be wound down over the course of fiscal 2005.

As of June 30, 2005, all six of these test concept stores had been closed.

During the fourth quarter of fiscal 2004, we opened two test bridal stores in the San Francisco Bay Area in order to test additional opportunities in the bridal industry. These stores are located contiguous to existing Men’s Wearhouse stores. ~~We may open~~As of January 28, 2006, no additional bridal stores ~~on a limited basis in 2005 as we continue to test the market and opportunities in the bridal industry. However, we do not expect these operations or expansion efforts to~~ have ~~a material effect on our financial position, results of operations or cash flows for 2005.~~

been opened.

Merchandising

Our stores offer a broad selection of designer, brand name and private label men’s business attire, including a consistent stock of core items (such as navy blazers, tuxedos and basic suits). Although basic styles are emphasized, each season’s merchandise reflects current fabric and color trends, and a small percentage of inventory, accessories in particular, are usually more fashion oriented. The broad merchandise selection creates increased sales opportunities by permitting a customer to purchase substantially all of his tailored wardrobe and accessory requirements, including shoes, at our stores. Within our tailored clothing, we offer an assortment of styles from a variety of manufacturers and maintain a broad selection of fabrics, colors and sizes. Based on the experience and expertise of our management, we believe that the depth of selection offered provides us with an advantage over most of our competitors.

The Company’s inventory mix includes “business casual” merchandise designed to meet demand for such products resulting from more relaxed dress codes in the workplace. This merchandise consists of tailored and ~~non-tailored~~non- tailored clothing (sport coats, casual slacks, knits and woven sports shirts, sweaters and casual shoes) that complements the existing product mix and provides opportunity for enhanced sales without significant inventory risk.

We do not purchase significant quantities of merchandise overruns or close-outs. We provide recognizable quality merchandise at consistent prices that assist the customer in identifying the value available at our stores. We believe that the merchandise at Men’s Wearhouse and Moores stores is generally offered 20% to 30% below traditional department and specialty store regular prices and that merchandise at K&G stores is generally 30% to 70% below regular retail prices charged by such stores. A ticket is generally affixed to ~~each item,~~items, which displays our selling price alongside a price we believe reflects the regular, non-promotional price of the item at traditional department and specialty stores.

By targeting men’s business attire, a category of men’s clothing characterized by infrequent and more predictable fashion changes, we believe we are not as exposed to trends typical of more fashion-forward apparel retailers. This allows us to carry basic merchandise over to the following season and reduces the need for markdowns; for example, a navy blazer or gray business suit may be carried over to the next season. Our Men’s Wearhouse and Moores stores have an annual sale that starts around Christmas and runs through the month of January, during which prices on many items are reduced 20% to 50% off the everyday low prices. This sale reduces stock at year-end and prepares for the arrival of the new season’s merchandise. We also have a similar event in mid-summer; however, the level of advertising for promotion of the summer event is lower than that for the year-end event.

During ~~2002,~~ 2003, 2004 and ~~2004, 56.5%~~2005, 55.2%, ~~55.2%~~54.4% and ~~54.4%~~53.3%, respectively, of our total net merchandise sales were attributable to tailored clothing (suits, sport coats and slacks) and ~~43.5%~~44.8%, ~~44.8%~~45.6% and ~~45.6%~~46.7%, respectively, were attributable to casual attire, sportswear, shoes, shirts, ties, outerwear and other.

In addition to accepting cash, checks or nationally recognized credit cards, we offer our own private label credit card to Men’s Wearhouse and Moores customers. We have contracted with a third-party vendor to provide all necessary servicing and processing and to assume all credit risks associated with athe private label credit card program. We believe that the private label credit card provides us with an important tool for targeted marketing and presents an excellent opportunity to communicate with our customers. Beginning in September 2004, all purchases made with the private label credit card at Men’s Wearhouse stores are entitled to a 5% discount. We believe that this

change in our private label credit card under our Men’s Wearhouse brand will continue to provide us with an excellent opportunity to develop relationships with our customers. During ~~2004,~~2005, our customers used the private label credit card for approximately ~~17%~~16% of our sales at Men’s Wearhouse stores and approximately ~~15%~~17% of our sales at Moores stores.

We also offer loyalty programs to our Men’s Wearhouse and Moores customers. Under the loyalty programs, customers receive points for purchases. Points are equivalent to dollars spent on aone-for-one basis, excluding any U.S. sales tax dollars. Upon reaching 500 points, customers are issued a $50 rewards certificate which they may use to make purchases at Men’s Wearhouse or Moores stores. We believe that the loyalty programs ~~allow us~~facilitate our ability to cultivate

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.

Customer Service and Marketing

The Men’s Wearhouse and Moores sales personnel are trained as clothing consultants to provide customers with assistance and advice on their apparel needs, including product style, color coordination, fabric choice and garment fit. For example, many clothing consultants at Men’s Wearhouse stores attend an intensive training program at our training facility in Fremont, California, which is further supplemented with ~~weekly~~ store meetings, in-market training programs, periodic merchandise meetings and frequent interaction with all levels of store management.

We encourage our clothing consultants to be friendly and knowledgeable and to promptly greet each customer entering the store. Consultants are encouraged to offer guidance to the customer at each stage of the decision-making process, making every effort to earn the customer’s confidence and to create a professional relationship that will continue beyond the initial visit. Clothing consultants are also encouraged to contact customers after the purchase orpick-up of tailored clothing to determine whether customers are satisfied with their purchases and, if necessary, to take corrective action. Store personnel as well as Men’s Wearhouse customer services representatives operating from our corporate offices have full authority to respond to customer complaints and reasonable requests, including the approval of returns, exchanges, refunds, re-alterations and other special requests, all of which we believe helps promote customer satisfaction and loyalty.

K&G stores are designed to allow customers to select and purchase apparel by themselves. For example, each merchandise category is clearly marked and organized by size, and suits are specifically tagged “Athletic Fit,” “Double-Breasted,” “Three Button,” etc., as a means of further assisting customers to easily select their styles and sizes. K&G employees assist customers with merchandise selection, including correct sizing.

Each of our stores provideson-site tailoring services to facilitate timely alterations at a reasonable cost to customers. Tailored clothing purchased at a Men’s Wearhouse store will be pressed and re-altered (if the alterations were performed at a Men’s Wearhouse store) free of charge for the life of the garment.

Because management believes that men prefer direct and easy store access, we attempt to locate our stores in regional strip and specialty retail centers or in freestanding buildings to enable customers to park near the entrance of the store.

Our total annual advertising expenditures, which were ~~$60.1 million,~~ $62.9 million, ~~and~~ $60.5 million and $61.5 million in ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively, are significant. The Company advertises principally on television and radio, which we consider the most effective means of attracting and reaching potential customers, and our advertising campaign is designed to reinforce our various brands.

Purchasing and Distribution

We purchase merchandise from approximately 700 vendors. In ~~2004,~~2005, no vendor accounted for 10% or more of purchases. Management does not believe that the loss of any vendor would significantly impact us. While we have

no material long-term contracts with our vendors, we believe that we have developed an excellent relationship with our vendors, which is supported by consistent purchasing practices.

We believe we obtain favorable buying opportunities relative to many of our competitors. We do not request cooperative advertising support from manufacturers, which reduces the manufacturers’ costs of doing business with us and enables them to offer us lower prices. Further, we believe we obtain better discounts by entering into purchase arrangements that provide for limited return policies, although we always retain the right to return goods that are damaged upon receipt or determined to be improperly manufactured. Finally, volume purchasing of specifically planned quantities purchased well in advance of the season enables more efficient production runs by manufacturers who, in turn, generally pass some of the cost savings back to us.

We purchase a significant portion of our inventory through a direct sourcing program. In addition to finished product, we purchase fabric from mills and contract with certain factories for the assembly of the finished product to be sold in our U.S. and Canadian stores. Our direct sourcing arrangements for fabric and assembly have been with ~~both domestic and~~ foreign mills and factories. During ~~2002,~~ 2003, 2004 and ~~2004,~~2005, product procured through the direct

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.

To protect against currency exchange risks associated with certain firmly committed and certain other probable, but not firmly committed, inventory transactions denominated in a foreign currency (primarily the Euro), we enter into forward exchange contracts. In addition, many of the purchases from foreign vendors are secured by letters of credit.

We have entered into license agreements with a limited number of parties under which we are entitled to use designer labels such as “Gary Player^®” and nationally recognized brand labels such as “Botany^®” and “Botany 500^®” in return for royalties paid to the licensor based on the costs of the relevant product. These license agreements generally limit the use of the individual label to products of a specific nature (such as men’s suits, men’s formal wear or men’s shirts). The labels licensed under these agreements will continue to be used in connection with a portion of the purchases under the direct sourcing program described above, as well as purchases from other vendors. We monitor the performance of these licensed labels compared to their cost and may elect to selectively terminate any license, as provided in the respective agreement. We have also purchased several trademarks, including “Cricketeer^®,” “Joseph & Feiss^®,” ~~“Baracuta~~^®”, “Pronto Uomo^®,” “Linea Uomo^®,” and “Twinhill^®,” which are used similarly to our licensed labels.Because of the continued consolidation in the men’s tailored clothing industry, we may be presented with opportunities to acquire or license other designer or nationally recognized brand labels.

All merchandise for Men’s Wearhouse stores is received into our central warehouse located in Houston, Texas. Merchandise for a store is picked and then moved to the appropriate staging area for shipping. In addition to the central distribution center in Houston, we have space within certain Men’s Wearhouse stores or separate hub warehouse facilities in the majority of our markets, which function as redistribution facilities for their respective areas. ~~Most purchased merchandise for Moores and K&G stores is direct shipped by vendors to the stores. However, in~~In fiscal 2005 our K&G stores ~~will begin~~began to receive merchandise consistent with our Men’s Wearhouse stores from our central warehouse located in Houston, Texas. ~~This transition~~Currently, approximately 75% of purchased merchandise is transported to our K&G stores from our central distribution center in Houston. All other merchandise is direct shipped by vendors to the ~~receipt~~stores. We anticipate that we will continue to transport merchandise to our K&G stores using a combination of our central distribution center and direct shipment from vendors. Most purchased merchandise for our ~~K&G~~Moores stores is ~~targeted for completion~~distributed to the stores from our warehouse in ~~the third quarter of fiscal 2005.~~

Montreal.

We lease and operate 2427 long-haul tractors and 5455 trailers, which, together with common carriers, are used to transport merchandise from the vendors to our distribution facilities and from the distribution facilities to Men’s Wearhouse stores within each market. A majority of all merchandise transported from the vendors to our distribution facilities and from the distribution facilities to our K&G stores is transported by common carriers.

We also lease or own 95113 smaller van-like trucks, which are used to deliver merchandise locally or within a given geographic region.

Competition

~~We believe that the unit demand for men’s tailored clothing has generally declined over the past decade.~~

Our primary competitors include specialty men’s clothing stores, traditional department stores, off-price retailers, manufacturer-owned and independently owned outlet ~~stores and three-day~~ stores. Over the past several years market conditions have resulted in consolidation of the industry. We believe that the principal competitive factors in the menswear market are merchandise assortment, quality, price, garment fit, merchandise presentation, store location and customer service.

We believe that strong vendor relationships, our direct sourcing program and our buying volumes and patterns are the principal factors enabling us to obtain quality merchandise at attractive prices. We believe that our vendors rely on our predictable payment record and history of honoring promises, including our promise not to advertise names of labeled and unlabeled designer merchandise when requested. Certain of our competitors (principally department stores) may be larger and may have substantially greater financial, marketing and other resources than we have and therefore may have certain competitive advantages.

Seasonality

Like most retailers, our business is subject to seasonal fluctuations. In most years, ~~over 30%~~a significant portion of our net sales and ~~over 40% of~~ our net earnings have been generated during the fourth quarter of each ~~year.~~year when holiday season shopping peaks. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year (see Note 12 of Notes to Consolidated Financial Statements).

Trademarks and Servicemarks

We are the owner in the United States of the trademark and servicemark “The Men’s Wearhouse^®” and of federal registrations therefor expiring in 2009, 2010 and 2012, respectively, subject to renewal. We have also been granted registrations for that trademark and servicemark in 43 of the 44 states (including Texas and California) in which we currently do business (as well as the District of ~~Columbia)~~Columbia and Puerto Rico) and have used those marks. We are also the owner of “MW Men’s Wearhouse (and design)^®” and federal registrations therefor expiring in 2010 and 2011, respectively, subject to renewal. Our rights in the “The Men’s Wearhouse^®” and “MW Men’s Wearhouse (and design)^®” marks are a significant part of our business, as the marks have become well known through our television and radio advertising campaigns. Accordingly, we intend to maintain our marks and the related registrations.

We are also the owner in the United States of the servicemarks “The Suit Warehouse^®” and “The Suit Warehouse (and logo),” which are tradenames used by certain of the stores in Michigan operated by K&G, and “K&G^®”, which is a tradename used by K&G stores. K&G stores also operate under the tradenames “K&G Men’s Superstore^®,” “K&G Men’s Center,” “K&G MenSmart” and “K&G Ladies^®.” We own the registrations for “K&G^®,^” “K&G (stylized)^®,” “K&G For Men. For Women. For Less^®,” “K&G For Men. For Less^®,” “K&G Men’s Superstore^®,” “K&G Men’s Superstore (and design)^® ,”,” “K&G Ladies^®,” “K&G Fashion Superstore” and “K&G Superstore^®.” ~~The application for the servicemark “K&G Ladies Superstore” is pending~~. In addition, we own or license other trademarks/servicemarks used in the business, principally in connection with the labeling of products purchased through the direct sourcing program.

We are also the owner in the United States of the service mark “MWCLEANERS” as well as certain logos incorporating “MWCLEANERS” or the letters “MW” to identify dry cleaning services. The applications are currently pending with the United States Patent and Trademark Office.

We own Canadian trademark registrations for the marks “Moores The Suit People^®,” “Moores Vetements Pour Hommes^®,” “Moores Vetements Pour Hommes (and design)^®,^” “Moores Clothing For Men^®” and “Moores Clothing For Men (and design)^®.” Moores stores operate under the tradenames “Moores Clothing For Men” and “Moores Vetements Pour Hommes.”

We are also the owner in Canada of the service mark “MWCLEANERS” as well as certain logos incorporating “MWCLEANERS” or the letters “MW” to identify dry cleaning services. The applications are currently pending with the Canadian Trademarks Office.

~~Employees~~

Employees

At January ~~29, 2005,~~28, 2006, we had approximately ~~13,200~~13,800 employees, of whom approximately ~~9,900~~10,200 were full-time and approximately ~~3,300~~3,600 were part-time employees. Seasonality affects the number of part-time employees as well as the number of hours worked by full-time and part-time personnel. Approximately ~~899~~700 of our employees at Golden Brand belong to the Union of Needletrades, Industrial and Textile Employees. Golden Brand is part of a collective bargaining unit, of which it is the largest company. The current union contract expires in November ~~2005.~~

2009.


Item 1A.	*Risk Factors*

We wish to caution you that there are risks and uncertainties that could affect our business. These risks and uncertainties include, but are not limited to, the risks described below and elsewhere in this report, particularly found in “Forward-Looking and Cautionary Statements.” The following is not intended to be a complete discussion of all potential risks or uncertainties, as it is not possible to predict or identify all risk factors.

Our ability to continue to expand our Men’s Wearhouse stores may be limited.

A large part of our growth has resulted from the addition of new Men’s Wearhouse stores and the increased sales volume and profitability provided by these stores. We will continue to depend on adding new stores to increase our sales volume and profitability. As of January 28, 2006, we operate 526 Men’s Wearhouse stores. However, we believe that our ability to increase the number of Men’s Wearhouse stores in the United States above 600 will be limited. Therefore, we cannot assure you that we will continue to experience the same rate of growth as we have historically.

Expansion into new markets may not be profitable.

When we enter new markets, we have to:


	•	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.

We cannot assure you that we will be able to open and operate new stores on a timely and profitable basis. The costs associated with opening new stores may negatively affect our profitability. Conditions in the commercial real estate market existing at the time we seek to expand could cause us to postpone our expansion plans.

Certain of our expansion strategies may present greater risks.

Expansion into more 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 seasonal.

In most years, a significant portion of our net sales and our net earnings have been generated during November, December and January. Accordingly, our results for the first, second and third quarters of our fiscal year are not necessarily indicative of our annual profitability. Therefore, any decrease in sales during these months could have a significant adverse effect on our net earnings.

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.

6
7

Sales in the men’s tailored clothing market have increased modestly over recent years.

According to industry sources, sales in the men’s tailored clothing market increased modestly in 2004 and in 2005. We believe that this trend is attributable primarily to more employers returning to less relaxed dress codes. We also believe that this trend has contributed to our increases in comparable store sales. However, this trend may not continue and we may not be able to continue to expand our sales volume within our segment of the retailing industry.

The loss of, or disruption in, our centralized distribution center could result in delays in the delivery of merchandise to our stores.

All merchandise for Men’s Wearhouse stores and a majority of the merchandise for K&G stores is received into our centralized distribution center in Houston, Texas, where the inventory is then processed, sorted and shipped to our stores. In addition, over 90% of our U.S. tuxedo rental product and our unit rentals are maintained and processed through this facility. We depend in large part on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of the distribution center. Events, such as disruptions in operations due to fire or other catastrophic events, employee matters or shipping problems, may result in delays in the delivery of merchandiseand/or tuxedo rentals to our stores. For example, given our proximity to the Texas Gulf Coast, it is possible that a hurricane or tropical storm could cause damage to the distribution center, result in extended power outages, or flood roadways into and around the distribution center, any of which would disrupt or delay deliveries to the distribution center and to our stores.

Although we maintain business interruption and property insurance, we cannot assure you that our insurance will be sufficient, or that insurance proceeds will be timely paid to us, in the event our distribution center is shut down for any reason or if we incur higher costs and longer lead times in connection with a disruption at our distribution center.

Our stock price has been and may continue to be volatile due to many factors.

The market price of our common stock has fluctuated in the past and may change rapidly in the future depending on news announcements and changes in general market conditions. The following factors, among others, may cause significant fluctuations in our stock price:


	•	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.

Rights of our shareholders may be negatively affected if we issue any of the shares of preferred stock which our Board of Directors has authorized for issuance.

We have available for issuance 2,000,000 shares of preferred stock, par value $.01 per share. Our Board of Directors is authorized to issue any or all of this preferred stock, in one or more series, without any further action on the part of shareholders. The rights of our shareholders may be negatively affected if we issue a series of preferred stock in the future that has preference over our common stock with respect to the payment of dividends or distribution upon our liquidation, dissolution or winding up. See Note 6 of Notes to Consolidated Financial Statements for more information.

Our success significantly depends on our key personnel and our ability to attract and retain additional personnel.

Mr. George Zimmer has been very important to our success. Mr. Zimmer is the Company’s Chairman of the Board, Chief Executive Officer and primary advertising spokesman. The loss of Mr. Zimmer’s services could have a material adverse effect on the securities markets’ view of our prospects.

Also, our continued success and the achievement of our expansion goals are dependent upon our ability to attract and retain additional qualified employees as we expand.

Fluctuations in exchange rates may cause us to experience currency exchange losses.

Moores conducts most of its business in Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars has fluctuated historically. If the value of the Canadian dollar against the U.S. dollar weakens, then the revenues and earnings of our Canadian operations will be reduced when they are translated to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may decline.

In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro), which create currency exchange risks. If the value of foreign currency strengthens, then the cost in U.S. dollars to purchase such goods would increase.

A labor union dispute could cause interruptions in the Moores manufacturing business.

Moores, through its wholly owned subsidiary, Golden Brand Clothing (Canada) Ltd., manufactures a significant portion of the tailored clothing offered for sale by our Moores stores. Approximately 700 of our employees at Golden Brand belong to the Union of Needletrades, Industrial and Textile Employees. We could experience shortages in men’s tailored clothing to sell in our Moores stores if Golden Brand fails to meet its production goals due to labor disputes.

Any significant interruption in fabric supply could cause interruption in the Moores manufacturing business.

Golden Brand’s principal raw material is fabric. Most of Golden Brand’s supply arrangements are seasonal. Golden Brand does not have any long-term agreements in place with its fabric suppliers; therefore, no assurances can be given that any of such suppliers will continue to do business with Golden Brand in the future. If a particular mill were to experience a delay due to fire or natural disaster and become unable to meet Golden Brand’s supply needs, it could take a period of up to several months for Golden Brand to arrange for and receive an alternate supply of such fabric. In addition, import and export delays caused, for example, by an extended strike at the port of entry, could prevent Golden Brand from receiving fabric shipped by its suppliers. Therefore, there could be a negative effect on the ability of Golden Brand to meet its production goals if there is an unexpected loss of a supplier of fabric or a long interruption in shipments from any fabric supplier.

We are subject to import risks, including potential disruptions in supply, changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise, strikes and other events affecting delivery; and economic, political or other problems in countries from or through which merchandise is imported.

Many of the products sold in our stores are sourced from many foreign countries. Political or financial instability, terrorism, trade restrictions, tariffs, currency exchange rates, transport capacity limitations, disruptions and costs, strikes and other work stoppages and other factors relating to international trade are beyond our control and could affect the availability and the price of our inventory.

If we are unable to operate information systems and implement new technologies effectively, our business could be disrupted or our sales or profitability could be reduced.

The efficient operation of our business is dependent on our information systems, including our ability to operate them effectively and successfully to implement new technologies, systems, controls and adequate disaster recovery systems. In addition, we must protect the confidentiality of our and our customers’ data. The failure of our information systems to perform as designed or our failure to implement and operate them effectively could disrupt our business or subject us to liability and thereby harm our profitability.


Item 1B.	*Unresolved Staff Comments*

None.

~~ITEM 2. PROPERTIES~~
9


Item 2.	*Properties*

As of January ~~29, 2005,~~28, 2006, we operated ~~593~~603 retail apparel stores in 44 states and the District of Columbia and ~~114~~116 retail apparel stores in the 10 Canadian provinces. The following table sets forth the location, by state or province, of these stores:

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

7
10

Men’s Wearhouse and Moores stores vary in size from approximately ~~2,950~~3,100 to 15,100 total square feet (average square footage at January ~~29, 2005~~28, 2006 was ~~5,595~~5,645 square feet with 66% of stores having between 4,500 and 6,500 square feet). Men’s Wearhouse and Moores stores are primarily located in middle and upper-middle income regional strip and specialty retail shopping centers. We believe our customers generally prefer to limit the amount of time they spend shopping for menswear and seek easily accessible store sites.

Men’s Wearhouse and Moores stores are designed to further our strategy of facilitating sales while making the shopping experience pleasurable. We attempt to create a specialty store atmosphere through effective merchandise presentation and sizing, attractive in-store signs and efficient checkout procedures. Most of these stores have similar floor plans and merchandise presentation to facilitate the shopping experience and sales process. Designer, brand name and private label garments are intermixed, and emphasis is placed on the fit of the garment rather than on a particular label or manufacturer. Each store is staffed with clothing consultants and sales associates and has a tailoring facility with at least one tailor.

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.

K&G stores vary in size from approximately 5,400 to 50,000 total square feet (average square footage at January ~~29, 2005~~28, 2006 was ~~23,291~~23,834 square feet with ~~42%~~47% of stores having between 15,000 and 25,000 square feet). K&G stores are “destination” stores located primarily in low-cost warehouses and second generation strip shopping centers that are easily accessible from major highways and thoroughfares. K&G has created a 20,000 to 25,000 square foot prototype men’s and ladies’ superstore with fitting rooms and convenient check-out, customer service and tailoring areas. K&G stores are organized to convey the impression of a dominant assortment of first-quality merchandise and to project a no-frills, value-oriented warehouse atmosphere. Each element of store layout and merchandise presentation is designed to reinforce K&G’s strategy of providing a large selection and assortment in each category. We seek to make K&G stores “customer friendly” by utilizing store signage and grouping merchandise by categories and sizes, with brand name and private label merchandise intermixed. To provide our customers with a greater sense of consistency and purchase opportunities, in September 2004 we extended our hours of operation at our K&G stores from four to seven days a week. Prior to September 1, 2004, our K&G stores were open for business on Thursdays, Fridays, Saturdays and Sundays only, except for a limited number of Monday holidays and an expanded schedule for certain holiday periods when the stores were open every day. Each store is typically staffed with a manager, assistant manager and other employees who serve as customer service and sales personnel and cashiers. Each store also has a tailoring facility with at least one tailor.

We lease our stores on terms generally from five to ten years with renewal options at higher fixed rates in most cases. Leases typically provide for percentage rent over sales break points. Additionally, most leases provide for a base rent as well as “triple net charges”, including but not limited to common area maintenance expenses, property taxes, utilities, center promotions and insurance. In certain markets, we lease between 1,000 and ~~5,000~~19,000 additional square feet as a part of a Men’s Wearhouse store or in a separate hub warehouse unit to be utilized as a redistribution facility in that geographic area.

During 1999, we purchased a46-acre site in Houston, Texas on which we have developed our principal warehouse and distribution facilities. The first phase of development, an approximately 385,000 square foot facility to support our tuxedo rental program and our flat-packed merchandise, became operational during 2001. In early 2003, we implemented an in-house tuxedo dry cleaning plant as part of the facility. In late 2003, we completed phase two of our development, an addition of approximately 242,000 square feet primarily to support the tuxedo rental program. In late 2004, we completed phase three of our development, an additional 300,000 square feet to accommodate the centralization of our warehouse and distribution program for K&G. In ~~early~~ 2005, we developed an additional 150,000 square feet in order to further accommodate the growth in our tuxedo rental program and improve our current and future ~~operations as well as our E-commerce activities.~~operations. We also own a 240,000 square foot facility situated on approximately seven acres of land in Houston, Texas which serves as an office, warehouse and distribution facility. Approximately 65,000 square feet of this facility is used as office space for our financial, information technology and construction departments with the remaining 175,000 square feet serving as a warehouse and distribution center. We also own a 150,000 square foot facility, situated on an adjacent six acres, comprised of approximately 9,000 square feet of office space and 141,000 square feet serving as a warehouse and distribution center.

Our executive offices in Fremont, California are housed in a 35,500 square foot facility that we own. This facility serves as an office and training facility. We also lease ~~21,052~~27,345 square feet of additional office space in ~~two~~four other ~~locations and 27,000 square feet of warehouse space in Richmond, California.~~

locations.

K&G leases a 100,000 square foot facility in Atlanta, Georgia which serves as an office, distribution and store facility. Approximately 35,000 square feet of this facility is used as office space for financial, information

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.

Moores leases a ~~37,700~~36,700 square foot facility in Toronto, Ontario, comprised of approximately ~~17,900~~16,900 square feet of office space and 19,800 square feet utilized for warehousing and distribution. ~~Moores also leases a 48,930 square foot facility in Toronto that is utilized as its tuxedo distribution center.~~ In January 2005, Moores purchased a building in Toronto of approximately 131,000 square feet which ~~will be~~is utilized as its new tuxedo distribution center. ~~The lease for the 48,930 square foot facility expires in early 2007. Negotiations for early termination of this lease or for the subletting of these premises are presently in progress. The new~~This tuxedo distribution center ~~is expected to be~~began operations in ~~operation by the end of~~ the first quarter of fiscal 2005.

In addition, Moores leases a 94,700 square foot warehouse and distribution center facility in Montreal, Quebec, and 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.

~~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*

We are involved in various routine legal proceedings, including ongoing litigation, incidental to the conduct of our business. Management believes that none of these matters will have a material adverse effect on our financial position, results of operations or cash flows.

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended January ~~29, 2005.~~

28, 2006.

9
12

PART II

~~ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER~~~~MATTERS~~

Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol “MW.” The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices per share for our common stock as reported by the New York Stock Exchange:

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

Fiscal Year 2004

First quarter ended May 1, 2004⁽¹⁾
$ 18.76 $ 15.22
Second quarter ended July 31, 2004⁽¹⁾
18.17 15.27
Third quarter ended October 30, 2004⁽¹⁾
21.29 16.59
Fourth quarter ended January 29, 2005⁽¹⁾
23.01 20.10
Fiscal Year 2005

First quarter ended April 30, 2005⁽¹⁾
$ 29.37 $ 21.67
Second quarter ended July 30, 2005⁽¹⁾
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.

On April ~~25, 2005,~~7, 2006, there were approximately ~~1,580~~1,500 holders of record and approximately ~~18,300~~6,400 beneficial holders of our common stock.

~~We have not paid~~

On January 25, 2006, our Board of Directors declared our first quarterly cash ~~dividends on~~dividend of $0.05 per share of our common stock ~~and we currently intend~~payable on March 31, 2006 to ~~retain all~~shareholders of record on March 21, 2006. The dividend payout was approximately $2.7 million.

On January 25, 2006, our Board of Directors authorized a new $100.0 million share repurchase program of our ~~earnings for~~common stock. This authorization superceded the ~~future operation and expansion~~approximately $0.2 million we had remaining under our May 2005 authorization. No shares of ~~our business. Our credit agreement prohibits the payment of cash dividends on~~ our common stock ~~(see Note 3~~were repurchased during the fourth quarter of ~~Notes to Consolidated Financial Statements).~~

fiscal 2005.

10
13

~~ITEM 6. SELECTED FINANCIAL DATA~~

Item 6. Selected Financial Data

The following selected statement of earnings, balance sheet and cash flow information for the fiscal years indicated has been derived from our audited consolidated financial statements. The Selected Financial Data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and notes thereto. References herein to years are to the Company’s52-week or53-week fiscal year, which ends on the Saturday nearest January 31 in the following calendar year. For example, references to ~~“2004”~~“2005” mean the fiscal year ended January ~~29, 2005.~~28, 2006. All fiscal years for which financial information is included herein had 52 ~~weeks, except 2000 which had 53~~ weeks.

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

11
14


	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. ~~Fiscal year 2000 is calculated on a 52-week basis.~~

~~(2)~~(3)		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.

~~(3)~~(4)		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.

~~(4)~~(5)		Retail apparel stores include stores operating under our Men’s Wearhouse, K&G and Moores brands.

~~(5)~~(6)		~~Fiscal years 2002 and 2003 have been restated~~On January 25, 2006, our Board of Directors declared our first quarterly cash dividend of $0.05 per share of our common stock payable on March 31, 2006 to ~~reflect certain lease accounting adjustments as discussed in Note 13~~shareholders of ~~Notes to Consolidated Financial Statements. Conforming adjustments have been made to fiscal years 2000 and 2001.~~record on March 21, 2006.

1215

~~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

General

The Men’s Wearhouse opened its first store in Houston, Texas in August 1973, and we are now one of the largest specialty retailers of men’s suits in the United States and Canada. At January ~~29, 2005,~~28, 2006, we operated ~~707~~719 retail apparel stores with ~~593~~603 stores in the United States and ~~114~~116 stores in Canada. Our U.S. stores are primarily operated under the brand names of Men’s Wearhouse ~~(517~~(526 stores) and K&G ~~(76~~(77 stores) in 44 states and the District of Columbia. Our Canadian stores are operated under the brand name of Moores Clothing for Men in ten provinces. For ~~2004,~~2005, we had revenues of $1.725 billion and net earnings of $103.9 million, compared to revenues of $1.547 billion and net earnings of $71.4 million ~~compared to~~in 2004 and revenues of $1.393 billion and net earnings of $49.7 million in ~~2003 and revenues of $1.295 billion and net earnings of $42.4 million in 2002.~~2003. The more significant factors impacting these results are addressed in the “Results of Operations” discussion below.

Under the Men’s Wearhouse and Moores brands, which contributed approximately ~~80%~~77% of our revenues, we target middle and upper-middle income men by offering quality merchandise at everyday low prices. Because we concentrate on men’s ~~“wear-to-work”~~“wear-to-work” business attire which is characterized by infrequent and more predictable fashion changes, we believe we are not as exposed to trends typical of more fashion-forward apparel retailers, where significant markdowns and promotional pricing are more common. In addition, because this inventory mix includes “business casual” merchandise, we are able to meet demand for such products resulting from the trend over the past decade toward more relaxed dress codes in the workplace. We also strive to provide a superior level of customer service by training our sales personnel as clothing consultants and offeringon-site tailoring services in each of our stores. We believe that the quality, value, selection and service we provide to our Men’s Wearhouse and Moores customers have been significant factors in enabling us to consistently gain market share within both the U.S. and Canadian markets for men’s tailored apparel. In addition, we have expanded our customer base and leveraged our existing infrastructure by completing the rollout of our tuxedo rental program to nearly all of our Men’s Wearhouse stores in early 2002 and to all of our Moores stores during the first quarter of fiscal 2004. As a percentage of total revenues, tuxedo rentals have grown from ~~2.5% in 2002 to~~ 3.7% in 2003 ~~and~~to 5.0% in ~~2004.~~2004 and 5.6% in 2005. These revenues are expected to continue to increase in ~~2005~~2006 as the program continues to mature.

Under the K&G brand, we target the more price sensitive customer with a value-oriented superstore approach. K&G’s merchandising strategy emphasizes broad assortments of men’s apparel across all major categories, including tailored clothing, casual sportswear, dress furnishings, footwear and accessories. In addition, 4352 of the 7677 K&G stores operating at January ~~29, 2005~~28, 2006 offer ladies’ career apparel that is also targeted to the more price sensitive customer. Although K&G employees assist customers with merchandise selection, including correct sizing, the stores are designed to allow customers to select and purchase apparel by themselves. Each store also provideson-site tailoring services.

Like most retailers, our business is subject to seasonal fluctuations. In most years, ~~more than 30%~~a significant portion of our net sales and ~~more than 40% of~~ our net earnings have been generated during the fourth quarter of each ~~year.~~year when holiday season shopping peaks. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year.

We opened ~~16 stores in 2002,~~ 13 stores in 2003, ~~and~~ 20 stores in 2004 and 18 stores in 2005 under our Men’s Wearhouse, K&G and Moores brands. Expansion is generally continued within a market as long as management believes it will provide profitable incremental sales volume. In ~~2005,~~2006, we plan to open approximately 1521 new Men’s Wearhouse stores ~~six~~and 15 new K&G stores and ~~two new Moores stores and~~ to expandand/or relocate approximately 2418 existing Men’s Wearhouse stores ~~six~~and seven existing K&G ~~stores and eight existing Moores~~ stores. The average cost (excluding telecommunications andpoint-of-sale equipment and inventory) of opening a new store is expected to be approximately $0.4 million in ~~2005.~~2006. Although we believe that our ability to increase the number of Men’s Wearhouse stores in the U.S. above ~~550~~600 will be limited, we believe that additional growth opportunities exist through improving and diversifying the merchandise mix, relocating stores, expanding our K&G brand and adding complementary products and services.

We have closed 2221 stores in the three years ended January ~~29, 2005.~~28, 2006. Generally, in determining whether to close a store, we consider the store’s historical and projected performance and the continued desirability of the store’s location. In determining store contribution, we consider net sales, cost of sales and other direct store costs, but

exclude buying costs, corporate overhead, depreciation and amortization, financing costs and advertising. Store performance is continually monitored and, occasionally, as regions and shopping areas change, we may determine that it is in our best interest to close or relocate a store. In ~~2002, five stores were closed due to substandard performance or lease expiration and two stores were closed when their operations were combined with other existing area stores. In~~ 2003, nine stores were closed due to substandard performance. In 2004, six stores were closed due to substandard performance or lease expiration. In 2005, four stores were closed due to substandard performance or lease expiration and two stores were closed due to demographic changes in the areasand/or the proximity of a newly opened store. We plan to close ~~two~~four stores in ~~2005.~~

2006.

During fiscal year 2004, we opened six new casual clothing/sportswear concept stores in order to test an expanded, more fashion-oriented merchandise concept for men and women. In March 2005, it was determined that no further investments would be made into these test concept stores and, ~~that~~as of June 30, 2005, all six of the ~~six~~ stores had been closed. Net operating ~~at January 29,~~losses from these stores reduced diluted earnings per share by $0.05 and $0.11 for fiscal 2004 and 2005, ~~will be wound down over the course of fiscal 2005.~~

respectively.

Critical Accounting ~~Policies~~

Estimates

The preparation of our consolidated financial statements requires the appropriate application of accounting policies in accordance with generally accepted accounting principles. In many instances, this also requires management to make estimates and assumptions about future events that affect the amounts and disclosures included in our financial statements. We base our estimates on historical experience and various assumptions that we believe are reasonable under the circumstances. However, since future events and conditions and their effects cannot be determined with certainty, actual results will differ from our estimates and such differences could be material to our financial statements.

Our accounting policies are described in Note 1 of Notes to Consolidated Financial Statements. We consistently apply these policies and periodically evaluate the reasonableness of our estimates in light of actual events. Historically, we have found our critical accounting policies to be appropriate and our estimates and assumptions reasonable. We believe our critical accounting policies and our most significant estimates are those that relate to inventories and long-lived assets, including goodwill, our estimated liabilities for the self-insured portions of our workers’ compensation and employee health benefit costs, our income taxes, and our ~~income taxes.~~

operating lease accounting.

Our inventory is carried at the lower of cost or market. Cost is determined on the average cost method for approximately 78% of our inventory and on the retail inventory method for the remaining 22%. Our inventory cost also includes estimated procurement and distribution costs (warehousing, freight, hangers and merchandising costs) associated with the inventory, with the balance of such costs included in cost of sales. We make assumptions, based primarily on historical experience, as to items in our inventory that may be damaged, obsolete or salable only at marked down prices and reduce the cost of inventory to reflect the market value of these items. If actual damages, obsolescence or market demand is significantly different from our estimates, additional inventory write-downs could be required. In addition, procurement and distribution costs are allocated to inventory based on the ratio of annual product purchases to average inventory cost. If this ratio were to change significantly, it could materially affect the amount of procurement and distribution costs included in cost of sales.

We make judgments about the carrying value of long-lived assets, such as property and equipment and amortizable intangibles, and the recoverability of goodwill whenever events or changes in circumstances indicate that another-than-temporary impairment in the remaining value of the assets recorded on our balance sheet may exist. We test goodwill for impairment annually in the fourth quarter of each year or more frequently if circumstances dictate. To estimate the fair value of long-lived assets, including goodwill, we make various assumptions about the future prospects for the brand that the asset relates to and typically estimate future cash flows to be generated by these brands. Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the asset stated on our balance sheet to reflect its estimated fair value. Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, different assumptions and estimates

could materially impact our reported financial results. In 2003 and 2004 respectively, we recorded pretax impairment charges of $2.5 million and $2.2 million, respectively, related to certain technology assets.

No impairment charges were recorded in 2005.

We self-insure significant portions of our workers’ compensation and employee medical costs. We estimate our liability for future payments under these programs based on historical experience and various assumptions as to participating

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.

Significant judgment is required in determining the provision for income taxes and the related taxes payable and deferred tax assets and liabilities since, in the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. Additionally, our tax returns are subject to audit by various domestic and foreign tax authorities that could result in material adjustments or differing interpretations of the tax laws. Although we believe that our estimates are reasonable and are based on the best available information at the time that we prepare the provision, actual results could differ from these estimates resulting in a final tax outcome that may be materially different from that which is reflected in our consolidated financial statements.

Our operating leases primarily relate to stores and generally contain rent escalation clauses, rent holidays, contingent rent provisions and occasionally leasehold incentives. We recognize rent expense for operating leases on a straight-line basis over the term of the lease, which is generally five to ten years based on the initial lease term plus first renewal option periods that are reasonably assured. The lease terms commence when we take possession with the right to control use of the leased premises and, for stores, is generally 60 days prior to the date rent payments begin. We capitalize rent amounts allocated to the construction period for leased properties as leasehold improvements (see “Impact of Recently Issued Accounting Pronouncements” discussion herein regarding Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”)No. FAS 13-1 (“FSP13-1”), “Accounting for Rental Costs Incurred during a Construction Period”). Deferred rent that results from recognition of rent on a straight-line basis is included in other liabilities. 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.

Results of Operations

The following table sets forth the Company’s results of operations expressed as a percentage of net sales for the periods indicated:


										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	%

2005 Compared with 2004

The Company’s net sales increased $178.2 million, or 11.5%, to $1.725 billion for 2005 due mainly to a $149.4 million increase in clothing and alteration sales and an $18.7 million increase in tuxedo rental revenues. The components of this $178.2 million increase in net sales are as follows:


(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

Our U.S. comparable store sales (which are calculated by excluding the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period) increased 8.4% due mainly to increased store traffic levels at our traditional Men’s Wearhouse stores and at our K&G stores where the hours of operation were extended from four days to seven days a week beginning September 1, 2004. Improvement was experienced in nearly all product categories at both our Men’s Wearhouse and K&G stores and in our tuxedo rental revenues. We have also experienced an improved customer response at our K&G stores as a result of a comparative advertising campaign. In Canada, comparable store sales increased 2.7% primarily as a result of improved retail sales in suits and shirts and continued growth in our tuxedo rental business.

Gross margin increased $94.1 million, or 15.6%, to $697.1 million in 2005. As a percentage of sales, gross margin increased from 39.0% in 2004 to 40.4% in 2005. This increase in gross margin percentage resulted mainly from higher initial mark-ups and from continued growth in our tuxedo rental business, which carries a significantly higher incremental gross margin impact than our clothing sales. 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 as a percentage of sales from 2004 to 2005. However, on an absolute dollar basis, occupancy costs increased by 7.8% from 2004 to 2005 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 increased to $531.8 million in fiscal 2005 from $484.9 million in fiscal 2004, an increase of $46.9 million or 9.7%. As a percentage of sales, these expenses decreased from 31.4% in 2004 to 30.8% in 2005. The components of this 0.6% net decrease in SG&A expenses as a percentage of net sales were as follows:


%		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

Interest expense remained constant at $5.9 million in 2005 while interest income increased from $1.5 million in 2004 to $3.3 million in 2005. Weighted average borrowings outstanding decreased slightly from $130.9 million in the prior year to $130.8 million in 2005, and the weighted average interest rate on outstanding indebtedness decreased from 3.4% to 3.3%. The increase in interest income primarily relates to increases in our average cash and short-term investment balances and in higher interest rates. See Note 3 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources” discussion herein.

Our effective income tax rate decreased from 37.3% in 2004 to 36.1% in 2005 due primarily to (i) a $2.3 million reduction in previously recorded tax accruals due to developments associated with certain tax audits, (ii) a $2.0 million reduction in previously recorded tax accruals associated with favorable developments on certain outstanding income tax matters and (iii) an increase in the amount of tax exempt interest income for the current fiscal year. These reductions were partially offset by additional tax expenses of $3.9 million resulting from the repatriation of foreign earnings from our Canadian subsidiaries in the fourth quarter of 2005 under the provisions of the American Jobs Creation Act of 2004. Refer to Note 4 of Notes to Consolidated Financial Statements for additional information regarding our income tax provision and the repatriation of foreign earnings.

These factors resulted in 2005 net earnings of $103.9 million or 6.0% of net sales, compared with 2004 net earnings of $71.4 million or 4.6% of net sales.

2004 Compared with 2003

The following table presents a breakdown of 2003 and 2004 net sales of the Company from stores open in each of these periods (in millions):


	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

The Company’s net sales increased $154.0 million, or 11.1%, to $1.547 billion for 2004 due mainly to a $117.7 million increase in clothing and alteration sales and an $26.5 million increase in tuxedo rental revenues. Our U.S. comparable store sales (which are calculated by excluding the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period) increased 7.3% due mainly to increased store traffic levels at our traditional Men’s Wearhouse stores and at our K&G stores where the hours of operation were extended from four days to seven days a week beginning September 1, 2004. We also experienced a strong response from customers during the third quarter of 2004 due to the expansion of our Men’s Wearhouse customer loyalty program. At our core Men’s Wearhouse brand, a 5.5% increase in unit suit sales helped drive increases in other product categories as well as in alteration sales. In addition, our U.S. tuxedo rental business continued to grow with a 40.9% increase in tuxedo rental revenues. In Canada, comparable store sales increased 7.1% as a result of improved unit suit sales and the rollout of the tuxedo rental business to all Moores stores at the beginning of this fiscal year. Combined U.S. and Canadian tuxedo rental revenues increased from 3.7% of total revenues in 2003 to 5.0% of total revenues in 2004.

Gross margin increased $89.6 million, or 17.4%, to $603.0 million in 2004. As a percentage of sales, gross margin increased from 36.9% in 2003 to 39.0% in 2004. 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 2003 to 2004. However, on an

absolute dollar basis, occupancy costs increased by 6.7% from 2003 to 2004 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”)~~&A expenses, as a percentage of sales, were 31.4% in 2004 compared to 31.0% in 2003, with SG&A expenditures increasing by $53.3 million or 12.3% to $484.9 million. On an absolute dollar basis, advertising decreased by $2.4 million, store salaries increased by $27.1 million and other SG&A increased by $28.6 million. As a percentage of sales, advertising expense decreased from 4.5% to 3.9%, store salaries increased from 12.3% to 12.8% and other SG&A expenses increased from 14.2% to 14.7%. On an absolute dollar basis, the principal components of SG&A expenses increased primarily due to (i) increased commissions due to higher sales, (ii) increased store salaries, benefits and other costs associated with store personnel additions for tuxedo rental operations, (iii) increased travel and training expenses related to incremental training for new and existing store personnel, (iv) increased legal costs related to various matters being litigated, (v) consulting costs associated with ongoing Sarbanes Oxley Section 404 compliance efforts and (vi) recognition of a $2.2 million pretax impairment charge related to certain technology assets. SG&A expenses were reduced in 2003 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. 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 increased from $4.0 million in 2003 to $5.9 million in 2004 while interest income remained at $1.5 million. Weighted average borrowings outstanding increased from $70.0 million in the prior year to $130.9 million in 2004, and the weighted average interest rate on outstanding indebtedness decreased from 4.6% to ~~3.6%~~3.4%. 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 outstanding indebtedness. The decrease in the weighted average interest rate was due primarily to the lower interest rate on the Notes. 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 was 37.3% for each of the years ended January 29, 2005 and January 31, 2004. The effective tax rate was higher than the statutory U.S. federal rate of 35% primarily due to the effect of state income taxes.

These factors resulted in 2004 net earnings of $71.4 million or 4.6% of net sales, compared with 2003 net earnings of $49.7 million or 3.6% of net sales.

~~2003 Compared with 2002~~

~~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

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,~~

On June 13, 2005, we ~~replaced~~effected athree-for-two stock split by paying a 50% stock dividend to shareholders of record as of 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.

On December 21, 2005, we entered into an ~~existing $125.0 million revolving credit facility which was scheduled to mature in February 2004 with a new revolving credit agreement~~Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks ~~(the “Credit Agreement”)~~to amend and restate our existing revolving credit facility that ~~provides for borrowing of up~~was scheduled to ~~$100.0 million through February 4, 2006. In July 2004, we amended the Credit Agreement to extend the maturity date to~~mature on July 7, 2009. The Credit Agreement provides us with a $100.0 million senior secured revolving credit facility that can be expanded to $150.0 million upon additional lender commitments and includes a sublimit for the issuance of letters of credit. In addition, the Credit Agreement provides our Canadian subsidiaries with senior secured term loans in the aggregate equivalent of US$75.0 million. The proceeds of the Canadian term loan were used to fund the repatriation of US$74.7 million of Canadian earnings in January 2006 under the American Jobs Creation Act of 2004. The revolving credit facility and the Canadian term loan mature on February 10, 2011. The Credit Agreement is secured by ~~substantially all of~~ the stock of certain of the ~~subsidiaries~~Company’s subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) an alternate base rate (equal to the greater of ~~The Men’s Wearhouse, Inc.~~the prime rate or the federal funds rate plus 0.5%) or (ii) LIBO rate or (iii) CDO rate. Advances under the Credit Agreement bear interest at a rate

per annum ~~equal to, at our option,~~using the ~~agent’s prime rate or the reserve adjusted LIBOR rate~~applicable 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

borrowings outstanding under the ~~Credit Agreement.~~

revolving credit facility and there was US$75.3 million outstanding under the Canadian term loan.

The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain ~~a minimum level of net worth and~~ certain financial ratios. The restrictive provisions in the Credit Agreement ~~also prohibits payment~~have been modified to afford us with greater operating flexibility than was provided for in our previous existing facility and to reflect an overall covenant structure that is generally representative of ~~cash dividends on~~a commercial loan made to an investment-grade company. Our debt, however, is not rated, and we have not sought, and are not seeking, a rating of our ~~common stock.~~debt. We were in compliance with the covenants in the Credit Agreement as of January ~~29, 2005.~~

28, 2006.

On October 21, 2003, we issued $130.0 million of 3.125% Convertible Senior Notes due 2023 (“Notes”) in a private placement. A portion of the net proceeds from the Notes was used to repay outstanding indebtedness and to repurchase shares of our common stock under the program authorized by the Board in September 2003 (see below); the balance is reserved for general corporate purposes, which may include additional purchases of our common stock under our share repurchase program. Interest on the Notes is payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2004. The Notes will mature on October 15, 2023. However, holders may require us to purchase all or part of the Notes, for cash, at a purchase price of 100% of the principal amount per Note plus accrued and unpaid interest on October 15, 2008, October 15, 2013 and October 15, 2018 or upon a designated event. Beginning on October 15, 2008, we will pay additional contingent interest on the Notes if the average trading price of the Notes is above a specified level during a specified period. In addition, we may redeem all or a portion of the Notes on or after October 20, 2008 at 100% of the principal amount of the Notes plus any accrued and unpaid interest, contingent interest and additional amounts, if any. We also have the right to redeem the Notes between October 20, 2006 and October 19, 2008 if the price of our common stock reaches certain levels.

During certain periods, the Notes are convertible by holders into shares of our common stock ~~initially~~ at a conversion rate of ~~23.3187~~34.9780 shares of common stock per $1,000 principal amount of Notes, which is equivalent to ~~an initial~~a conversion price of ~~$42.88~~$28.59 per share of common stock (subject to adjustment in certain events), under the following circumstances: (1) if the closing sale price of our common stock issuable upon conversion exceeds 120% of the conversion price under specified conditions; (2) if we call the Notes for redemption; or (3) upon the occurrence of specified corporate transactions. Upon conversion of the Notes, in lieu of delivering common stock we may, at our election, deliver cash or a combination of cash and common stock. However, on January 28, 2005, we entered into a supplemental indenture relating to the Notes and irrevocably elected to settle the principal amount at issuance of such Notes in 100% cash when they become convertible and are surrendered by the holders thereof. The Notes are general senior unsecured obligations, ranking on parity in right of payment with all our existing and future unsecured senior indebtedness and our other general unsecured obligations, and senior in right of payment with all our future subordinated indebtedness. The Notes are effectively subordinated to all of our senior secured indebtedness and all indebtedness and liabilities of our subsidiaries.

On January 25, 2006, our Board of Directors declared our first quarterly cash dividend of $0.05 per share of our common stock payable on March 31, 2006 (the “Payment Date”) to shareholders of record on March 21, 2006 (the “Record Date”). The dividend payout was approximately $2.7 million.

As a result of the above-described cash dividend, effective immediately after the close of business on the Payment Date, the conversion rate of our 3.125% Convertible Senior Notes due 2023 changed from 34.9780 shares of common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of $28.59 per share of common stock, to 35.0271 shares of common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of $28.55 per share of common stock.

In December 2003, we acquired the assets and operating leases for 13 retail dry cleaning and laundry facilities and issued a note payable for $1.0 million as partial consideration. The unsecured note payable, with interest at 4%, was paid in full in January 2005.

We utilize letters of credit primarily for inventory purchases. At January ~~29, 2005,~~28, 2006, letters of credit totaling approximately ~~$14.5~~$15.4 million were issued and outstanding.

Our primary sources of working capital are cash flow from operations and borrowings under the Credit Agreement. We had working capital of ~~$326.1 million,~~ $357.0 million, $388.2 million and ~~$388.2~~$491.5 million at the end of ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively. Historically, our working capital has been at its lowest level in January and February, and has

increased through November as inventory buildup occurs in preparation for the fourth quarter selling season. ~~Working~~The $103.3 million increase in working capital at January 28, 2006 compared to January 29, 2005 resulted from the ~~end of fiscal year 2004 is higher than fiscal year 2002 and 2003 due mainly to our increased inventory levels and cash balances.~~

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

Our operating activities provided net cash of ~~$115.0 million in 2002,~~ $119.7 million in 2003, ~~and~~ $130.0 million in 2004 and $154.6 million in 2005 mainly because cash provided by net earnings, as adjusted for non-cash charges, ~~and~~ increases in payables and accrued expenses (2003 and 2004) and increases in income taxes payable (2003 and 2005) more than offset cash used for increases in other assets ~~inventories (2003~~ and ~~2004)~~inventories. Inventories increased in each of the years due mainly to increased selling square footage and ~~decreases in income taxes payable (2002~~increased sales. In 2003 and ~~2004). Inventory decreased $17.3 million in 2002. A modest increase in net sales in 2002, combined with our high inventory levels at the end of 2001 and a modification~~2004, we were also returning to our ~~inventory mix at our Men’s Wearhouse stores to increase our offering~~normal buying patterns as a result of ~~opening price point product, resulted in~~ lower planned inventory purchases through most of 2002. ~~However, our buying patterns normalized in the last quarter of 2002 and resulted in an increase of $19.6 million in accounts payable and accrued expenses for the year. In 2003 and 2004, inventories~~

~~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 inventories~~higher 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 payable~~increased 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 was~~2005 due ~~primarily to increased estimated tax payments made during the year due~~mainly to increased earnings and the timing of ~~previous~~required tax payments.

Our investing activities used net cash of ~~$43.2 million,~~ $55.8 million and $96.9 million in ~~2002,~~ 2003 and 2004, respectively, due mainly to capital expenditures of ~~$47.4 million,~~ $49.7 million and $85.4 million in ~~2002,~~ 2003 and 2004, respectively. In 2005, our investing activities used net cash of $129.4 million due mainly to capital expenditures of $66.5 million and net purchases of short-term investments of $62.8 million. Short-term investments consist of auction rate securities which represent funds available for current operations. These securities have stated maturities beyond three months but are priced and traded as short-term instruments due to the liquidity provided through the interest rate mechanism of 7 to 35 days. As of January 28, 2006, we held short-term investments of $62.8 million. Our capital expenditures relate to costs incurred for stores opened, remodeled or relocated during the year or under construction at the end of the year, distribution facility additions and infrastructure technology investments as detailed below. However, during 2002, cash used for capital expenditures was partially offset by $6.8 million of net proceeds received from the sale of certain technology assets to an unrelated company regularly engaged in the development and licensing of software to the retail industry. Approximately $4.4 million of this amount was recognized as a pretax operating gain by the Company in the first quarter of 2003 (see “Other Matters” herein). In 2003 and 2004, our cash used by investing activities also included $4.5 million and $11.0 million, respectively, for net assets acquired for 13 and 11, respectively, retail dry cleaning and laundry facilities operating in the Houston, Texas area.

The following table details our capital expenditures (in millions):

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

Property additions relating to new retail apparel stores include stores in various stages of completion at the end of the fiscal year ~~(no~~(eight stores at the end of ~~2002,~~2003, eight stores at the end of ~~2003~~2004 and ~~eight~~12 stores at the end of ~~2004)~~2005). ~~Our~~In addition, our expenditures for the relocation and remodeling of existing retail apparel stores continue to ~~be substantial~~increase as we ~~have opened fewer new stores.~~update our store base. Capital expenditures in 2004 ~~also include~~included approximately $10.0 million for the centralization

in Houston, Texas of our warehouse and distribution program for our K&G ~~in Houston, Texas~~stores and approximately $13.0 million related to our Canadian operations for the purchase of a new tuxedo distribution center in Toronto, Ontario and for the construction of a new warehouse and distribution center in Montreal, Quebec.

We used net cash in financing activities of ~~$26.6~~$19.7 million in ~~2002~~2003 due mainly ~~for net payments of long-term debt and~~to purchases of treasury ~~stock. In 2003, net cash used in financing activities was $19.7 million due mainly to~~stock and the repayment of outstanding indebtedness, offset partially by proceeds received from the issuance of the Notes in October 2003 and proceeds from the issuance of our common stock for options ~~exercised, offset by purchases of treasury stock and the repayment of outstanding indebtedness.~~exercised. The treasury stock purchases were made under stock repurchase programs authorized by our Board of Directors in January 2000, January 2001, November 2002 and September 2003. Under the first three authorized programs, we repurchased ~~1,480,000 and 1,057,100~~1,585,650 shares of our common stock during ~~2002 and~~fiscal 2003, ~~respectively,~~ at a cost of ~~$28.1 million and~~ $24.1 ~~million, respectively.~~million. The average price per share of our common stock repurchased under these programs was ~~$18.96 and $22.80~~$15.20 during ~~2002 and 2003, respectively.~~fiscal 2003. In September 2003, the Board of Directors authorized a program for the repurchase of up to $100.0 million of ~~Company~~our common stock in the open market or in private transactions. This authorization superceded the approximately $1$1.0 million we had remaining under the Board’s November 2002 authorization. As of January 31, 2004, we had repurchased under this program ~~1,405,400~~2,108,100 shares at a cost of $42.4 million in private transactions and ~~1,713,400~~2,570,100 shares at a cost of $42.6 million in open market transactions. Under all authorized programs during fiscal 2003, we repurchased ~~4,175,900~~6,263,850 shares of our common stock at a cost of $109.2 million, with an average repurchase price of ~~$26.15~~$17.43 per share. As of January 29, 2005, we had repurchased under the September 2003 program ~~1,405,400~~2,108,100 shares at a cost of $42.4 million in private transactions and ~~2,036,400~~3,054,600 shares at a cost of $51.4 million in open market transactions, for a total of ~~3,441,800~~5,162,700 shares at an average price per share of ~~$27.25.~~

$18.17.

In 2004, net cash used in financing activities was $1.6 million due mainly to purchases of treasury stock offset by proceeds from the issuance of our common stock for options ~~exercised, offset by purchases of treasury stock.~~exercised. In June 2004, the Board of Directors authorized a program for the repurchase of up to $50.0 million of our common stock in the open market or in private transactions. This authorization superceded the approximately $6.2 million we had remaining under the September 2003 authorization. As of January 29, 2005, a total of ~~99,400~~149,100 shares at a cost of $2.5 million were repurchased in open market transactions under this program at an average price per share of ~~$24.99.~~$16.66. During fiscal 2004, a total of ~~422,400~~633,600 shares at a cost of $11.2 million were repurchased in open market transactions under all authorized stock repurchase programs at an average price per share of ~~$26.48.~~

~~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 the~~January 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.

In 2005, net cash provided by financing activities was $5.1 million due mainly to borrowings under our ~~share repurchases. Under these contracts,~~Credit Agreement used to fund the ~~contract counterparties had~~repatriation of $US74.7 million of foreign earnings from our Canadian subsidiaries and proceeds from the ~~option to require us to purchase a specific number of shares~~issuance of our common stock for options exercised, offset by purchases of treasury stock. In May 2005, the Board of Directors approved a replenishment of our share repurchase program to $50.0 million by authorizing $43.0 million to be added to the remaining $7.0 million under the June 2004 authorization program. As of January 28, 2006, a total of 1,696,000 shares at ~~specific strike prices~~a cost of $49.8 million were repurchased in open market transactions under this program at an average price per share ~~on specific dates. During 2002, we issued~~of $29.36. On January 25, 2006, the Board of Directors authorized a ~~put contract for 500,000 shares and received a premium of $0.6~~new $100.0 million ~~for issuing this contract. The contract counterparty had the option to exercise this contract at a strike price of $22.76 per~~ share ~~on December 17, 2002, but contract completion was required earlier if the market price~~repurchase program of our common ~~stock fell below~~stock. This authorization superceded the approximately $0.2 million we had remaining under the May 2005 authorization. No shares have been repurchased under this program as of January 28, 2006. The remaining balance available under the January 2006 authorization at January 28, 2006 is $100.0 million.

During 2005, a ~~trigger price~~total of ~~$12.64 per share. During the third quarter of 2002, the market price of our common stock fell below the trigger price and we settled the contract by repurchasing the 500,000~~3,199,750 shares at ~~$22.76~~a cost of $90.3 million were repurchased in open market transactions under all authorized stock repurchase programs at an average price per share ~~or $11.4 million; we recorded~~of $28.21.

The following table summarizes our share repurchases over the ~~shares purchased as treasury stock. We were not obligated to issue any shares under the put contract nor were we obligated to settle in cash.~~

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

Our primary cash requirements are to finance working capital increases as well as to fund capital expenditure requirements which are anticipated to be approximately ~~$60.0~~$65.7 million for ~~2005.~~2006. This amount includes the

anticipated costs of opening approximately 1521 new Men’s Wearhouse stores ~~six~~and 15 new K&G stores ~~and two Moores stores~~ in ~~2005~~2006 at an expected average cost per store of approximately $0.4 million (excluding telecommunications andpoint-of-sale equipment and inventory). ~~It also includes approximately $7.0 million for continued development of our distribution facilities in Houston for our K&G brand and future business models.~~ The balance of the capital expenditures for ~~2005~~2006 will be used for telecommunications,point-of-sale and other computer equipment and systems, store relocations, remodeling and expansion and investment in complimentary services and concepts. The Company anticipates that each of the 1521 new Men’s Wearhouse ~~stores, each of the six new K&G~~ stores and each of the ~~two Moores~~15 new K&G stores will require, on average, an initial inventory costing approximately ~~$0.3 million, $1.4~~$0.4 million and ~~$0.5~~$1.6 million, respectively (subject to the seasonal patterns that affect inventory at all stores), which will be funded by our revolving credit facility, trade credit and cash from ~~operations~~.operations. The actual amount of future capital expenditures and inventory purchases will depend in part on the number of new stores opened and the terms on which new stores are leased. Additionally, the continuing consolidation of the men’s tailored clothing industry may present us with opportunities to acquire retail chains significantly larger than our past acquisitions. Any such acquisitions may be undertaken as an alternative to opening new stores. We may use cash on hand, together with cash flow from operations, borrowings under our revolving credit facility and issuances of equity securities, to take advantage of significant acquisition opportunities.

On August 16, 2004, we purchased a store (land and building, which we had been leasing) in Dallas, Texas for $1.0 million from 8239 Preston Road, Inc., a Texas corporation of which George Zimmer, Chairman of the Board and CEO of the Company, James E. Zimmer, Senior Vice President-Merchandising of the Company, and Richard Goldman, a former officer and director of the Company, each owned 20% of the outstanding common stock, and Laurie Zimmer, sister of George and James E. Zimmer, owned 40% of the outstanding common stock.

On August 20, 2004, we purchased a 1980 Gulfstream III aircraft from Regal Aviation L.L.C. (“Regal Aviation”) for $5.0 million. Regal Aviation operates a private air charter service and is a limited liability company of which George Zimmer owns 99%. In addition, on August 20, 2004, we entered into a leasing arrangement with Regal Aviation under which Regal Aviation ~~will operate, manage~~operates, manages and ~~market~~markets the aircraft as well as ~~provide~~provides the appropriate flight personnel and services. The aircraft ~~will be~~is utilized to provide air transportation from time to time for ~~employees of the Company as well as be~~George Zimmer and is leased to third parties for charter.

On October 15, 2004, we purchased a warehouse facility located in Houston, Texas (the “Facility”) from Zig Zag for $0.7 million. Zig Zag is a Texas joint venture, in which Richard E. Goldman, George Zimmer and James E. Zimmer were the sole and equal joint venturers. Prior to the purchase of the Facility, we leased the Facility from Zig Zag.

of the store purchase and the Facility purchase ~~are~~were comparable to what would have been available to us from unaffiliated third parties at the time such agreements were entered into.

We anticipate that our existing cash and cash flow from operations, supplemented by borrowings under our ~~various credit agreements,~~Credit Agreement, will be sufficient to fund planned store openings, other capital expenditures and operating cash requirements for at least the next 12 months.

As substantially all of our cash is held by three financial institutions, we are exposed to risk of loss in the event of failure of any of these parties. However, due to the creditworthiness of these three financial institutions, we anticipate full performance and access to our deposits and liquid investments.

In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro). We generally enter into forward exchange contracts to reduce the risk of currency fluctuations related to such commitments. As these forward exchange contracts are with one financial institution, we are exposed to credit risk in the event of nonperformance by this party. However, due to the creditworthiness of this major financial institution, full performance is anticipated. We may also be exposed to market risk as a result of changes in foreign exchange rates. This market risk should be substantially offset by changes in the valuation of the underlying transactions.

Contractual Obligations

As of January ~~29, 2005,~~28, 2006, the Company is obligated to make cash payments in connection with its long-term debt, noncancelable capital and operating leases, purchase obligations and ~~purchase~~other contractual obligations in the amounts listed below. In addition, we utilize letters of credit primarily for inventory purchases. At January ~~29, 2005,~~28, 2006, letters of credit totaling approximately ~~$14.5~~$15.4 million were issued and outstanding.

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% ~~convertible senior notes issued~~Convertible Senior Notes due 2023 and our Canadian term loan of US$75.3 million due in ~~October 2003.~~February 2011. Fixed interest due on ~~these~~the 3.125% convertible senior notes is $4.1 million annually. The Canadian term loan bears interest at CDOR plus an applicable margin. These borrowings are further described in Note 1 and Note 3 of Notes to Consolidated Financial Statements. The table assumes our long-term debt is held to maturity.

(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 ~~29, 2005,~~28, 2006, we had 24three contracts maturing in varying increments to purchase an aggregate notional amount of ~~$9.0~~$1.2 million in foreign currency, maturing at various dates through ~~December 2005.~~April 2006. See Note 8 of Notes to Consolidated Financial Statements for more information.
(d) Other contractual obligations consist primarily of manufacturing contracts to purchase inventory.

Off-Balance Sheet Arrangements

Other than the noncancelable operating leases, forward exchange contracts, other contractual obligations and letters of credit discussed above, the Company does not have any off-balance sheet arrangements that are material to its financial position or results of operations.

Other Matters

In January 2000, we formed Chelsea Market Systems, L.L.C. (“Chelsea”), a joint venture company, for the purpose of developing a newpoint-of-sale software system for the Company and after successful implementation, exploring the possibility of marketing the system to third parties. Under the terms of the agreement forming Chelsea, we owned 50% of Chelsea and Harry M. Levy, a former director and officer, owned 50% with the understanding that Mr. Levy could assign, either directly or indirectly, some of his interest in Chelsea to other persons involved in the project. Thepoint-of-sale system was developed and successfully deployed by the Company during 2000 and 2001. From January 2000 though March 2002, we funded and recognized as expense all of the operating costs of Chelsea, which aggregated $4.5 million. On March 31, 2002, Chelsea sold substantially all of its assets, primarily certain technology assets, to an unrelated company regularly engaged in the development and licensing of software to the retail industry. As a result of the sale by Chelsea, the Company received a net amount of $6.8 million. Approximately $4.4 million of this amount was recognized as a pretax operating gain by the Company in the first quarter of 2003. However, the gain recognized 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.

Impact of Recently Issued Accounting Pronouncements

In November 2004, the FASB issued Statement of Financial Accounting Standards No. -151, “Inventory Costs -— an Amendment of Accounting Research Bulletin (“ARB”) No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. We do not expect the adoption of SFAS No. 151 to have a material impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. This Statement establishes the fair value method for measurement and requires all entities to apply this fair value method in accounting for share-based payment transactions. The amount of compensation cost will be measured based on the grant-date fair value of the instrument issued and will be recognized over the vesting period. SFAS No. 123R replaces SFAS 123 and supersedes APB No. 25. The provisions of SFAS No. 123R are effective for the first fiscal year beginning after June 15, 2005 for all awards granted or modified after that date and for those awards granted prior to that date that have not vested.

SFAS No. 123R requires companies to assess the most appropriate model to calculate the value of the options. In addition, there are a number of other requirements under the new standard that will result in differing accounting treatment than currently required. These differences include, but are not limited to, the accounting for the tax benefit on employee stock options and for stock issued under our employee stock purchase plan. In addition to the appropriate fair value model to be used for valuing share-based payments, we will also be required to determine the transition method to be used at date of adoption. The allowed transition methods include modified prospective and modified retroactive adoption options. Under the modified retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The modified prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the modified retroactive method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We ~~plan to~~will adopt SFAS No. 123R at the beginning of fiscal 2006 using the modified prospective method.

Upon adoption of SFAS No. 123R, ~~will have a significant impact on our consolidated financial statements as~~ we will be required to expense the fair value of our stock option grants and stock purchases under our employee stock purchase plan rather than disclose the impact on our consolidated net earnings and net earnings per share within our footnotes, as is our current practice in accordance with SFAS No. 123. The full impact of the adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net earnings and pro forma net earnings per share in Note 1 of Notes to Consolidated Financial Statements. We estimate that the expensing adoption of SFAS No. 123R will dilute earnings per share by approximately $0.06 in fiscal 2006. This estimate includes costs related to unvested stock options and our ~~consolidated financial statements.~~

current stock-based compensation programs. The potential impact of adopting SFAS 123R on fiscal 2006’s results of operations and diluted earnings per share is dependent on several factors including the number of options granted in fiscal 2006, the fair value of those options which will be determined at the date of grant, the related income tax benefits recorded and the diluted shares outstanding. This estimate is based on certain assumptions as to these factors and the actual impact may differ if actual results vary from these assumptions.

Also in December 2004, the FASB issued FASB Staff Position (“FSP”)No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”). FSP 109-2 provides guidance under FASB Statement No. 109, “Accounting for Income Taxes,” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (“Jobs Creation Act”) on enterprises’ income tax expense and deferred tax liability. The Jobs Creation Act provides a one-time 85% dividends received deduction for certain foreign earnings that are repatriated under a plan for reinvestment in the United States, provided certain criteria are met. During the fourth quarter of 2005, we completed our evaluation and repatriated US$74.7 million of foreign earnings from our Canadian subsidiaries. As a

22
27

result of this repatriation, we recorded an additional $3.9 million in income tax expenses, which reduced our 2005 diluted earnings per share by $0.07.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 clarifies that the term “conditional” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity even if the timingand/or settlement are conditional on a future event that may or may not be within the control of an entity. Accordingly, the entity must record a liability for the conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. FIN 47 is effective no later than the end of the fiscal year ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on our financial position, results of operations or cash flows.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections — A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 requires retrospective application to prior periods’ financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material impact on our financial position, results of operations or cash flows.

In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on IssueNo. 05-06, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination”(“EITF 05-06”). The guidance requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. The guidance is effective for periods beginning after June 29, 2005. The adoption ofEITF 05-06 is not expected to have a material impact on our financial position, results of operations or cash flows.

In October 2005, the FASB issued FSPNo. FAS 13-1 (“FSP13-1”), “Accounting for Rental Costs Incurred during a Construction Period,” which requires that rental costs associated with ground or building operating leases that are incurred during a construction period be recognized as rental expense. As permitted under existing generally accepted accounting principles, we capitalize rental costs incurred during the construction period. This FSP is effective for reporting periods beginning after December 15, 2005, with early adoption permitted. We will adopt FSP13-1 at the beginning of fiscal 2006, at which time we will cease capitalizing rent expense on those leases with properties under construction. We estimate that the adoption of FSP13-1 will result in additional expenses of $2.0 million to $3.0 million in fiscal 2006.

Inflation

The impact of inflation on the Company has been minimal.

~~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.

23
28

~~ITEM~~

Item 7A. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Quantitative and Qualitative Disclosures about Market Risk

We are subject to exposure from fluctuations in U.S. dollar/Euro exchange rates. As further described in Note 8 of Notes to Consolidated Financial Statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations –— Liquidity and Capital Resources”, we utilize foreign currency forward exchange contracts to limit exposure to changes in currency exchange rates. At January 28, 2006, we had three contracts maturing in varying increments to purchase an aggregate notional amount of $1.2 million in foreign currency, maturing at various dates through April 2006. At January 29, 2005, we had 24 contracts maturing in varying increments to purchase an aggregate notional amount of $9.0 million in foreign currency, maturing at various dates through December 2005. At January 31, 2004, we had 23 contracts maturing in varying increments to purchase an aggregate notional amount of $15.4 million in foreign currency, maturing at various dates through January 2005. Unrealized pretax losses on these forward contracts totaled approximately $1.0 million at January 31, 2004. Unrealized pretax gains on these forward contracts totaled approximately $0.6 million at January 29, 2005. Unrealized pretax losses on these forward contracts totaled approximately $32 thousand at January 28, 2006. A hypothetical 10% change in applicable January ~~29, 2005~~28, 2006 forward rates would increase or decrease this pretax ~~gain~~loss by approximately ~~$0.9~~$0.1 million related to these positions. However, it should be noted that any change in the value of these contracts, whether real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged item.

Moores conducts its business in Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars has fluctuated over the last ten years. If the value of the Canadian dollar against the U.S. dollar weakens, then the revenues and earnings of our Canadian operations will be reduced when they are translated to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may decline.

We are also subject to market risk from our Canadian term loan of US$75.3 million at January 28, 2006, which bears interest at CDOR plus an applicable margin (see Note 3 of Notes to Consolidated Financial Statements). An increase in market interest rates would increase our interest expense and our cash requirements for interest payments. For example, an average increase of 0.5% in the variable interest rate would increase our interest expense and payments by approximately $0.4 million.

24
29

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

Item 8. Financial Statements and Supplementary Data

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on such assessment, management concluded that, as of January ~~29, 2005,~~28, 2006, our internal control over financial reporting is effective based on those criteria.

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.

Management’s assessment of the effectiveness of our internal control over financial reporting as of January ~~29, 2005~~28, 2006 has been audited by Deloitte & Touche LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this report, as stated in their report which appears on page 2631 of this Annual Report onForm 10-K.

25
30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

The Men’s Wearhouse, Inc.

Houston, Texas

We have audited management’s assessment, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”, that The Men’s Wearhouse, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of January ~~29, 2005,~~28, 2006, based on criteria established inInternal ~~Control—~~Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of January ~~29, 2005,~~28, 2006, is fairly stated, in all material respects, based on the criteria established inInternal ~~Control—~~Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January ~~29, 2005,~~28, 2006, based on the criteria established inInternal ~~Control—~~Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended January ~~29, 2005~~28, 2006 of the Company and our report dated April ~~25, 2005~~11, 2006 expressed an unqualified opinion on those financial statements and financial statement ~~schedules and included an explanatory paragraph regarding the restatement of fiscal 2003 and 2002 consolidated financial statements.~~schedules.


		~~/s/ DELOITTE & TOUCHE LLP~~

~~Houston, Texas~~ ~~April 25, 2005~~

/s/ Deloitte & Touche LLP

Houston, Texas

April 11, 2006

26
31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

The Men’s Wearhouse, Inc.

Houston, Texas

We have audited the accompanying consolidated balance sheets of The Men’s Wearhouse, Inc. and subsidiaries (the “Company”) as of January ~~29, 2005~~28, 2006 and January ~~31, 2004,~~29, 2005, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended January ~~29, 2005.~~28, 2006. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Men’s Wearhouse, Inc. and subsidiaries as of January ~~29, 2005~~28, 2006 and January ~~31, 2004,~~29, 2005, and the results of their operations and their cash flows for each of the three years in the period ended January ~~29, 2005,~~28, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of January ~~29, 2005,~~28, 2006, based on the criteria established inInternal ~~Control—~~Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April ~~25, 2005~~11, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Houston, Texas

April 11, 2006

~~As discussed in Note 13, the accompanying fiscal 2003 and 2002 consolidated financial statements have been restated.~~


		~~/s/ DELOITTE & TOUCHE LLP~~

~~Houston, Texas~~ ~~April 25, 2005~~

27
32

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

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

ASSETS
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

LIABILITIES AND SHAREHOLDERS’ EQUITY
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

The accompanying notes are an integral part of these consolidated financial statements.

28
33

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended
~~February 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

The accompanying notes are an integral part of these consolidated financial statements.

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34

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME
For the Years Ended
~~February 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

The accompanying notes are an integral part of these consolidated financial statements.

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35

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
~~February 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 ) —
Purchases ofavailable-for-sale investments
— — (106,850 )
Proceeds from sales ofavailable-for-sale investments
— — 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 $ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

31
36

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended ~~February 1, 2003,~~

January 31, 2004, ~~and~~ January 29, 2005 and January 28, 2006
~~1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~


1.	Summary of Significant Accounting Policies

Organization and Business— The Men’s Wearhouse, Inc. and its subsidiaries (the “Company”) is a specialty retailer of menswear. We operate throughout the United States primarily under the brand names of Men’s Wearhouse and K&G and under the brand name of Moores in Canada. We follow the standard fiscal year of the retail industry, which is a52-week or53-week period ending on the Saturday closest to January 31. Fiscal year ~~2002 ended on February 1, 2003, fiscal year~~ 2003 ended on January 31, 2004, ~~and~~ fiscal year 2004 ended on January 29, ~~2005.~~2005 and fiscal year 2005 ended on January 28, 2006. Fiscal years ~~2002,~~ 2003, 2004 and ~~2004~~2005 included 52 weeks.

During fiscal year 2004, we opened six new casual clothing/sportswear concept stores in order to test an expanded, more fashion-oriented merchandise concept for men and women. In March 2005, it was determined that no further investments would be made into these test concept stores and, as of June 30, 2005, all six of the stores had been closed. Net operating losses from these stores reduced diluted earnings per share by $0.05 and $0.11 for fiscal 2004 and 2005, respectively.

Principles of Consolidation— The consolidated financial statements include the accounts of The Men’s Wearhouse, Inc. and its wholly owned or controlled subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Use of Estimates— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ~~The~~Our most significant estimates and assumptions, as discussed in “Critical Accounting Estimates” under Item 7 elsewhere herein, are those relating to inventories and long-lived assets, including goodwill, our estimated liabilities for self-insured portions of our workers’ compensation and employee health benefit costs, ~~and~~ our estimates relating to income ~~taxes.~~
taxes and our operating lease accounting.

Cash and Cash Equivalents— Cash and cash equivalents includes all cash in banks, cash on hand and all highly liquid investments with an original maturity of three months or less. As substantially all of our cash is held by three financial institutions, we are exposed to risk of loss in the event of failure of any of these parties. However, due to the creditworthiness of these three financial institutions, we anticipate full performance and access to our deposits and liquid investments.

Short-term Investments — Short-term investments consist of Auction Rate Securities (“ARS”), which represent funds available for current operations. In accordance with the Statement of Financial Accounting Standards No. 115 “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 115”), these short-term investments are classified asavailable-for-sale and are carried at cost, or par value which approximates the fair market value. These securities have stated maturities beyond three months but are priced and traded as short-term instruments due to the liquidity provided through the interest rate mechanism of 7 to 35 days.

Accounts Receivable—Accounts receivable consists of our receivables from third-party credit card providers and other receivables, net of an allowance for uncollectible accounts of $0.4 million atand $0.3 million in fiscal ~~year end 2003~~2004 and ~~2004.~~2005, respectively. Collectibility is reviewed regularly and the allowance is adjusted as necessary.

Inventories— Inventories are valued at the lower of cost or market, with cost determined on the average cost method and the retail cost method. Inventory cost includes ~~procurement~~buying and distribution costs ~~(warehousing,~~(merchandising, freight, hangers and ~~merchandising~~warehousing costs) associated with ending inventory.

Property and Equipment— Property and equipment are stated at cost. Normal repairs and maintenance costs are charged to earnings as incurred and additions and major improvements are capitalized. The cost of assets retired

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

or otherwise disposed of and the related allowances for depreciation are eliminated from the accounts in the period of disposal and the resulting gain or loss is credited or charged to earnings.

Buildings are depreciated using the straight-line method over their estimated useful lives of 20 to 25 years. Depreciation of leasehold improvements is computed on the straight-line method over the term of the lease, which is generally five to ten years based on the initial lease term plus first renewal option periods that are reasonably assured, or the useful life of the assets, whichever is shorter. Furniture, fixtures and equipment are depreciated using primarily the straight-line method over their estimated useful lives of three to ten years.

Goodwill and Other Assets —Intangible assets are initially recorded at their fair values. Identifiable intangible assets with finite useful lives are amortized to expense over the estimated useful life of the asset. Trademarks, tradenames and other intangibles are amortized over estimated useful lives of 3 to 17 years using the straight-line method. Identifiable intangible assets with an indefinite useful life, including goodwill, are evaluated annually in the fourth quarter or more frequently if circumstances dictate, for impairment by comparison of their carrying amounts with the fair value of the individual assets. No impairment was identified in fiscal ~~2002,~~ 2003, 2004 or ~~2004.~~
32
2005.

~~THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

Impairment of Long-Lived Assets —We evaluate the carrying value of long-lived assets, such as property and equipment and amortizable intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined, based on estimated undiscounted future cash flows, that an impairment has occurred, a loss is recognized currently for the impairment.

Fair Value of Financial Instruments— As of January ~~31, 2004~~29, 2005 and January ~~29, 2005,~~28, 2006, management estimates that the fair value of cash and cash equivalents, receivables, accounts payable and accrued expenses are carried at amounts that reasonably approximate their fair value. See Note 3 for the fair values of our long-term debt.

Revenue Recognition —Revenue is recognized at the time of sale and delivery of merchandise, net of actual sales returns and a provision for estimated sales returns, and excludes sales taxes. Revenues from alteration and other services are recognized upon completion of the services. Proceeds from the sale of gift cards are recorded as a liability and are recognized as revenues when the cards are redeemed.

Loyalty Program— We maintain a customer loyalty program in our Men’s Wearhouse and Moores stores in which customers receive points for purchases. Points are equivalent to dollars spent on aone-to-one basis, excluding any U.S. sales tax dollars. Upon reaching 500 points, customers are issued a $50 rewards certificate which they may redeem for purchases at our Men’s Wearhouse or Moores stores. Generally, reward certificates earned must be redeemed no later than six months from the date of issuance. We accrue the estimated costs of the anticipated certificate redemptions when the certificates are issued and charge such costs to cost of goods sold. Redeemed certificates are recorded as markdowns when redeemed and no revenue is recognized for the redeemed certificate amounts. The estimate of costs associated with the loyalty program requires us to make assumptions related to the cost of product or services to be provided to customers when the certificates are redeemed as well as redemption rates.

Vendor Allowances— In November 2002, the Emerging Issues Task Force (“EITF”) issued Issue 02-16, “Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor.” This EITF addresses the accounting treatment for cash vendor allowances received. The adoption of EITF Issue 02-16 in 2003 did not have a material impact on the Company’s financial position, results of operations or cash flows. Vendor allowances received are recognized as a reduction of the ~~costs~~cost of the merchandise purchased.

Shipping and Handling Costs— All shipping and handling costs for product sold are recognized as cost of goods sold.

Operating Leases— Operating leases relate primarily to stores and generally contain rent escalation clauses, rent holidays, contingent rent provisions and occasionally leasehold incentives. Rent expense for operating leases is recognized on a straight-line basis over the term of the lease, which is generally five to ten years based on the initial lease term plus first renewal option periods that are reasonably assured. Rent expense for stores is included in cost of sales as a part of occupancy cost and other rent is included in selling general and administrative expenses. The lease terms commence when we take possession with the right to control use of the leased premises and, for stores, is generally 60 days prior to the date rent payments begin. We capitalize rent amounts allocated to the construction

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

period for leased properties as leasehold ~~improvements.~~improvements (see “Recently Issued Accounting Pronouncements” below for a discussion regarding FASB Staff Position (“FSP”)No. FAS 13-1 (“FSP13-1”), “Accounting for Rental Costs Incurred during a Construction Period”). Deferred rent that results from recognition of rent expense on a straight-line basis is included in other liabilities. 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. Contingent rentals are generally based on percentages of sales and are recognized as store rent expense as they accrue.

Advertising— Advertising costs are expensed as incurred or, in the case of media production costs, when the commercial first airs. Advertising expenses were ~~$60.1 million,~~ $62.9 million, $60.5 million and ~~$60.5~~$61.5 million in fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively.

New Store Costs— Promotion and other costs associated with the opening of new stores are expensed as incurred.
33

~~THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

Store Closures and Relocations— ~~On November 3, 2002, we adopted Statement of Financial Accounting Standards No. 146, “Accounting for~~ Costs ~~Associated with Exit or Disposal Activities” (“SFAS No. 146”). This statement requires, among other things, that a liability for costs~~ associated with ~~an exit~~store closures or ~~disposal activity be recognized~~relocations are charged to expense when the liability is ~~incurred rather than when a company commits to such an activity and also establishes fair value as the objective for initial measurement of the liability. As of the fourth quarter of 2002, when~~incurred. When we close or relocate a store, we record a liability for the present value of estimated unrecoverable cost, which is substantially made up of the remaining net lease obligation, is charged to expense. Prior to the fourth quarter of 2002, these costs were expensed upon management’s commitment to closing or relocating a store, which was generally before the actual liability was incurred. The adoption of this statement did not have a material impact on our financial position, results of operations or cash flows.
obligation.

~~Stock Based~~Stock-Based Compensation— As permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure -an Amendment of SFAS No. 123” (“SFAS No. 148”), we account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). We have adopted the disclosure-only provisions of SFAS No. 123, as amended by SFAS No. 148, and continue to apply APB No. 25 and related interpretations in accounting for the stock option plans and the employee stock purchase plan.
~~In December 2002, the Financial~~ Refer to “Recently Issued Accounting ~~Standards Board (“FASB”) issued~~Pronouncements” 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.

Had we elected to apply the accounting standards of SFAS No. 123, as amended by SFAS No. 148, our net earnings and net earnings per share would have been approximately the pro forma amounts indicated below (in thousands, except per share data):


										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

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –— (Continued)

For purposes of computing pro forma net earnings, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which resulted in a weighted-average fair value of ~~$11.70,~~ $9.99, $15.82 and ~~$15.82~~$16.41 for grants made during fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively. The following weighted average assumptions were used for option grants for each respective period:

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%

Grants of ~~applying SFAS No. 123 in this pro forma disclosure may not be indicative~~restricted stock and deferred stock units are recorded as deferred compensation based on the fair market value of ~~pro forma future amounts.~~the shares on the grant date and are amortized to expense over the vesting period of the grant. Unamortized deferred compensation is recorded as a reduction of shareholders’ equity. See Note 6 for additional disclosures regarding stock-based compensation.
~~Refer~~

Stock Dividend — On June 13, 2005, we effected athree-for-two stock split by paying a 50% stock dividend to ~~“Recently Issued Accounting Pronouncements” below for a discussion~~shareholders of ~~Statement~~record as of ~~Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”).~~
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.

Derivative Financial Instruments— We enter into foreign currency forward exchange contracts to hedge against foreign exchange risks associated with certain firmly committed, and certain other probable, but not firmly committed, inventory purchase transactions that are denominated in a foreign currency (primarily the Euro). Gains and losses associated with these contracts are accounted for as part of the underlying inventory purchase transactions. These contracts have been accounted for in accordance with Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), as amended. The disclosures required by SFAS No. 133 are included in Note 8.
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.

Foreign Currency Translation— Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date. Shareholders’ equity is translated at applicable historical exchange rates. Income, expense and cash flow items are translated at average exchange rates during the year. Resulting translation adjustments are reported as a separate component of shareholders’ equity.

Comprehensive Income— Comprehensive income includes all changes in equity during the period presented that result from transactions and other economic events other than transactions with shareholders.

Segment Information— We consider our business as one operating segment based on the similar economic characteristics of our three brands. Revenues of Canadian retail operations were ~~$141.9 million,~~ $154.7 million, $174.9 million and ~~$174.9~~$193.5 million for fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively. Long-lived assets of our Canadian operations were ~~$44.3~~$63.1 million and ~~$63.1~~$81.8 million as of the end of fiscal ~~2003 and 2004, respectively.~~
~~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.

Recently Issued Accounting Pronouncements —In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs — an Amendment of Accounting Research Bulletin (“ARB”) No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. We do not expect the adoption of SFAS No. 151 to have a material impact on our financial position, results of operations or cash flows.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payment transactions be recognized in the financial statements. This Statement establishes the fair value method for measurement and requires all entities to apply this fair value method in accounting for share-based payment transactions. The amount of compensation cost will be measured based on the grant-date fair value of the instrument issued and will be recognized over the vesting period. SFAS No. 123R replaces SFAS 123 and supersedes APB No. 25. The provisions of SFAS No. 123R are effective for the first fiscal year beginning after June 15, 2005 for all awards granted or modified after that date and for those awards granted prior to that date that have not vested.

Upon adoption of SFAS No. 123R ~~will have a significant impact on our consolidated financial statements as~~ we will be required to expense the fair value of our stock option grants and stock purchases under our employee stock purchase plan rather than disclose the impact on our consolidated net earnings and net earnings per share within our footnotes, as is our current practice in accordance with SFAS No. 123. The full impact of the adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net earnings and pro forma net earnings per share elsewhere in this Note 1. We estimate that the expensing adoption of SFAS No. 123R will dilute earnings per share by approximately $0.06 in fiscal 2006. This estimate includes costs related to unvested stock options and our current stock-based compensation programs. The potential impact of adopting SFAS 123R on fiscal 2006’s results of operations and diluted earnings per share is dependent on several factors including the number of options granted in fiscal 2006, the fair value of those options which will be determined at the date of grant, the related income tax benefits recorded and the diluted shares outstanding. This estimate is based on certain assumptions as to these factors and the actual impact may differ if actual results vary from these assumptions.

~~2. EARNINGS PER SHARE~~
41

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

obligation can be reasonably estimated. FIN 47 is effective no later than the end of the fiscal year ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on our financial position, results of operations or cash flows.


2.	Earnings Per Share

Basic EPS is computed using the weighted average number of common shares outstanding during the period and net earnings. Diluted EPS gives effect to the potential dilution which would have occurred if additional shares were issued for stock options exercised under the treasury stock method, as well as the potential dilution that could occur if our contingent convertible debt or other contracts to issue common stock were converted or exercised. ~~No dilution from the contingent convertible debt or other contracts has occurred.~~
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 computations~~weighted 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,~~

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Long-Term Debt

On December 21, 2005, we ~~replaced~~entered into an ~~existing $125.0 million revolving credit facility which was scheduled to mature in February 2004 with a new revolving credit agreement~~Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of banks ~~(the “Credit Agreement”)~~to amend and restate our existing revolving credit facility that ~~provides for borrowing of up~~was scheduled to ~~$100.0 million through February 4, 2006. In July 2004, we amended the Credit Agreement to extend the maturity date to~~mature on July 7, 2009. The Credit Agreement provides us with a $100.0 million senior secured revolving credit facility that can be expanded to $150.0 million upon additional lender commitments and includes a sublimit for the issuance of letters of credit. In addition, the Credit Agreement provides our Canadian subsidiaries with senior secured term loans in the aggregate equivalent of US$75.0 million. The proceeds of the Canadian term loan were used to fund the repatriation of US$74.7 million of Canadian earnings in January 2006 under the American Jobs Creation Act of 2004. The revolving credit facility and the Canadian term loan mature on February 10, 2011. The Credit Agreement is secured by ~~substantially all of~~ the stock of certain of the ~~subsidiaries~~Company’s subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) an alternate base rate (equal to the greater of ~~The Men’s Wearhouse, Inc.~~the prime rate or the federal funds rate plus 0.5%) or (ii) LIBO rate or (iii) CDO rate. Advances under the Credit Agreement bear interest at a rate per annum ~~equal to, at our option,~~using the ~~agent’s prime rate or the reserve adjusted LIBOR rate~~applicable 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 borrowings outstanding under the ~~Credit Agreement.~~
revolving credit facility and there was US$75.3 million outstanding under the Canadian term loan.

~~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.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We utilize letters of credit primarily to secure inventory purchases. At January ~~29, 2005,~~28, 2006, letters of credit totaling approximately ~~$14.5~~$15.4 million were issued and outstanding.

The fair value of the Notes, using quoted market prices of the same or similar issues, was approximately ~~$127.1~~$134.7 and ~~$134.7~~$169.0 million at January ~~31, 2004~~29, 2005 and January ~~29, 2005,~~28, 2006, respectively. The carrying amounts of all other long-term debt approximate fair value at January ~~31, 2004~~29, 2005 and January ~~29, 2005.~~
~~4. INCOME TAXES~~
28, 2006.


4.	Income Taxes

The provision for income taxes consists of the following (in thousands):

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

No provision for U.S. income taxes or Canadian withholding taxes has been made on the cumulative undistributed earnings of Moores (approximately ~~$112.0~~$68.4 million at January ~~29, 2005)~~28, 2006). The potential deferred tax liability associated with these earnings, net of foreign tax credits associated with the earnings, is estimated to be $2$3.2 million.

In December 2004, the FASB issued FSPNo. ~~FAS109-2,~~FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of ~~2004 (AJCA)”~~2004”. The ~~AJCA~~Jobs Creation Act provides a one-time 85% dividends received deduction for certain foreign earnings that are repatriated under a plan for reinvestment in the United States, provided certain criteria are met. ~~FSP No. 109-2 is effective immediately and provides accounting and disclosure guidance for~~During the ~~repatriation provision. FSP No. 109-2 allows companies additional time to evaluate~~fourth quarter of 2005, we repatriated US$74.7 million of foreign earnings from our Canadian subsidiaries under the ~~effects~~provisions of the ~~law~~Jobs Creation Act. As a result of this repatriation, we recorded an additional $3.9 million in income tax expenses, which reduced our 2005 diluted earnings per share by $0.07. The 2005 income tax provision also includes a $2.3 million reduction of previously recorded tax accruals due to developments associated with certain tax audits and a $2.0 million reduction in previously recorded tax accruals associated with favorable developments on ~~its unremitted earnings for the purpose of applying the “indefinite reversal criteria” under APB Opinion No. 23, “Accounting for Income Taxes – Special Areas”, and~~certain outstanding income tax matters.

38
44

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –— (Continued)

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.

A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:

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 %

At January 29, 2005, we had net deferred tax liabilities of $10.1 million with $16.2 million classified as other current assets and $26.3 million classified as other liabilities (noncurrent). At January 28, 2006, we had net deferred tax liabilities of $13.1 million with $11.3 million classified as other current assets and $24.4 million classified as other liabilities (noncurrent). Our state net operating loss of ~~$1.3~~$0.5 million (pre-tax ~~$34.0~~$15.0 million) ~~and foreign tax credit carryforwards of $0.7 million expire~~expires in varying amounts annually from ~~2005~~2006 through ~~2024 and in 2014, respectively.~~
2023.

Total deferred tax assets and liabilities and the related temporary differences as of January ~~31, 2004~~29, 2005 and January ~~29, 2005~~28, 2006 were as follows (in thousands):


							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

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –— (Continued)

~~5. OTHER ASSETS AND ACCRUED EXPENSES~~


5.	Other Assets and Accrued Expenses

Other assets consist of the following (in thousands):

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

Dividends

On June 13, 2005, we effected athree-for-two stock split by paying a 50% stock dividend to shareholders of record as of 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.

On January 25, 2006, our Board of Directors declared our first quarterly cash dividend of $0.05 per share of our common stock payable on March 31, 2006 to shareholders of record on March 21, 2006. The dividend payout was approximately $2.7 million.

Stock Repurchase Program

In January 2000, the Board of Directors authorized the repurchase of up to ~~one~~1,500,000 million shares of our common stock in the open market or in private transactions. On January 31, 2001, the Board authorized an expansion of the program for up to an additional ~~two~~3,000,000 million shares. On November 19, 2002, the Board of Directors authorized a new stock repurchase program for up to $25.0 million in shares of our common stock. Under the first three authorized programs, we repurchased ~~1,480,000 and 1,057,100~~1,585,650 shares of our common stock during fiscal ~~2002 and~~ 2003, ~~respectively,~~ at a cost of ~~$28.1 million and~~ $24.1 ~~million, respectively.~~million. The average price per share of our common stock repurchased under these programs was ~~$18.96 and $22.80~~$15.20 during fiscal ~~2002 and 2003, respectively.~~
2003.

In September 2003, the Board of Directors authorized a program for the repurchase of up to $100.0 million of our common stock in the open market or in private transactions. This authorization superceded the approximately $1.0 million we had remaining under the Board’s November 2002 authorization. As of January 31, 2004, we had repurchased under this program ~~1,405,400~~2,108,100 shares at a cost of $42.4 million in private transactions and ~~1,713,400~~2,570,100 shares at a cost of $42.6 million in open market transactions. Under all authorized programs during fiscal 2003, we repurchased ~~4,175,900~~6,263,850 shares of our common stock at a cost of $109.2 million, with an average repurchase price of ~~$26.15~~$17.43 per share. As of January 29, 2005, we had repurchased under the September 2003 program ~~1,405,400~~2,108,100 shares at a cost of $42.4 million in private transactions and ~~2,036,400~~3,054,600 shares at a cost of $51.4 million in open market transactions, for a total of ~~3,441,800~~5,162,700 shares at an average price per share of ~~$27.25.~~$18.17.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In June 2004, the Board of Directors authorized a program for the repurchase of up to $50.0 million of our common stock in the open market or in private transactions. This authorization superceded the approximately $6.2 million we had remaining under the September 2003 authorization. As of January 29, 2005, a total of ~~99,400~~149,100 shares at a cost of $2.5 million were repurchased in open market transactions under this program at an average price per share of ~~$24.99.~~
40
$16.66.

~~THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

During fiscal 2004, a total of ~~422,400~~633,600 shares at a cost of $11.2 million were repurchased in open market transactions under all authorized stock repurchase programs at an average price per share of ~~$26.48.~~
$17.65.

In ~~connection with~~May 2005, the Board of Directors approved a replenishment of our share repurchase ~~programs, we have from time~~program to ~~time issued put option contracts and received premiums for doing so, with the premiums being~~$50.0 million by authorizing $43.0 million to be added to ~~our capital in excess~~the remaining $7.0 million under the June 2004 authorization program. On January 25, 2006, the Board of ~~par and effectively reducing the cost of our~~Directors authorized a new $100.0 million share ~~repurchases. Under these contracts, the contract counterparties had the option to require us to purchase a specific number of shares~~repurchase program of our common stock. This authorization superceded the approximately $0.2 million we had remaining under the May 2005 authorization. No shares have been repurchased under this program as of January 28, 2006. The remaining balance available under the January 2006 authorization at January 28, 2006 is $100.0 million.

The following table shows activity under our treasury stock ~~at a specific strike~~repurchase program during fiscal 2005 (in thousands, except share data and average price per share on a specific date. During fiscal 2002, we issued a put contract for 500,000 shares and received a premium of $0.6 million for issuing this contract. The contract counterparty had the option to exercise this contract at a strike price of $22.76 per share on December 17, 2002, but contract completion was required earlier if the market priceshare):

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

A reconciliation of our ~~common stock fell below a trigger price~~treasury shares for the past three fiscal years is provided below:
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
Preferred Stock
Our Board of $12.64 per share. During the third quarter of 2002, the market price of our common stock fell below the trigger price and we settled the contract by repurchasing the 500,000 shares at $22.76 per share or $11.4 million; we recorded the shares purchased as treasury stock. We were not obligatedDirectors is authorized to issue up to 2,000,000 shares of preferred stock and to determine the dividend rights and terms, redemption rights and terms, liquidation preferences, conversion rights, voting rights and sinking fund provisions of those shares without any ~~shares under~~further vote or act by the ~~put contract nor were we obligated to settle in cash.~~company shareholders. There was no issued preferred stock as of January 29, 2005 and January 28, 2006.

47

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock Plans

We have adopted the 1992 Stock Option Plan (“1992 Plan”) which, as amended, provides for the grant of options to purchase up to ~~1,071,507~~1,607,261 shares of our common stock to full-time key employees (excluding certain officers); the 1996 Long-Term Incentive Plan (formerly known as the 1996 Stock Option Plan) (“1996 Plan”) which, as amended, provides for an aggregate of up to ~~1,850,000~~2,775,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees (excluding certain officers); the 1998 Key Employee Stock Option Plan (“1998 Plan”) which, as amended, provides for the grant of options to purchase up to ~~2,100,000~~3,150,000 shares of our common stock to full-time key employees (excluding certain officers); and the 2004 Long-Term Incentive Plan which provides for an aggregate of up to ~~600,000~~900,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees. The 1992 Plan expired in February 2002 and each of the other plans will expire at the end of ten years following the effective date of such plan; no ~~option~~awards may be granted pursuant to the plans after the expiration date. In fiscal 1992, we also adopted a Non-Employee Director Stock Option Plan (“Director Plan”) which, as amended, provides for an aggregate of up to ~~167,500~~251,250 shares of our common stock with respect to which stock options, stock appreciation rights or restricted stock awards may be granted to non-employee directors of the Company. In fiscal 2001, the Director Plan’s termination date was extended to February 23, 2012. Options granted under these plans must be exercised within ten years of the date of grant.

Generally, options granted pursuant to the employee plans vest at the rate of 1/3 of the shares covered by the grant on each of the first three anniversaries of the date of grant. However, a significant portion of options granted under these Plans vest annually in varying increments over a period from one to ten years. Under the 1996 Plan and the 2004 Plan, options may not be issued at a price less than 100% of the fair market value of our stock on the date of grant. Under the 1996 Plan and the 2004 Plan, the vesting, transferability restrictions and other applicable provisions of any stock appreciation rights, restricted stock, deferred stock units or performance based awards will be determined by the Compensation Committee of the Company’s ~~board~~Board of ~~directors.~~Directors. Options granted under the Director Plan vest one year after the date of grant and are issued at a price equal to the fair market value of our stock on the date of grant; provided, however, that the committee who administers the Director Plan may elect to grant stock appreciation rights, having such terms and conditions as the committee determines, in lieu of any option grant. Restricted stock awards granted under the Director Plan vest one year after the date of grant. ~~On January 30, 2004, 4,000 restricted shares were granted~~Grants of deferred stock units generally vest over a three year period; however, certain grants vest annually at varying increments over a period up to ~~the outside directors at a grant price of $23.29 per share. During fiscal 2004, 8,000 restricted shares were granted to the outside directors at an average price per share of $30.94.~~seven years.

41
48

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –— (Continued)

Stock Options

The following table is a summary of our stock option activity:

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

Grants of stock options outstanding as of January ~~29, 2005~~28, 2006 are summarized as follows:

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

Exercise Prices
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

As of January ~~29, 2005, 1,184,452~~28, 2006, 1,733,878 options were available for grant under existing plans and ~~3,393,235~~4,318,125 shares of common stock were reserved for future issuance.

The difference between the option price and the fair market value of our common stock on the dates that options for ~~165,105, 421,441~~632,162, 734,342 and ~~489,561~~1,667,477 shares of common stock were exercised during fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively, resulted in a tax benefit to us of ~~$0.6 million,~~ $1.6 million, $1.8 million and ~~$1.8~~$9.6 million, respectively, which has been recognized as capital in excess of par.

Restricted Stock

During fiscal 2003, 2004 and 2005, 6,000, 12,000 and 9,000 restricted shares, respectively, were granted to our outside directors under the Director Plan at an average grant price of $15.53, $20.62 and $34.64 per share, respectively.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On November 11, 2005, we entered into a Second Amended and Restated Employment Agreement (“Agreement”) with David H. Edwab, Vice Chairman of the Company. Simultaneously with the execution of this Agreement, we granted to Mr. Edwab 96,800 shares of restricted stock under the 1996 Long-Term Incentive Plan, at a grant price per share of $30.00, which shall vest in equal numbers over a five-year period beginning on February 6, 2007. In exchange for the issuance of the restricted shares, options to purchase 165,000 shares of our common stock which were held by Mr. Edwab were cancelled.

At January 28, 2006, there were 123,800 restricted shares issued, of which 18,000 were vested and no longer restricted.

Deferred Stock Units

Under the 1996 and 2004 Long-Term Incentive Plans, 425,160 deferred stock units were granted to key employees in fiscal 2005 at an average grant price of $27.82 per share; 18,072 of these units were forfeited. At January 28, 2006, there were 407,088 unvested deferred stock units outstanding.

Employee Profit Sharing and Stock Purchase Plans

We have a profit sharing plan, in the form of an employee stock plan, which covers all eligible employees, and an employee tax-deferred savings plan. Contributions to the profit sharing plan are made at the discretion of the Board of Directors. During fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, contributions charged to operations were ~~$0.8 million,~~ $1.7 million, $2.2 million and ~~$2.2~~$2.9 million, respectively, for the plans.

In 1998, we adopted an Employee Stock Discount Plan (“ESDP”) which allows employees to authorize after-tax payroll deductions to be used for the purchase of up to ~~1,425,000~~2,137,500 shares of our common stock at 85% of the lesser of the fair market value on the first day of the offering period or the fair market value on the last day of the offering period. We make no contributions to this plan but pay all brokerage, service and other costs incurred. Effective for offering periods beginning July 1, 2002, the plan was amended so that a participant may not purchase more than 125 shares during any calendar quarter. During fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, employees purchased ~~51,359, 48,195~~72,293, 73,817 and
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, 1,105,836~~28, 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

Changes in the net carrying amount of goodwill for the years ended January ~~31, 2004~~29, 2005 and January ~~29, 2005~~28, 2006 are as follows (in thousands):

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

In ~~December 2003,~~September 2004, we acquired the assets and operating leases for 1311 retail dry cleaning and laundry facilities operating in the Houston, Texas area. ~~We acquired an additional 11 facilities in September 2004.~~

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The gross carrying amount and accumulated amortization of our other intangibles, which are included in other assets in the accompanying balance sheet, are as follows (in thousands):

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

The pretax amortization expense associated with intangible assets totaled approximately ~~$428,000,~~ $737,000, $857,000 and ~~$857,000~~$954,000 for fiscal ~~2002,~~ 2003, 2004 and ~~2004,~~2005, respectively. Pretax amortization expense associated with intangible assets at January ~~29, 2005~~28, 2006 is estimated to be approximately ~~$886,000~~$771,000 for the fiscal year ~~2005, $832,000 for fiscal year~~ 2006, ~~$674,000~~$678,000 for each of the fiscal years 2007 and 2008, ~~and $658,000~~$661,000 for the fiscal year ~~2009.~~
~~8. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING~~
2009 and $628,000 for the fiscal year 2010.


8.	Accounting for Derivative Instruments and Hedging

In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro). Our practices include entering into foreign currency forward exchange contracts to minimize foreign currency exposure related to forecasted purchases of certain inventories. Under SFAS No. 133, such contracts have been designated as and accounted for as cash flow hedges. The settlement terms of the forward contracts, including amount, currency and maturity, correspond with payment terms for the merchandise inventories. Any ineffective portion of a hedge is reported in earnings immediately. At January 28, 2006, we had three contracts maturing in varying increments to purchase an aggregate notional amount of $1.2 million in foreign currency, maturing at various dates through April 2006. At January 29, 2005, we had 24 contracts maturing in varying increments to purchase an aggregate notional amount of $9.0 million in foreign currency, maturing at various dates through December 2005. At January 31, 2004, we had 23 contracts maturing in varying increments to purchase an aggregate notional amount of $15.4 million in foreign currency, maturing at various dates through January 2005. During fiscal ~~2003~~2004 and ~~2004,~~2005, we recognized an insignificant amount of hedge ineffectiveness.

The changes in the fair value of the foreign currency forward exchange contracts are matched to inventory purchases by period and are recognized in earnings as such inventory is sold. The fair value of the forward exchange contracts is estimated by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at year-end. We expect to recognize in earnings through ~~January 28,~~April 2006 ~~approximately $0.4 million, net of tax,~~an immaterial amount of existing net ~~gains~~losses presently deferred in accumulated other comprehensive income.
43

~~THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~9. RELATED PARTY TRANSACTIONS~~


9.	Related Party Transactions

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

James E. Zimmer were the sole and equal joint venturers. Prior to the purchase of the Facility, we leased the Facility from Zig Zag.
~~10. COMMITMENTS AND CONTINGENCIES~~

Based on the results of recent appraisals and review of the terms of other Regal Aviation leasing arrangements with unrelated third parties, we believe that the terms of the aircraft purchase and leasing agreements and the terms of the store purchase and the Facility purchase were comparable to what would have been available to us from unaffiliated third parties at the time such agreements were entered into.


10.	Commitments and Contingencies

Lease commitments

We lease retail business locations, office and warehouse facilities, copier equipment and automotive equipment under various noncancelable capital and operating leases expiring in various years through 2027. Rent expense for operating leases for fiscal ~~2002,~~ 2003, 2004 and ~~2004~~2005 was ~~$86.0 million,~~ $90.0 million, $95.7 million and ~~$95.7~~$101.4 million, respectively, and includes contingent rentals of $0.6 million, $0.8 million ~~$0.6 million~~ and ~~$0.8~~$0.6 million, respectively. Minimum future rental payments under noncancelable capital and operating leases as of January ~~29, 2005~~28, 2006 for each of the next five years and in the aggregate are as follows (in thousands):

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

Fiscal Year
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

Leases on retail business locations specify minimum rentals plus common area maintenance charges and possible additional rentals based upon percentages of sales. Most of the retail business location leases provide for renewal options at rates specified in the leases. In the normal course of business, these leases are generally renewed or replaced by other leases.

At January 28, 2006, the gross capitalized balance and the accumulated depreciation balance of our capital lease assets was $4.2 million and $2.0 million, respectively, resulting in a net capitalized value of $2.2 million. At January 29, 2005, the gross capitalized balance and the accumulated depreciation balance of our capital lease assets was $3.6 million and $2.2 million, respectively, resulting in a net capitalized value of $1.4 million. These assets are included in furniture, fixtures and equipment on the balance sheet. The deferred liability balance of these capital lease assets is included in deferred taxes and other liabilities on the balance sheet.
44

~~THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

Legal matters
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, 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

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –— (Continued)

~~12. QUARTERLY RESULTS OF OPERATIONS (Unaudited)~~


11.	Subsequent Event


12.	Quarterly Results of Operations (Unaudited)

Our quarterly results of operations reflect all adjustments, consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The consolidated results of operations by quarter for the ~~2003~~2004 and ~~2004~~2005 fiscal years are presented below (in thousands, except per share amounts):

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
Due to the method of calculating weighted average common shares outstanding, the sum of the quarterly per share amounts may not equal earnings per share for the respective years.
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 )

~~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 )

~~(1)~~

~~Due to the effect of rounding, the sum of the per share amounts may not equal the effect of the adjustment.~~

~~ITEM~~Item 9. ~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
~~ITEM 9A. CONTROLS AND PROCEDURES~~
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports filed or submitted under the Exchange Act, within the time periods specified in the SEC’s rules and forms.
Internal Control over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting and the Attestation Report of the Registered Public Accounting Firm thereon appear on pages 2531 and ~~26,~~32, respectively, of this Annual Report onForm 10-K. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal ~~2004~~2005 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
~~ITEM 9B. OTHER INFORMATION~~
Item 9B.   Other Information
None
PART III
~~ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY~~
Item 10. Directors and Executive Officers of the Company
Except as set forth below, the information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders to be held June ~~29, 2005.~~
21, 2006.
The Company has adopted a Code of Ethics for Senior Management which applies to the Company’s Chief Executive Officer and all Presidents, Chief Financial Officers, Principal Accounting Officers, Executive Vice Presidents and other designated financial and operations officers. A copy of such policy is posted on the Company’s website,www.menswearhouse.com, under the heading “Corporate Governance”.
~~ITEM 11. EXECUTIVE COMPENSATION~~
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders to be held June ~~29, 2005.~~
21, 2006.
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
The following table sets forth certain equity compensation plan information for the Company as of January ~~29, 2005.~~28, 2006.

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)~~
(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 ~~2,100,000~~3,150,000 shares of the Company’s common stock to full-time key employees (excluding executive officers), of which ~~1,245,458~~1,058,569 shares are to be issued upon the exercise of outstanding options and ~~137,124~~237,772 shares remain available for future issuance under the 1998 Plan. Options granted under the 1998 Plan must be exercised within ten years from the date of grant. Unless otherwise provided by the Stock Option Committee, options granted under the 1998 Plan vest at the rate of 1/3 of the shares covered by the grant on each of the first three anniversaries of the date of grant and may not be issued at a price less than 50% of the fair market value of our stock on the date of grant. However, a significant portion of options granted under these Plans vest annually in varying increments over a period from one to ten years.
In connection with the merger with K&G Men’s Center, Inc. in June 1999, the Company granted substitute options to certain holders of options to purchase shares of common stock of K&G Men’s Center, Inc. who were not eligible to participate in the Company’s stock option plans at a weighted-average exercise price of ~~$44.12.~~$29.71. Of the ~~62,134~~93,201 shares initially reserved for issuance pursuant to such options, options covering ~~18,704~~14,511 shares remain unexercised at this time.
In connection with other acquisitions, the Company entered into employment or consulting arrangements with certain key individuals at the acquired companies and issued to them options to purchase ~~30,000~~45,000 shares at an exercise price of ~~$17.42, 22,500~~$11.61, 33,750 shares at an exercise price of ~~$24.25,~~$16.17, and ~~32,000~~48,000 shares at an exercise price of ~~$15.98,~~$10.65, of which ~~14,000~~21,000 shares remain unexercised.
The additional information required by Item 12 is incorporated herein by reference from the Company’s Proxy Statement for its Annual Meeting of Shareholders to be held June ~~29, 2005.~~
21, 2006.
~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS~~
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders to be held June ~~29, 2005.~~
21, 2006.
~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders to be held June ~~29, 2005.~~
21, 2006.
50
55
PART IV
~~ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
The following consolidated financial statements of the Company are included in Part II, Item 8:
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January ~~31, 2004 (as restated-note 13)~~29, 2005 and January ~~29, 2005~~
28, 2006
Consolidated Statements of Earnings for the years ended ~~February 1, 2003 (as restated-note 13),~~ January 31, 2004, ~~(as restated-note 13)~~January 29, 2005 and January ~~29, 2005~~
28, 2006
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended ~~February 1, 2003 (as restated-note 13),~~ January 31, 2004, ~~(as restated-note 13)~~January 29, 2005 and January ~~29, 2005~~
28, 2006
Consolidated Statements of Cash Flows for the years ended ~~February 1, 2003 (as restated-note 13),~~ January 31, 2004, ~~(as restated-note 13)~~January 29, 2005 and January ~~29, 2005~~
28, 2006
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II –— Valuation and Qualifying Accounts
The Men’s Wearhouse, Inc.
(In thousands)

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.
All other schedules are omitted because they are not applicable or because the required information is included in the Consolidated Financial Statements or Notes thereto.
51
~~3. Exhibits~~
~~Exhibit~~
~~Number~~ ~~Exhibit~~
~~3.1~~ — ~~Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 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 on Form 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 on Form 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 on Form S-1 (Registration No. 33-45949)).~~
~~4.4~~ — ~~Articles of Amendment to the Restated Articles of Incorporation (included as Exhibit 3.3).~~
~~4.5~~ — Revolving Credit Agreement dated as of January 29, 2003, among the Company and JPMorgan Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2003).
~~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 on Form 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 on Form 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 on Form 10-Q for the fiscal quarter ended November 1, 2003).
~~4.9~~ — First Amendment to Revolving Credit Agreement, dated October 13, 2003 among the Company, JPMorgan Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 1, 2003).
~~4.10~~ — Second Amendment to Revolving Credit Agreement dated July 7, 2004, by and among the Company, JPMoran Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2004).
~~4.11~~ — 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 on Form 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 on Form S-1 (Registration No. 33-45949)).~~
*10.2 — ~~First Amendment to 1992 Stock Option Plan (incorporated by Reference from Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (Registration No. 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 on Form 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 on Form S-1 (Registration No. 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 on Form 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 on Form 8-K filed with the Commission on March 18, 2005).
*10.7 — ~~1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 10.18 to the Company’s Annual Report on Form 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 on Form S-8 (registration No. 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 on Form 10-K for the fiscal year ended January 29, 2000).~~
52
56
3. Exhibits

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).
~~Exhibit~~
~~Number~~ ~~Exhibit~~
*~~10.10~~ — Split-Dollar Agreement dated January 14, 2002, by and between the Company and Eric Lane (incorporated by reference from Exhibit 10.25 to the Company’s Annual Report on Form 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, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2002).
*10.12 — 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 on Form 10-K for the fiscal year ended February 2, 2002).
*10.13 — 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 on Form 10-K for the fiscal year ended February 2, 2002).
*10.14 — Amended and Restated Employment Agreement effective as of February 3, 2003, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31,2004).
*10.15 — 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 on Form 10-Q for the fiscal quarter ended July 31, 2004).
*10.16 — ~~2004 Long-Term Incentive Plan (filed herewith).~~
*10.17 — ~~Succession Agreement between the Company and Eric J. Lane (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 4, 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
The Company will furnish a copy of any exhibit described above to any beneficial holder of its securities upon receipt of a written request therefore, provided that such request sets forth a good faith representation that, as of the record date for the Company’s ~~2005~~2006 Annual Meeting of Shareholders, such beneficial holder is entitled to vote at such meeting, and provided further that such holder pays to the Company a fee compensating the Company for its reasonable expenses in furnishing such exhibits.
5358
SIGNATURES
~~SIGNATURES~~
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Men’s Wearhouse, Inc.
By ~~THE MEN’S WEARHOUSE, INC.~~
By
/s/  ~~GEORGE ZIMMER~~
George Zimmer
~~Chairman of the Board and~~
~~Chief Executive Officer~~
George Zimmer
Chairman of the Board and
Chief Executive Officer
Dated: April ~~28, 2005~~
13, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.

Signature

Title

Date
/s/  ~~GEORGE ZIMMER~~George Zimmer

George Zimmer Chairman of the Board, Chief Executive Officer and Director April ~~28, 2005~~13, 2006

~~George Zimmer~~
/s/  Neill P. Davis

Neill P. Davis Executive Vice President, Chief Financial Officer and ~~Director~~Principal Financial Officer April 13, 2006

/s/  ~~NEILL P. DAVIS~~
~~Executive Vice President, Chief Financial~~ ~~April 28, 2005~~
~~Neill P. Davis~~ ~~Officer and Principal Financial Officer~~
~~/s/ DIANA~~Diana M. ~~WILSON~~Wilson
Diana M. Wilson Senior Vice President and Principal Accounting Officer April ~~28, 2005~~13, 2006

~~Diana M. Wilson~~
/s/  ~~DAVID~~David H. ~~EDWAB~~Edwab

David H. Edwab Vice Chairman of the Board and Director April ~~28, 2005~~13, 2006

~~David H. Edwab~~
/s/  Rinaldo S. Brutoco

Rinaldo S. Brutoco Director April 13, 2006

/s/  ~~RINALDO S. BRUTOCO~~Michael L. Ray

Michael L. Ray Director April ~~28, 2005~~13, 2006

~~Rinaldo S. Brutoco~~
/s/  Sheldon I. Stein

Sheldon I. Stein Director April 13, 2006

/s/  ~~MICHAEL L. RAY~~Kathleen Mason

Kathleen Mason Director April ~~28, 2005~~13, 2006

~~Michael L. Ray~~
Deepak Chopra Director April 13, 2006

/s/  ~~SHELDON I. STEIN~~William B. Sechrest

William B. Sechrest Director April ~~28, 2005~~
~~Sheldon I. Stein~~
~~/s/ KATHLEEN MASON~~ ~~Director~~ ~~April 28, 2005~~
~~Kathleen Mason~~
~~/s/ DEEPAK CHOPRA~~ ~~Director~~ ~~April 28, 2005~~
~~Deepak Chopra~~
~~/s/ WILLIAM B. SECHREST~~ ~~Director~~ ~~April 28, 2005~~
~~William B. Sechrest~~ 13, 2006
54
~~Exhibit Index~~
~~Exhibit~~
~~Number~~ ~~Exhibit~~
~~3.1~~ — ~~Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 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 on Form 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 on Form 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 on Form S-1 (Registration No. 33-45949)).~~
~~4.4~~ — ~~Articles of Amendment to the Restated Articles of Incorporation (included as Exhibit 3.3).~~
~~4.5~~ — Revolving Credit Agreement dated as of January 29, 2003, among the Company and JPMorgan Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2003).
~~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 on Form 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 on Form 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 on Form 10-Q for the fiscal quarter ended November 1, 2003).
~~4.9~~ — First Amendment to Revolving Credit Agreement, dated October 13, 2003 among the Company, JPMorgan Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 1, 2003).
~~4.10~~ — Second Amendment to Revolving Credit Agreement dated July 7, 2004, by and among the Company, JPMoran Chase Bank and the Banks listed therein (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2004).
~~4.11~~ — 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 on Form 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 on Form S-1 (Registration No. 33-45949)).~~
*10.2 — ~~First Amendment to 1992 Stock Option Plan (incorporated by Reference from Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (Registration No. 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 on Form 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 on Form S-1 (Registration No. 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 on Form 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 on Form 8-K filed with the Commission on March 18, 2005).
60
59
Exhibit Index

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).
~~Exhibit~~
~~Number~~ ~~Exhibit~~
*~~10.7~~ — ~~1998 Key Employee Stock Option Plan (incorporated by reference from Exhibit 10.18 to the Company’s Annual Report on Form 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 on Form S-8 (registration No. 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 on Form 10-K for the fiscal year ended January 29, 2000).~~
*10.10 — Split-Dollar Agreement dated January 14, 2002, by and between the Company and Eric Lane (incorporated by reference from Exhibit 10.25 to the Company’s Annual Report on Form 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, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2002).
*10.12 — 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 on Form 10-K for the fiscal year ended February 2, 2002).
*10.13 — 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 on Form 10-K for the fiscal year ended February 2, 2002).
*10.14 — Amended and Restated Employment Agreement effective as of February 3, 2003, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2004).
*10.15 — 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 on Form 10-Q for the fiscal quarter ended July 31, 2004).
*10.16 — ~~2004 Long-Term Incentive Plan (filed herewith).~~
*10.17 — ~~Succession Agreement between the Company and Eric J. Lane (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 4, 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


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

		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


Texas		74-1790172
(State or Other Jurisdiction of Incorporation or Organization)		~~74-1790172~~ (IRS Employer Identification Number)

5803 Glenmont Drive Houston, Texas		77081-1701 (Zip Code)
(Address of Principal Executive Offices)		~~77081-1701~~ ~~(Zip Code)~~


Title of each class		Name of each exchange on which registered

Common Stock, par value $.01 per share		~~Name of each exchange~~ ~~on which registered~~ New York Stock Exchange


Document		Incorporated as to

Notice and Proxy Statement for the Annual Meeting of Shareholders scheduled to be held June ~~29, 2005.~~21, 2006.		Part III: Items 10,11,12, 13 and 14


10-K Part and Item No.			Page No.

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	9
Item 2.	Properties	710
Item 3.	Legal Proceedings	912
Item 4.	Submission of Matters to a Vote of Security Holders	912

PART II
Item 5.	Market for the Company’s Common Equity, ~~and~~ Related Stockholder Matters and Issuer Purchases of Equity Securities	1013
Item 6.	Selected Financial Data	1114
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1316
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2429
Item 8.	Financial Statements and Supplementary Data	2530
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4954
Item 9A.	Controls and Procedures	4954
Item 9B.	Other Information	4954

PART III
Item 10.	Directors and Executive Officers of the Company	4954
Item 11.	Executive Compensation	4954
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5055
Item 13.	Certain Relationships and Related Transactions	5055
Item 14.	Principal Accountant Fees and Services	5055

PART IV
Item 15.	Exhibits and Financial Statement Schedules	5156
~~2004 Long-Term Incentive Plan~~
Subsidiaries of the Company
Consent of Deloitte & ~~Touch~~Touche LLP, independent auditors
Certification of Annual Report Pursuant to ~~Sec.~~Section 302 - CEO
Certification of Annual Report Pursuant to ~~Sec. 302~~Section 302- CFO
Certification of Annual Report Pursuant to ~~Sec.~~Section 906 - CEO
Certification of Annual Report Pursuant to ~~Sec. 906~~Section 906- CFO


	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


Item 4.	*Submission of Matters to a Vote of Security Holders*


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

Fiscal Year 2004
First quarter ended May 1, 2004⁽¹⁾	$	18.76	$	15.22
Second quarter ended July 31, 2004⁽¹⁾		18.17		15.27
Third quarter ended October 30, 2004⁽¹⁾		21.29		16.59
Fourth quarter ended January 29, 2005⁽¹⁾		23.01		20.10
Fiscal Year 2005
First quarter ended April 30, 2005⁽¹⁾	$	29.37	$	21.67
Second quarter ended July 30, 2005⁽¹⁾		37.44		27.33
Third quarter ended October 29, 2005		36.91		22.75
Fourth quarter ended January 28, 2006		34.85		23.67


	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


	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


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*


	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


	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


(c)		Included in purchase obligations are our forward exchange contracts. At January ~~29, 2005,~~28, 2006, we had 24three contracts maturing in varying increments to purchase an aggregate notional amount of ~~$9.0~~$1.2 million in foreign currency, maturing at various dates through ~~December 2005.~~April 2006. See Note 8 of Notes to Consolidated Financial Statements for more information.

(d)		Other contractual obligations consist primarily of manufacturing contracts to purchase inventory.


Item 8.	*Financial Statements and Supplementary Data*


									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


					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


				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
Exercise Prices	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


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


	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
Fiscal Year	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


	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


	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 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


	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	)