e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended November 3, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-16097

THE MEN’S WEARHOUSE, INC.

(Exact Name of Registrant as Specified in its Charter)


Texas		74-1790172
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

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

(713) 592-7200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ. No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o. No þ.

The number of shares of common stock of the Registrant, par value $.01 per share, outstanding at December 10, 2007 was 52,349,753 excluding 17,154,460 shares classified as Treasury Stock.

Forward-Looking and Cautionary Statements

Certain statements made in this Quarterly Report on Form 10-Q and in other public filings and press releases by the Company contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risk and uncertainty. These forward-looking statements may include, but are not limited to, references to future capital expenditures, acquisitions, sales, earnings, margins, costs, number and costs of store openings, demand for clothing, market trends in the retail clothing business, currency fluctuations, inflation and various economic and business trends. Forward-looking statements may be made by management orally or in writing, including, but not limited to, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q and other sections of our filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and the Securities Act of 1933.

Forward-looking statements are not guarantees of future performance and a variety of factors could cause actual results to differ materially from the anticipated or expected results expressed in or suggested by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, actions by governmental entities, domestic and international economic activity and inflation, our successful execution of internal operating plans and new store and new market expansion plans, including successful integration of acquisitions, performance issues with key suppliers, disruption in buying trends due to homeland security concerns, severe weather, foreign currency fluctuations, government export and import policies, aggressive advertising or marketing activities of competitors and legal proceedings. Future results will also be dependent upon our ability to continue to identify and complete successful expansions and penetrations into existing and new markets and our ability to integrate such expansions with our existing operations. Refer to “Risk Factors” in our Annual Report on Form 10-K for the year ended February 3, 2007 for a more complete discussion of these and other factors that might affect our performance and financial results. These forward-looking statements are intended to relay the Company’s expectations about the future, and speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GENERAL INFORMATION

The condensed consolidated financial statements herein include the accounts of The Men’s Wearhouse, Inc. and its subsidiaries and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted. We believe that the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal adjustments which are necessary for a fair statement of the results for the three and nine months ended October 28, 2006 and November 3, 2007.

Operating results for interim periods are not necessarily indicative of the results for full years. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended February 3, 2007 and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year then ended filed with the SEC.

Unless the context otherwise requires, “Company”, “we”, “us” and “our” refer to The Men’s Wearhouse, Inc. and its subsidiaries.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	October 28,			November 3,			February 3,
	2006			2007			2007
	(Unaudited)			(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	75,093		$	102,531		$	179,694
Short-term investments		180,275			—			—
Accounts receivable, net		17,671			24,118			17,018
Inventories		481,885			515,917			448,586
Other current assets		36,164			69,217			35,531


Total current assets		791,088			711,783			680,829

PROPERTY AND EQUIPMENT, net		277,510			392,917			289,640

TUXEDO RENTAL PRODUCT, net		57,542			71,120			57,565
GOODWILL		58,261			73,674			56,867
OTHER ASSETS, net		14,044			23,204			12,051


TOTAL	$	1,198,445		$	1,272,698		$	1,096,952


LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	121,105		$	131,543		$	111,213
Accrued expenses		78,691			123,214			95,249
Income taxes payable		18,699			19,425			19,676


Total current liabilities		218,495			274,182			226,138

LONG-TERM DEBT		207,310			92,595			72,967

DEFERRED TAXES AND OTHER LIABILITIES		49,216			68,294			44,075


Total liabilities		475,021			435,071			343,180


COMMITMENTS AND CONTINGENCIES (Note 8 and Note 11)

SHAREHOLDERS’ EQUITY:
Preferred stock		—			—			—
Common stock		676			695			691
Capital in excess of par		271,030			301,690			286,120
Retained earnings		702,828			868,968			752,361
Accumulated other comprehensive income		29,009			51,929			23,496

Total		1,003,543			1,223,282			1,062,668

Treasury stock, at cost		(280,119	)		(385,655	)		(308,896	)


Total shareholders’ equity		723,424			837,627			753,772


TOTAL	$	1,198,445		$	1,272,698		$	1,096,952

See Notes to Condensed Consolidated Financial Statements.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)


	For the Three Months Ended						For the Nine Months Ended
	October 28,			November 3,			October 28,			November 3,
	2006			2007			2006			2007
Net sales:
Clothing product	$	366,409		$	384,164		$	1,135,759		$	1,190,282
Tuxedo rental, alteration and other services		63,659			127,972			189,460			387,318

Total net sales		430,068			512,136			1,325,219			1,577,600

Cost of sales:
Clothing product, including buying and distribution costs		162,795			159,204			517,564			512,360
Tuxedo rental, alteration and other services		28,696			41,324			86,063			126,418
Occupancy costs		53,199			71,137			154,262			197,580

Total cost of sales		244,690			271,665			757,889			836,358

Gross margin		185,378			240,471			567,330			741,242

Selling, general and administrative expenses		136,610			181,307			416,580			534,139


Operating income		48,768			59,164			150,750			207,103

Interest income		(2,461	)		(1,352	)		(7,249	)		(4,655	)
Interest expense		2,346			1,304			6,826			3,513


Earnings before income taxes		48,883			59,212			151,173			208,245

Provision for income taxes		17,109			22,145			54,922			76,019


Net earnings	$	31,774		$	37,067		$	96,251		$	132,226


Net earnings per share:
Basic	$	0.60		$	0.70		$	1.81		$	2.47


Diluted	$	0.58		$	0.69		$	1.76		$	2.44


Weighted average common shares outstanding:
Basic		53,098			53,141			53,163			53,614


Diluted		54,903			53,775			54,715			54,284

See Notes to Condensed Consolidated Financial Statements.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	For the Nine Months Ended
	October 28,			November 3,
	2006			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	96,251		$	132,226
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		45,191			57,293
Tuxedo rental product amortization		14,627			36,976
Loss on disposition of assets		1,325			13
Deferred rent expense		1,180			1,374
Stock-based compensation		5,139			6,071
Deferred tax provision (benefit)		(4,873	)		529
Increase in accounts receivable		(797	)		(2,205	)
Increase in inventories		(63,578	)		(43,825	)
Increase in tuxedo rental product		(19,155	)		(17,525	)
Increase in other assets		(2,687	)		(2,630	)
Decrease in accounts payable and accrued expenses		(20,642	)		(21,157	)
Decrease in income taxes payable		(1,288	)		(2,968	)
Increase (decrease) in other liabilities		120			(1,088	)


Net cash provided by operating activities		50,813			143,084


CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(47,552	)		(90,394	)
Net assets acquired, net of cash		—			(68,253	)
Purchases of available-for-sale investments		(197,920	)		(277,480	)
Proceeds from sales of available-for-sale investments		80,420			277,480
Investment in trademarks, tradenames and other assets		(913	)		(91	)


Net cash used in investing activities		(165,965	)		(158,738	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		7,583			6,323
Deferred financing costs		(100	)		—
Cash dividends paid		(8,072	)		(9,186	)
Tax payments related to vested restricted stock and deferred stock units		(670	)		(2,207	)
Excess tax benefits from stock-based compensation		1,931			3,402
Purchase of treasury stock		(11,512	)		(78,080	)


Net cash used in financing activities		(10,840	)		(79,748	)


Effect of exchange rate changes		859			18,239


DECREASE IN CASH AND CASH EQUIVALENTS		(125,133	)		(77,163	)
Balance at beginning of period		200,226			179,694


Balance at end of period	$	75,093		$	102,531

See Notes to Condensed Consolidated Financial Statements.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation — The condensed consolidated financial statements herein include the accounts of The Men’s Wearhouse, Inc. and its subsidiaries (the “Company”) and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted. We believe that the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended February 3, 2007.

The preparation of the condensed consolidated financial statements in conformity with accounting principals generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual amounts could differ from those estimates.

Stock Based Compensation — Compensation cost resulting from all share-based payment transactions is recognized in the financial statements. The amount of compensation cost is measured based on the grant-date fair value of the instrument issued and is recognized over the vesting period. Stock-based compensation expense recognized for the nine months ended October 28, 2006 and November 3, 2007 was $5.1 million and $6.1 million, respectively. Excess tax benefits realized from the exercise of stock-based compensation was $1.9 million and $3.4 million for the nine months ended October 28, 2006 and November 3, 2007, respectively. Refer to Note 10 for additional disclosures regarding stock-based compensation.

Recently Issued Accounting Pronouncements — In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a Company’s financial statements in accordance with FASB No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption are to be accounted for as an adjustment to the beginning balance of retained earnings. We adopted the provisions of FIN 48 at the beginning of fiscal 2007 and recognized a $1.1 million increase to our reserve for uncertain tax positions. The increase is recorded as a cumulative effect adjustment to retained earnings. At the adoption date of February 4, 2007, we had $17.5 million of unrecognized tax benefits, $12.6 million of which would affect the effective tax rate if recognized. During the quarter ended August 4, 2007, we concluded certain income tax audits and recognized $2.8 million of previously unrecognized tax benefits, $1.4 million of which was accrued interest. The amount of the recognized benefit that affected the effective tax rate was $2.3 million. During the quarter ended November 3, 2007, we did not have any material changes to its uncertain tax positions.

Interest and penalties related to uncertain tax positions are recognized in income tax expense. As of the adoption date of February 4, 2007, we had approximately $4.5 million of accrued interest related to uncertain tax positions.

Tax years 2002-2006 remain open to examination by several taxing jurisdictions. Our major taxing jurisdictions are the United States and Canada.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

In June 2006, the Emerging Issues Task Force (“EITF”) ratified its conclusion on EITF Issue No. 06-02 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43,” “Accounting for Compensated Absences” (“EITF 06-02”). EITF 06-02 requires that compensation expense associated with a sabbatical leave, or other similar benefit arrangement, be accrued over the requisite service period during which an employee earns the benefit. We adopted EITF 06-02 at the beginning of fiscal 2007 through a cumulative effect adjustment to retained earnings. The adoption of EITF 06-02 resulted in an additional liability of $8.0 million, additional deferred tax assets of $3.1 million, and a reduction to retained earnings of $4.9 million. We estimate the adoption of EITF 06-02 will result in additional pre-tax expenses of approximately $1.0 million in fiscal 2007.

In June 2006, the EITF ratified its conclusion on EITF No. 06-03, “How Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation),” (“EITF 06-03”). EITF 06-03 concluded that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer such as sales, use, value added and certain excise taxes is an accounting policy decision that should be disclosed in a Company’s financial statements. Additionally, companies that record such taxes on a gross basis should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The adoption of EITF 06-03 at the beginning of fiscal 2007 had no effect on our financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact that the adoption of SFAS 157 will have on our financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115,” (“SFAS 159”). SFAS 159 provides companies with an option to measure certain financial instruments and other items at fair value with changes in fair value reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact that the adoption of SFAS 159 will have on our financial position, results of operations and cash flows.

In June 2007, the EITF ratified its conclusion on EITF Issue No. 06-11 “Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. We are currently evaluating the impact that the adoption of EITF 06-11 will have on our financial position, results of operation and cash flows

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how a company recognizes assets acquired, liabilities assumed, contractual contingencies and contingent consideration measured at fair value at the acquisition date. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effect of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact that the adoption of SFAS 141R will have on our financial position, results of operation and cash flows.

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 160 to have any impact on our financial position, results of operation or cash flows.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

2. Acquisition

On April 9, 2007, we completed the acquisition of After Hours Formalwear, Inc (“After Hours”), a men’s formalwear chain in the United States with 509 stores operating under After Hours Formalwear and Mr. Tux store fronts. As a result of the acquisition of After Hours, the condensed consolidated statement of earnings and condensed consolidated statement of cash flows for the nine months ended November 3, 2007 include the results of operations and cash flows, respectively, of After Hours beginning April 10, 2007. In addition, the condensed consolidated balance sheet as of November 3, 2007 includes preliminary estimates of the fair values of the assets acquired and liabilities assumed as of the acquisition date for After Hours. After Hours has a preferred relationship with David’s Bridal, Inc., the nation’s largest bridal retailer. This preferred relationship also includes all Men’s Wearhouse tuxedo operations. We expect to rebrand the After Hours operations and to realize future cost synergies resulting from the consolidation of central functions, division integrations and the adoption of best practices across the combined operations during fiscal 2007.

Under the terms of the stock purchase agreement, we acquired all of the outstanding stock of After Hours from Federated Department Stores, Inc. in exchange for an aggregate purchase price of $100.0 million, adjusted for certain items, primarily customer cash deposits retained by Federated on rentals to be completed after closing. The total net cash consideration paid after these adjustments and other acquisition costs was approximately $69.9 million.

We have not completed our assessment of the fair values of the acquired After Hours assets and liabilities and we have not finalized the integration of the acquired After Hours operations with our other tuxedo operations. Until such time, the allocation of the purchase price is subject to revisions.

The following table summarizes the estimated fair values of the non-cash assets and liabilities assumed at the date of acquisition (in thousands):


	As of
	April 9,
	2007
Current non-cash assets	$	35,229
Property and equipment		60,421
Tuxedo rental product		28,863
Goodwill		10,527
Intangible assets		7,946
Other assets		1,500

Total assets acquired		144,486


Current liabilities		65,775
Other liabilities		8,848

Total liabilities assumed		74,623


Net assets acquired	$	69,863

Acquired intangible assets consist primarily of favorable leases which are amortized over the remaining lease terms, ranging from one to 10 years.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

The following pro forma information presents the Company’s net sales, net earnings and earnings per share as if the After Hours acquisition had occurred on January 29, 2006, after giving effect to certain purchase accounting adjustments (in thousands, except per share amounts).


	For the Three		For the Nine		For the Nine
	Months Ended		Months Ended		Months Ended
	October 28,		October 28,		November 3,
	2006		2006		2007
Total net sales	$	501,366	$	1,533,053	$	1,607,580
Net earnings	$	38,225	$	105,718	$	123,630

Net earnings per share:
Basic	$	0.72	$	1.99	$	2.31
Diluted	$	0.70	$	1.93	$	2.28

This pro forma information is not necessarily indicative of actual results had the acquisition occurred on January 29, 2006, nor is it necessarily indicative of future results, and does not reflect potential synergies, integration costs, or other such costs or savings. In addition, the tuxedo rental business is heavily concentrated in the months of April, May, and June. Second quarter, followed by the third quarter, is the highest revenue quarter for the tuxedo rental business and first and fourth quarters are considered off season.

3. 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. Our convertible debt was redeemed, at our election, during the fourth quarter of 2006. Refer to Note 8 of Notes to Condensed Consolidated Financial Statements. The following table reconciles basic and diluted weighted average common shares outstanding and the related net earnings per share (in thousands, except per share amounts):


	For the Three Months				For the Nine Months
	Ended				Ended
	October 28,		November 3,		October 28,		November 3,
	2006		2007		2006		2007
Net earnings	$	31,774	$	37,067	$	96,251	$	132,226


Basic weighted average common shares outstanding		53,098		53,141		53,163		53,614
Effect of dilutive securities:
Convertible Notes		1,023		—		781		—
Stock options and equity-based compensation		782		634		771		670

Diluted weighted average common shares outstanding		54,903		53,775		54,715		54,284


Net earnings per share:
Basic	$	0.60	$	0.70	$	1.81	$	2.47

Diluted	$	0.58	$	0.69	$	1.76	$	2.44

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

4. Dividends

A quarterly cash dividend of $0.05 per share was paid during each of the quarters ended April 29, 2006, July 29, 2006, October 28, 2006 and May 5, 2007. A quarterly cash dividend of $0.06 per share was paid during each of the quarters ended August 4, 2007 and November 3, 2007. Cash dividends paid were approximately $8.1 and $9.2 million during the nine months ended October 28, 2006 and November 3, 2007, respectively.

In October 2007, our Board of Directors declared a quarterly cash dividend of $0.06 per share payable on December 28, 2007 to shareholders of record at the close of business on December 18, 2007. The dividend payout is estimated to be approximately $3.2 million and is included in accrued expenses as of November 3, 2007.

5. 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 policy is to enter into foreign currency forward exchange contracts to minimize foreign currency exposure related to forecasted purchases of certain inventories. Under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 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 (arising from the change in the difference between the spot rate and the forward rate) of a hedge is reported in earnings immediately. We had no contracts outstanding at October 28, 2006 and November 3, 2007, respectively.

The changes in the fair value of the foreign currency forward exchange contracts are matched to inventory purchases by period and are recognized in earnings as such inventory is sold. The fair value of the forward exchange contracts is estimated by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at quarter end.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

6. Comprehensive Income and Supplemental Cash Flows

Our comprehensive income is as follows (in thousands):


	For the Three Months					For the Nine Months
	Ended					Ended
	October 28,			November 3,		October 28,		November 3,
	2006			2007		2006		2007
Net earnings	$	31,774		$	37,067	$	96,251	$	132,226

Change in derivative fair value, net of tax		(3	)		—		19		—
Currency translation adjustments, net of tax		1,049			15,865		2,112		28,432


Comprehensive income	$	32,820		$	52,932	$	98,382	$	160,658

We paid cash during the first nine months of 2006 of $7.1 million for interest and $60.2 million for income taxes, compared with $3.5 million for interest and $77.1 million for income taxes during the first nine months of 2007. We had non-cash investing and financing activities resulting from the tax benefit recognized upon exercise of stock-based compensation of $3.1 million and $4.2 million for the first nine months of 2006 and 2007, respectively. We had non-cash investing and financing activities resulting from the issuance of treasury stock to the employee stock ownership plan of $2.0 million and $2.5 million for the first nine months of 2006 and 2007, respectively. We had non-cash investing and financing activities resulting from cash dividends declared of $2.7 million and $3.2 million for the first nine months of 2006 and 2007, respectively.

We had net assets acquired, net of cash, of $69.9 million in the nine months ended November 3, 2007. The fair value of non-cash assets assumed was $144.5 million and the fair value of liabilities assumed was $74.6 million.

We had capital expenditure purchases accrued in accounts payable and accrued expenses of approximately $10.9 million at November 3, 2007.

7. Goodwill and Other Intangible Assets

Changes in the net carrying amount of goodwill for the year ended February 3, 2007 and for the nine months ended November 3, 2007 are as follows (in thousands):


Balance January 28, 2006	$	57,601
Translation adjustment		(734	)

Balance, February 3, 2007	$	56,867
Translation adjustment		6,280
Goodwill of acquired business		10,527

Balance, November 3, 2007	$	73,674

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

The goodwill of acquired business resulted from our April 9, 2007 acquisition of After Hours, a men’s formalwear chain in the United States with 509 stores operating under After Hours Formalwear and Mr. Tux store fronts. Refer to Note 2 of Notes to Condensed Consolidated Financial Statements.

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):


	October 28,			November 3,			February 3,
	2006			2007			2007
Trademarks, tradenames and other intangibles	$	9,316		$	15,712		$	9,316
Accumulated amortization		(4,192	)		(5,864	)		(4,418	)

Net total	$	5,124		$	9,848		$	4,898

The pretax amortization expense associated with intangible assets totaled approximately $671,000 and $1,517,000 for the nine months ended October 28, 2006 and November 3, 2007, respectively, and approximately $897,000 for the year ended February 3, 2007. Pretax amortization associated with intangible assets at November 3, 2007 is estimated to be $0.9 million for the remainder of fiscal year 2007, $2.1 million for fiscal year 2008, $1.9 million for fiscal year 2009, $1.4 million for fiscal year 2010 and $1.0 million for fiscal year 2011.

8. Long-Term Debt

On December 21, 2005, we entered into an Amended and Restated Credit Agreement with a group of banks to amend and restate our revolving credit facility. On February 2, 2007, we entered into an Agreement and Amendment to the Credit Agreement effective as of January 31, 2007. The Amendment (i) extends the maturity date of the revolving credit facility under the Credit Agreement to February 11, 2012 and (ii) increases the total senior secured revolving credit facility under the Credit Agreement from $100.0 million to $200.0 million, which can be expanded to $250.0 million upon additional lender commitments. The Credit Agreement also provided our Canadian subsidiaries with a senior secured term loan 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 Canadian term loan matures on February 10, 2011. The Credit Agreement is secured by the stock of certain of the Company’s subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) an alternate base rate (equal to the greater of the prime rate or the federal funds rate plus 0.5%) or (ii) LIBO rate or (iii) CDO rate. Advances under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin up to 1.125%. The Credit Agreement also provides for fees applicable to unused commitments ranging from 0.100% to 0.175%. The effective interest rate for the Canadian term loan was 5.5% at November 3, 2007. As of November 3, 2007, there were no borrowings outstanding under the revolving credit facility and there was US$92.6 million outstanding under the Canadian term loan.

The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement have been modified to afford us with greater operating flexibility than was provided for in our previous facility and to reflect an overall covenant structure that is generally representative of a commercial loan made to an investment-grade company. Our debt, however, is not rated, and we have not sought, and are not seeking, a rating of our debt. We were in compliance with the covenants in the Credit Agreement as of November 3, 2007.

On October 21, 2003, we issued $130.0 million of 3.125% Convertible Senior Notes due 2023 in a private placement. Interest on the Notes was payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2004. The Notes were scheduled to mature on October 15, 2023. However, we had the right to redeem the Notes between October 20, 2006 and October 19, 2008 if the price of our common stock reached certain levels.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

During certain periods, the Notes were convertible by holders into shares of our common stock at a conversion rate of 35.1309 shares of common stock per $1,000 principal amount of Notes, which was equivalent to a conversion price of $28.47 per share of common stock (subject to adjustment in certain events), under the following circumstances: (1) if the closing sale price of our common stock issuable upon conversion exceeded 120% of the conversion price under specified conditions; (2) if we called 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 could, 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 were 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 were effectively subordinated to all of our senior secured indebtedness and all indebtedness and liabilities of our subsidiaries.

On November 16, 2006, we issued a press release announcing that, as a result of the closing sale price of the Company’s common stock exceeding 140% of the conversion price for the requisite number of days during the requisite period, we had elected to redeem the full $130.0 million aggregate principal amount of the Notes. Holders of the Notes had the right to convert their notes at any time prior to two business days immediately preceding the redemption date. As indicated above, we had irrevocably elected to settle the principal amount at issuance of the Notes in cash when and if surrendered for conversion. Under the terms governing the Notes, holders of approximately $127.0 million principal amount of the Notes exercised their conversion right in lieu of having their notes redeemed and we exercised our right to pay cash for the principal amount of the Notes converted in lieu of issuing common stock. The market value of the common stock to be issued upon conversion that exceeded the principal amount was paid by delivering common stock. As a result, we paid approximately $127.0 million in cash and issued 1,222,364 shares of the Company’s common stock pursuant to the requested conversions. The remaining $3.0 million principal amount of the Notes was redeemed on December 15, 2006 with such payment and accrued and unpaid interest being made in cash. Notes converted into common stock prior to the redemption date were not entitled to receive accrued and unpaid interest. In connection with the conversion and redemption of the Notes, we paid approximately $130.1 million in cash, issued 1,222,364 shares of the Company’s common stock and wrote-off approximately $1.3 million of unamortized deferred financing costs.

We utilize letters of credit primarily to secure inventory purchases. At November 3, 2007, letters of credit totaling approximately $13.5 million were issued and outstanding.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

9. Treasury Stock

As of November 3, 2007, we had 16,935,760 shares held in treasury stock. A reconciliation of our treasury shares for the year ended February 3, 2007 and for the nine months ended November 3, 2007 is provided below:


	Treasury
	Shares
Balance, January 28, 2006		14,169,241
Treasury stock issued to profit sharing plan		(68,564	)
Purchases of treasury stock		1,134,000

Balance, February 3, 2007		15,234,677
Shares received in lieu of tax withholding payments		8,290
Treasury stock issued to profit sharing plan		(65,207	)
Purchases of treasury stock		1,758,000

Balance, November 3, 2007		16,935,760

In January 2006, the Board of Directors authorized a $100.0 million share repurchase program of our common stock. This authorization superceded any remaining previous authorizations. As of October 28, 2006, a total of 369,400 shares at a cost of $11.5 million were purchased in open market transactions under this program at an average price per share of $31.16. In August 2007, the Company’s Board of Directors approved a replenishment of the Company’s share repurchase program to $100 million by authorizing $90.3 million to be added to the remaining $9.7 million of the then current program. During the first nine months of 2007, 1,063,200 shares at a cost of $50.1 million were purchased in open market transactions under the January 2006 authorization at an average price of $47.08 and 694,800 shares at a cost of $28.0 million were purchased in open market transactions under the August 2007 authorization at an average price of $40.34. At November 3, 2007, the remaining balance available under the August 2007 replenishment was $72.0 million.

The following table summarizes our treasury stock repurchases (in thousands, except share data and average price per share):


	For the Nine Months Ended
	October 28,		November 3,
	2006		2007
Shares repurchased		369,400		1,758,000
Total costs	$	11,512	$	78,080
Average price per share	$	31.16	$	44.41

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

10. Stock-Based Compensation Plans

Stock Plans

We have adopted the 1996 Long-Term Incentive Plan (formerly known as the 1996 Stock Option Plan) which, as amended, provides for an aggregate of up to 2,775,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees (excluding certain officers); the 1998 Key Employee Stock Option Plan which, as amended, provides for the grant of options to purchase up to 3,150,000 shares of our common stock to full-time key employees (excluding certain officers); and the 2004 Long-Term Incentive Plan which provides for an aggregate of up to 900,000 shares of our common stock (or the fair market value there of) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full-time key employees. Each of the plans will expire at the end of ten years following the effective date of such plan unless extended by amendment; no awards may be granted pursuant to the plans after the expiration date. The 1996 Plan will expire March 29, 2014, ten years following its amended and restated effective date. In fiscal 1992, we also adopted a Non-Employee Director Stock Option Plan which, as amended, provides for an aggregate of up to 251,250 shares of our common stock with respect to which stock options, stock appreciation rights or restricted stock awards may be granted to non-employee directors of the Company. In fiscal 2001, the Director Plan’s termination date was extended to February 23, 2012. Options granted under these plans must be exercised within ten years of the date of grant.

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 of Directors. Options granted under the Director Plan vest one year after the date of grant and are issued at a price equal to the fair market value of our stock on the date of grant; provided, however, that the committee who administers the Director Plan may elect to grant stock appreciation rights, having such terms and conditions as the committee determines, in lieu of any option grant. Restricted stock awards granted under the Director Plan vest one year after the date of grant. Grants of deferred stock units generally vest over a three year period; however, certain grants vest annually at varying increments over a period up to seven years.

Stock Options

The following table summarizes stock option activity for the nine months ended November 3, 2007:


						Weighted-
				Weighted-		Average
				Average		Remaining	Aggregate
				Exercise		Contractual	Intrinsic
Options	Shares			Price		Term	Value (000’s)
Outstanding at February 3, 2007		1,434,016		$	15.81
Granted		1,500			47.18
Exercised		(300,619	)		15.62
Forfeited or expired		(108,898	)		21.75

Outstanding at November 3, 2007		1,025,999		$	15.29	4.9 years	$	25,636

Exercisable at November 3, 2007		435,008		$	14.90	4.0 years	$	11,020

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

No stock options were granted during the nine months ended October 28, 2006. For the nine months ended November 3, 2007, 1,500 stock options were granted, at a weighted-average fair value of $19.43. The fair value of the options is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for grants during the nine months ended November 3, 2007: expected volatility of 40.37%, risk-free interest rates (U.S. Treasury five year notes) of 4.63%, dividend yield of 0.46% and an expected life of five years. The total intrinsic value of options exercised during the nine months ended October 28, 2006 and November 3, 2007 was $7.7 million and $9.6 million, respectively. As of November 3, 2007, we have unrecognized compensation expense related to nonvested stock options of approximately $2.5 million which is expected to be recognized over a weighted average period of 3.1 years.

Restricted Stock and Deferred Stock Units

The following table summarizes restricted stock and deferred stock unit activity for the nine months ended November 3, 2007:


				Weighted-
				Average
				Grant-Date
Nonvested Shares	Shares			Fair Value
Nonvested at February 3, 2007		513,702		$	28.69
Granted		100,664			47.19
Vested		(145,647	)		29.56
Forfeited		(8,053	)		36.22

Nonvested at November 3, 2007		460,666		$	33.44

For the nine months ended October 28, 2006, we granted 83,252 deferred stock units at a weighted-average grant date fair value of $35.31. For the nine months ended November 3, 2007, we granted 100,664 restricted stock and deferred stock units at a weighted-average grant date fair value of $47.19. As of November 3, 2007, we have unrecognized compensation expense related to nonvested restricted stock and deferred stock units of approximately $9.1 million which is expected to be recognized over a weighted average period of 2.5 years. The total fair value of shares vested during the nine months ended October 28, 2006 and November 3, 2007 was $2.4 million and $6.5 million, respectively. During the nine months ended November 3, 2007, 19,360 restricted stock shares vested and 1,500 restricted stock shares were granted at an average grant price of $47.18. No shares of restricted stock were forfeited during the nine months ended November 3, 2007. Total nonvested shares of 460,666 at November 3, 2007 included 87,940 nonvested restricted stock shares.

THE MEN’S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Employee Stock Purchase Plan

In 1998, we adopted an Employee Stock Discount Plan which allows employees to authorize after-tax payroll deductions to be used for the purchase of up to 2,137,500 shares of our common stock at 85% of the lesser of the fair market value on the first day of the offering period or the fair market value on the last day of the offering period. We make no contributions to this plan but pay all brokerage, service and other costs incurred. Effective for offering periods beginning July 1, 2002, the plan was amended so that a participant may not purchase more than 125 shares during any calendar quarter.

During the nine months ended October 28, 2006, employees purchased 48,084 shares under the ESDP, the weighted-average fair value of which was $26.28 per share. During the nine months ended November 3, 2007, employees purchased 42,256 shares under the ESDP, the weighted-average fair value of which was $38.48 per share. We recognized approximately $0.6 million of stock-based compensation expense related to the ESDP for the nine months ended November 3, 2007. As of November 3, 2007, 1,488,359 shares were reserved for future issuance under the ESDP.

11. Legal Matters

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

12. Supplemental Sales Information (in thousands)


	For the Three Months Ended				For the Nine Months Ended
	October 28,		November 3,		October 28,		November 3,
	2006		2007		2006		2007
Net sales:
Men’s tailored clothing product	$	189,905	$	201,435	$	597,180	$	620,044
Men’s non-tailored clothing product		159,026		163,297		486,232		508,428
Ladies clothing product		15,597		14,775		47,148		50,759
Corporate uniform product		1,881		4,657		5,199		11,051

Total clothing product		366,409		384,164		1,135,759		1,190,282


Tuxedo rentals		34,486		96,090		104,401		290,521
Alteration services		24,511		26,580		71,217		80,699
Retail dry cleaning services		4,662		5,302		13,842		16,098

Total tuxedo rental, alteration and other services		63,659		127,972		189,460		387,318


Total net sales	$	430,068	$	512,136	$	1,325,219	$	1,577,600


Net sales by brand:
MW (including After Hours from April 10, 2007)	$	280,324	$	354,042	$	859,512	$	1,073,031
K&G		89,906		87,656		288,215		298,842
Moores		53,295		60,479		158,451		178,578
MW Cleaners		4,662		5,302		13,842		16,098
Twin Hill		1,881		4,657		5,199		11,051

	$	430,068	$	512,136	$	1,325,219	$	1,577,600

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

For supplemental information, it is suggested that “Management’s Discussion and Analysis of Financial Condition and Results of Operations” be read in conjunction with the corresponding section included in our Annual Report on Form 10-K for the year ended February 3, 2007. References herein to years are to our 52-week or 53-week fiscal year which ends on the Saturday nearest January 31 in the following calendar year. For example, references to “2007” mean the 52-week fiscal year ending February 2, 2008.

The following table presents information with respect to retail apparel stores in operation during each of the respective fiscal periods:


												For the Year
	For the Three Months Ended					For the Nine Months Ended						Ended
	October 28,		November 3,			October 28,			November 3,			February 3,
	2006		2007			2006			2007			2007
Stores open at beginning of period:		735		1,269			719			752			719
Opened		8		15			26			35			35
Acquired		—		—			—			509			—
Closed		—		(12	)		(2	)		(24	)		(2	)

Stores open at end of period		743		1,272			743			1,272			752


Stores open at end of period:
U.S. —
Men’s Wearhouse		538		560			538			560			543
After Hours		—		493			—			493			—
K&G		89		103			89			103			93

		627		1,156			627			1,156			636

Canada —
Moores		116		116			116			116			116

		743		1,272			743			1,272			752

On April 9, 2007, we completed the acquisition of After Hours, a men’s formalwear chain in the United States with 509 stores operating under After Hours Formalwear and Mr. Tux store fronts. As a result of the acquisition of After Hours, the condensed consolidated statement of earnings and condensed consolidated statement of cash flows for the nine months ended November 3, 2007 include the results of operations and cash flows, respectively, of After Hours beginning April 10, 2007. In addition, the condensed consolidated balance sheet as of November 3, 2007 includes preliminary estimates of the fair values of the assets acquired and liabilities assumed as of the acquisition date for After Hours. After Hours has a preferred relationship with David’s Bridal, Inc., the nation’s largest bridal retailer. This preferred relationship also includes all Men’s Wearhouse tuxedo operations. We expect to rebrand the After Hours operations and to realize future cost synergies resulting from the consolidation of central functions, division integrations and the adoption of best practices across the combined operations during fiscal 2007.

As of November 3, 2007, we are operating 33 retail dry cleaning and laundry facilities in the Houston, Texas area. We may open or acquire additional facilities on a limited basis in 2007 as we continue to test market and evaluate the feasibility of developing a national retail dry cleaning and laundry line of business. In addition, we continue to pursue our corporate apparel and uniform program by entering into contracts to provide corporate uniforms to our customers’ workforces. As of November 3, 2007, we are servicing approximately eight contract customers.

Results of Operations

Three Months Ended October 28, 2006 and November 3, 2007

The Company’s net sales increased $82.1 million, or 19.1%, to $512.1 million for the quarter ended November 3, 2007, due mainly to a $61.6 million increase in tuxedo rental revenues, a $17.8 million increase in clothing product sales and a $2.1 million increase in alteration service revenues. The $82.1 million increase in net sales is attributable to the following:


( in millions)			Amount Attributed to

$	60.6		Increase in net sales from acquired After Hours stores.
	9.1		Increase from net sales of stores opened in 2006, relocated stores and expanded stores not yet included in comparable sales.
	5.9		Increase from alteration and other sales.
	(6.8	)	2.1% decrease and 0.6% increase in comparable sales for US and Canadian stores, respectively, in the third quarter of 2007 compared to the third quarter of 2006.
	8.4		Net sales from 15 new stores opened in 2007.
	(0.6	)	Closed stores.
	5.5		Effect of exchange rate changes.
$	82.1		Total

Our Men’s Wearhouse 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 0.6%, while our K&G comparable store sales decreased 11.3%. Our Men’s Wearhouse comparable store sales increased due to continued growth in our tuxedo rental business. The decrease in K&G comparable store sales was due mainly to a decrease in traffic levels and unseasonably warm weather. In Canada, comparable store sales increased 0.6% primarily as a result of continued growth in our tuxedo rental business. As a percentage of total revenues, combined U.S. and Canadian tuxedo rental revenues increased from 8.0% in the third quarter of 2006 to 18.8% in the third quarter of 2007. Our condensed consolidated financial statements include tuxedo rental revenues of $56.9 million from After Hours since the acquisition date of April 9, 2007.

Gross margin increased 29.7% from the same prior year quarter to $240.5 million in the third quarter of 2007. As a percentage of sales, gross margin increased from 43.1% in the third quarter of 2006 to 47.0% in the third quarter of 2007. This increase in gross margin percentage resulted mainly from improvements in clothing product margins from 55.6% in 2006 to 58.6% in 2007 related to lower product costs and from continued growth in our tuxedo rental and other services margins from 54.9% in 2006 to 67.7% in 2007 due mainly to our acquisition of After Hours effective April 9, 2007. The increases in the clothing product and services gross margins were partially offset by an increase from 12.4% to 13.9% from the third quarter of 2006 to the third quarter of 2007 for 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. On an absolute dollar basis, occupancy cost increased by 33.7% from the third quarter of 2006 to the third quarter of 2007, due mainly to our acquisition of After Hours, higher rent expense from our increased store count and renewals of existing leases at higher rates.

Selling, general and administrative expenses increased to $181.3 million in the third quarter of 2007 from $136.6 million in the third quarter of 2006, an increase of $44.7 million or 32.7%. As a percentage of sales, these expenses increased from 31.8% in the third quarter of 2006 to 35.4% in the third quarter of 2007. The components of this 3.6% net increase in SG&A expenses as a percentage of net sales were as follows:


%			Attributed to

	(0.1	)	Decrease in advertising expense as a percentage of sales from 3.5% in the third quarter of 2006 to 3.4% in the third quarter of 2007. On an absolute dollar basis, advertising expense increased $2.6 million.
	1.2		Increase in store salaries as a percentage of sales from 13.1% in the third quarter of 2006 to 14.3% in the third quarter of 2007. Store salaries on an absolute dollar basis increased $16.5 million primarily due to salary expense associated with After Hours and increased base salaries.
	2.5		Increase in other SG&A expenses as a percentage of sales from 15.2% in the third quarter of 2006 to 17.7% in the third quarter of 2007. On an absolute dollar basis, other SG&A expenses increased $25.6 million primarily due to expenses associated with After Hours, continued growth in our tuxedo rental business, increase in base salaries and increased warehouse and administrative occupancy costs.
	3.6	%	Total

Interest expense decreased from $2.3 million in the third quarter of 2006 to $1.3 million in the third quarter of 2007 while interest income decreased from $2.5 million in the third quarter of 2006 to $1.4 million in the third quarter of 2007. Weighted average borrowings outstanding decreased from $207.3 million in the third quarter of 2006 to $85.4 million in the third quarter of 2007, and the weighted average interest rate on outstanding indebtedness increased from 3.9% to 5.9%. The decrease in weighted average borrowings and the increase in the weighted average interest rate is due to our election to redeem our $130.0 million 3.125% Convertible Senior Notes due 2023 in the fourth quarter of 2006. For additional information regarding the redemption of our Notes, refer to Note 8 of Notes to Condensed Consolidated Financial Statements and the “Liquidity and Capital Resources” discussion herein. The decrease in interest income primarily relates to decreases in our average cash and short-term investment balances.

Our effective income tax rate was 35.0% for the third quarter of 2006 and 37.4% for the third quarter of 2007. The effective tax rate in 2007 was higher than the statutory U.S. federal rate of 35% primarily due to the effect of state income taxes.

These factors resulted in net earnings of $37.1 million or 7.2% of net sales for the third quarter of 2007, compared with net earnings of $31.8 million or 7.4% of net sales for the third quarter of 2006.

Nine Months Ended October 28, 2006 and November 3, 2007

The Company’s net sales increased $252.4 million, or 19.0%, to $1,577.6 million for the nine months ended November 3, 2007, due mainly to a $186.1 million increase in tuxedo rental revenues, a $54.5 million increase in clothing product sales and a $9.5 million increase in alteration service revenues and. The $252.4 million increase in net sales is attributable to the following:


( in millions)			Amount Attributed to

$	176.0		Increase in net sales from acquired After Hours stores.
	36.6		Increase from net sales of stores opened in 2006, relocated stores and expanded stores not yet included in comparable sales.
	18.1		Increase from alteration and other sales.
	0.1		(0.8)% decrease and 5.1% increase in comparable sales for US and Canadian stores, respectively, for the nine months ended November 3, 2007
	16.5		Net sales from 35 new stores opened in 2007.
	(2.9	)	Closed stores.
	8.0		Effect of exchange rate changes.
$	252.4		Total

Our Men’s Wearhouse comparable store sales increased 1.5%, while our K&G comparable store sales decreased 8.0%. Our Men’s Wearhouse comparable store sales increased due to a slight increase in traffic levels and continued growth in our tuxedo rental business. The decrease in K&G comparable store sales was due mainly to a decrease in traffic levels and the cannibalization effect from opening new stores. In Canada, comparable store sales increased 5.1% primarily as a result of increased traffic levels, an improved average ticket and continued growth in our tuxedo rental business. As a percentage of total revenues, combined U.S. and Canadian tuxedo rental revenues increased from 7.9% in the first nine months of 2006 to 18.4% in the first nine months of 2007. Our condensed consolidated financial statements include tuxedo rental revenues of $165.5 million from After Hours since the acquisition date of April 9, 2007.

Gross margin increased $173.9 million or 30.7% over the same prior year period to $741.2 million for the first nine months of 2007. As a percentage of sales, gross margin increased from 42.8% in the first nine months of 2006 to 47.0% in the first nine months of 2007. This increase in gross margin percentage resulted mainly from improvements in clothing product margins from 54.4% in 2006 to 57.0% in 2007 related to lower product costs and from continued growth in our tuxedo rental and other services margins from 54.6% in 2006 to 67.4% in 2007 due mainly to our acquisition of After Hours effective April 9, 2007. The increases in the clothing product and services gross margins were partially offset by an increase from 11.6% to 12.5% from the first nine months of 2006 to the first nine months of 2007 for 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. On an absolute dollar basis, occupancy costs increased by 28.1% from the first nine months of 2006 to the first nine months of 2007, due mainly to our acquisition of After Hours, higher rent expense from our increased store count and renewals of existing leases at higher rates. In addition, the increase in the gross margin percentage was partially offset by a $3.6 million charge due to the elimination of under performing tuxedo rental styles as a result of our strategy to establish a global merchandising assortment for the combined tuxedo rental operations of After Hours and Men’s Wearhouse.

Selling, general and administrative expenses increased to $534.1 million in the first nine months of 2007 from $416.6 million in the first nine months of 2006, an increase of $117.6 million or 28.2%. As a percentage of sales, these expenses increased from 31.4% in the first nine months of 2006 to 33.9% in the first nine months of 2007. The components of this 2.5% net increase in SG&A expenses as a percentage of net sales were as follows:


%			Attributed to

	(0.2	)	Decrease in advertising expense as a percentage of sales from 3.4% in the first nine months of 2006 to 3.2% in the first nine months of 2007. On an absolute dollar basis, advertising expense increased $5.3 million.
	0.8		Increase in store salaries as a percentage of sales from 12.8% in the first nine months of 2006 to 13.6% in the first nine months of 2007. Store salaries on an absolute dollar basis increased $44.8 million primarily due to salary expense associated with After Hours and increased commissions associated with higher sales and increased base salaries.
	1.9		Increase in other SG&A expenses as a percentage of sales from 15.2% in the first nine months of 2006 to 17.1% in the first nine months of 2007. On an absolute dollar basis, other SG&A expenses increased $67.5 million primarily due to expenses associated with After Hours, continued growth in our tuxedo rental business, increased base salaries and increased warehouse and administrative occupancy costs, partially offset by the receipt of proceeds of business interruption insurance related to store closings in prior periods.
	2.5	%	Total

Interest expense decreased from $6.8 million in the first nine months of 2006 to $3.5 million in the first nine months of 2007 while interest income decreased from $7.2 million in the first nine months of 2006 to $4.7 million in the first nine months of 2007. Weighted average borrowings outstanding decreased from $207.3 million in the first nine months of 2007 to $80.5 million in the first nine months of 2007, and the weighted average interest rate on outstanding indebtedness increased from 3.8% to 5.4%. The decrease in weighted average borrowings and the increase in the weighted average interest rate is due to our election to redeem our $130.0 million 3.125% Convertible Senior Notes due 2023 in the fourth quarter of 2006. For additional information regarding the redemption of our Notes, refer to Note 8 of Notes to Condensed Consolidated Financial Statements and the “Liquidity and Capital Resources” discussion herein. The decrease in interest income primarily relates to decreases in our average cash and short-term investment balances.

Our effective income tax rate was 36.3% for the first nine months of 2006 and 36.5% for the first nine months of 2007. The effective tax rate in 2007 was higher than the statutory U.S. federal rate of 35% primarily due to the effect of state income taxes, offset by favorable developments in certain outstanding income tax matters in the second quarter of 2007.

These factors resulted in net earnings of $132.2 million or 8.4% of net sales for the first nine months of 2007, compared with net earnings of $96.3 million or 7.3% of net sales for the first nine months of 2006.

Liquidity and Capital Resources

We utilize letters of credit primarily to secure inventory purchases. At November 3, 2007, letters of credit totaling approximately $13.5 million were issued and outstanding.

In October 2007, our Board of Directors declared a quarterly cash dividend of $0.06 per share payable on December 28, 2007 to shareholders of record at close of business on December 18, 2007. The dividend payout is estimated to be approximately $3.2 million and is included in accrued expenses as of November 3, 2007.

Our primary sources of working capital are cash flow from operations and borrowings under the Credit Agreement. We had working capital of $437.6 million at November 3, 2007, which is down from $454.7 million at February 3, 2007 and $572.6 million at October 28, 2006. Historically, our working capital has been at its lowest level in January and February, and has increased through November as inventory buildup occurs in preparation for the fourth quarter selling season. The $17.1 million decrease in working capital at November 3, 2007 compared to February 3, 2007 resulted primarily from the acquisition of After Hours and the purchase of treasury stock.

Our operating activities provided net cash of $50.8 million and $143.1 million during the first nine months of 2006 and 2007, respectively, due mainly to net earnings, adjusted for non-cash charges, offset by increases in inventories and tuxedo rental product and a decrease in payables and accrued expenses. Inventories increased in the first nine months of 2006 and 2007 due mainly to seasonal inventory buildup and an increase in selling square footage. The increase in tuxedo rental product in the first nine months of 2006 and 2007 is due to purchases of this product to support the continued growth in our tuxedo rental business. Accounts payable and accrued expenses decreased in the first nine months of 2006 and 2007 due mainly to the timing of vendor payments, the payment of bonuses and the contribution to the employee stock ownership plan.

Our investing activities used net cash of $166.0 million for the first nine months of 2006 due mainly to capital expenditures of $47.5 million and net purchases of short-term investments of $117.5 million. During the first nine months of 2007, our investing activities used net cash of $158.7 million due mainly to our acquisition of After Hours on April 9, 2007 for $69.9 million and capital expenditures of $90.4 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 November 3, 2007, we held no short-term investments. Our capital expenditures relate to costs incurred for stores opened, remodeled or relocated during the period or under construction at the end of the period, office and distribution facility additions and infrastructure technology investments.

Our financing activities used net cash of $10.8 million and $79.7 million for the first nine months of 2006 and 2007, respectively, due mainly to purchases of treasury stock and the payment of cash dividends, partially offset by proceeds from the issuance of common stock and excess tax benefits in connection with stock based compensation.

In January 2006, the Board of Directors authorized a $100.0 million share repurchase program of our common stock. This authorization superceded any remaining previous authorizations. As of October 28, 2006, a total of 369,400 shares at a cost of $11.5 million were purchased in open market transactions under this program at an average price per share of $31.16. In August 2007, the Company’s Board of Directors approved a replenishment of the Company’s share repurchase program to $100 million by authorizing $90.3 million to be added to the remaining $9.7 million of the then current program. During the first nine months of 2007, 1,063,200 shares at a cost of $50.1 million were purchased in open market transactions under the January 2006 authorization at an average price of $47.08 and 694,800 shares at a cost of $28.0 million were purchased in open market transactions under the August 2007 authorization at an average price of $40.34. For the nine months ended November 3, 2007 a total of 1,758,000 shares were purchased at a cost of $78.1 million at an average price of $44.41. At November 3, 2007, the remaining balance available under the August 2007 replenishment was $72.0 million.

We anticipate that our existing cash and cash flow from operations, supplemented by borrowings under our Credit Agreement, will be sufficient to fund the 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 financial institutions, we anticipate full performance and access to our deposits and liquid investments.

In connection with our direct sourcing program, we may enter into purchase commitments that are denominated in a foreign currency (primarily the Euro). We generally enter into forward exchange contracts to reduce the risk of currency fluctuations related to such commitments. We may also be exposed to market risk as a result of changes in foreign exchange rates. This market risk should be substantially offset by changes in the valuation of the underlying transactions. As of November 3, 2007, we had no contracts outstanding.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to exposure from fluctuations in U.S. dollar/Euro exchange rates and the Canadian dollar/Euro exchange rates. As further described in Note 5 of Notes to Condensed Consolidated Financial Statements and “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 October 28, 2006 and November 3, 2007, we had no contracts outstanding.

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$92.6 million at November 3, 2007, which bears interest at CDO rate plus an applicable margin (see Note 8 of Notes to Condensed Consolidated Financial Statements). An increase in market interest rates would increase our interest expense and our cash requirements for interest payments. For example, an average increase of 0.5% in the variable interest rate would increase our interest expense and payments by approximately $0.5 million.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the fiscal quarter ended November 3, 2007. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter ended November 3, 2007 to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended November 3, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) The following table presents information with respect to purchases of common stock of the Company made during the quarter ended November 3, 2007 as defined by Rule 10b-18(a)(3) under the Exchange Act:


					(c)
					Total		(d)
					Number of		Approximate
					Shares		Dollar Value of
					Purchased		Shares that
					as Part of		May Yet Be
	(a)		(b)		Publicly		Purchased
	Total Number		Average		Announced		Under the
	of Shares		Price Paid		Plans or		Plans or
Period	Purchased		Per Share		Programs		Programs
							(In thousands)

August 5, 2007 through September 1, 2007		123,200	$	49.43		123,200	$	100,000

September 2, 2007 through October 6, 2007		—		—		—	$	100,000

October 7, 2007 through November 3, 2007		694,800	$	40.34		694,800	$	71,975

Total		818,000	$	41.71		818,000	$	71,975

In August 2007, the Company’s Board of Directors approved a replenishment of the Company’s share repurchase program to $100.0 million. Stock purchases that occurred in August applied to the January 2006 Authorization.

ITEM 6 — EXHIBITS

(a) Exhibits.


Exhibit
Number		Exhibit Index

3.1	—	Second Amended and Restated Bylaws (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 6, 2007).

31.1	—	Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).

31.2	—	Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).

32.1	—	Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).

32.2	—	Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, The Men’s Wearhouse, Inc., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated: December 13, 2007	THE MEN’S WEARHOUSE, INC.
	By	/s/ NEILL P. DAVIS
		Neill P. Davis
		Executive Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer


Part and Item No.		Page No.
PART I — Financial Information

Item 1 — Condensed Consolidated Financial Statements

General Information		1

Condensed Consolidated Balance Sheets as of October 28, 2006 (unaudited), November 3, 2007 (unaudited) and February 3, 2007		2

Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended October 28, 2006 (unaudited) and November 3, 2007 (unaudited)		3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 28, 2006 (unaudited) and November 3, 2007 (unaudited)		4

Notes to Condensed Consolidated Financial Statements (unaudited)		5

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3 — Quantitative and Qualitative Disclosures about Market Risk		25

Item 4 — Controls and Procedures		25

PART II — Other Information

Item 1 — Legal Proceedings		26

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		26

Item 6 — Exhibits		27

SIGNATURES		27
Certification Pursuant to Section 302 by CEO
Certification Pursuant to Section 302 by CFO
Certification Pursuant to Section 906 by CEO
Certification Pursuant to Section 906 by CFO

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents


Exhibit
Number		Exhibit Index

3.1	—	Second Amended and Restated Bylaws (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 6, 2007).

31.1	—	Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).

31.2	—	Certification of Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).

32.1	—	Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith).

32.2	—	Certification of Periodic Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith).

	1.		I have reviewed this quarterly report on Form 10-Q of The Men’s Wearhouse, Inc.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated: December 13, 2007	By	/s/ GEORGE ZIMMER
		George Zimmer
		Chief Executive Officer

	(1)		The Report fully complies with the requirement of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.