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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)    

ý

 

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

For the fiscal year ended February 1, 2014

or

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

6380 Rogerdale Road
Houston, Texas

(Address of Principal Executive Offices)

 

77072-1624
(Zip Code)

(281) 776-7000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý.    No o.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o.    No ý.

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 ý.    No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý.    No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company 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 ý.

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of shares of common stock on the New York Stock Exchange on August 3, 2013, was approximately $1,916.9 million.

The number of shares of common stock of the registrant outstanding on March 21, 2014 was 47,604,629 excluding 137,900 shares classified as Treasury Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Document   Incorporated as to
Notice and Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held June 18, 2014
  Part III: Items 10, 11, 12, 13 and 14

   


Table of Contents


FORM 10-K REPORT INDEX

10-K Part and Item No.
  Page No.  

PART I

 

 

       

Item 1.

 

Business

    2  

Item 1A.

 

Risk Factors

    13  

Item 1B.

 

Unresolved Staff Comments

    20  

Item 2.

 

Properties

    21  

Item 3.

 

Legal Proceedings

    24  

Item 4.

 

Mine Safety Disclosures

    24  

PART II

 

 

   
 
 

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

    25  

Item 6.

 

Selected Financial Data

    27  

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

    29  

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

    46  

Item 8.

 

Financial Statements and Supplementary Data

    48  

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    85  

Item 9A.

 

Controls and Procedures

    85  

Item 9B.

 

Other Information

    87  

PART III

 

 

   
 
 

Item 10.

 

Directors, Executive Officers and Corporate Governance

    87  

Item 11.

 

Executive Compensation

    87  

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    87  

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

    88  

Item 14.

 

Principal Accounting Fees and Services

    88  

PART IV

 

 

   
 
 

Item 15.

 

Exhibits, Financial Statement Schedules

    88  

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Forward-Looking and Cautionary Statements

Certain statements made in this Annual Report on Form 10-K 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, sales, earnings, margins, costs, number and costs of store openings, future capital expenditures, acquisitions, demand for clothing, market trends in the retail and corporate apparel 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 Annual Report on Form 10-K and other sections of our filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended.

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; success, or lack thereof, in executing our internal operating plans and new store and new market expansion plans, including 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. These forward looking statements are based upon management's current beliefs or expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies and third party approvals, many of which are beyond our control. Refer to "Risk Factors" contained in Part I of this Annual Report on Form 10-K 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 convey 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.

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PART I

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 6380 Rogerdale Road, Houston, Texas 77072-1624 (telephone number 281-776-7000) and at 6100 Stevenson Blvd., Fremont, California 94538-2490 (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 subsidiaries. References herein to years are to the Company's 52-week or 53-week fiscal year, which ends on the Saturday nearest January 31 in the following calendar year. The periods presented in these financial statements are the fiscal years ended February 1, 2014 ("fiscal 2013"), February 2, 2013 ("fiscal 2012") and January 28, 2012 ("fiscal 2011"). Each of these periods had 52 weeks, except for 2012, which consisted of 53 weeks.

We are one of the largest specialty retailers of men's suits and the largest provider of tuxedo rental product in the United States ("U.S.") and Canada. At February 1, 2014, we operated 1,124 retail stores, with 1,003 stores in the U.S. and 121 stores in Canada. Our U.S. retail stores are operated under the brand names of Men's Wearhouse (661 stores), Men's Wearhouse and Tux (248 stores) and K&G (94 stores) in 50 states and the District of Columbia. Our Canadian stores are operated under the brand name of Moores Clothing for Men ("Moores") in ten provinces. We also conduct retail dry cleaning, laundry and heirlooming operations through MW Cleaners in the Houston, Texas area. On August 6, 2013, we acquired JA Holding, Inc. ("JA Holding"), the parent company of the American clothing brand Joseph Abboud® and a U.S. tailored clothing factory, for $97.5 million in cash consideration, subject to certain adjustments. The total net cash consideration paid after these adjustments was $94.9 million. We believe this transaction will accelerate our strategy of offering exclusive brands with broad appeal at attractive prices. These operations comprise our retail segment.

Additionally, we operate two corporate apparel providers—our UK-based holding company operations, the largest provider in the United Kingdom ("UK") under the Dimensions, Alexandra and Yaffy brands, and our Twin Hill operations in the U.S. These operations provide corporate clothing uniforms and workwear to workforces through multiple channels including managed corporate accounts, catalogs and the internet. The Company acquired 86% of the UK-based holding company in 2010. Certain previous shareholders of Dimensions control 14% of the UK-based holding company and the Company has the right to acquire this 14% after fiscal 2013. These operations comprise our corporate apparel segment.

During fiscal 2013, 2012 and 2011, we generated total consolidated net earnings attributable to common shareholders of $83.8 million, $131.7 million and $120.6 million, respectively. Our two reportable segments contributed the following net sales and operating income in each of the last three fiscal years (in thousands):

 
  Fiscal Year  
 
  2013   2012   2011  

Net sales:

                   

Retail

  $ 2,226,422   $ 2,248,849   $ 2,139,193  

Corporate apparel

    246,811     239,429     243,491  
               

Total net sales

  $ 2,473,233   $ 2,488,278   $ 2,382,684  
               
               

Operating income (loss):

                   

Retail

  $ 120,247   $ 194,679   $ 189,995  

Corporate apparel

    9,381     3,889     (4,563 )
               

Operating income. 

  $ 129,628   $ 198,568   $ 185,432  
               
               

Additional segment information, together with certain geographical information, is included in Note 15 of Notes to Consolidated Financial Statements contained herein.

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Retail Segment

In our retail segment, we offer our products and services through our four retail merchandising brands—The Men's Wearhouse, Men's Wearhouse and Tux, Moores and K&G—and the Internet at www.menswearhouse.com. Our stores are located throughout the U.S. and Canada and carry a wide selection of exclusive and non-exclusive merchandise brands. Our retail segment accounted for approximately 90.0%, 90.4% and 89.8% of our total net sales in fiscal 2013, 2012 and 2011, respectively. MW Cleaners, a retail dry cleaning, laundry and heirlooming operation in the Houston, Texas area, is also aggregated in the retail segment as these operations have not had a significant effect on our revenues or expenses. As a result of our acquisition of JA Holding, we now operate a factory located in New Bedford, Massachusetts that manufactures quality tailored clothing including designer suits, tuxedos, sport coats and slacks which we sell in our Men's Wearhouse stores. JA Holding is a component of our Men's Wearhouse brand and therefore has also been included in our retail segment.

Below is a summary of store statistics with respect to our retail apparel stores during each of the respective fiscal years, followed by a brief description of each brand.

 
  For the Year Ended  
 
  February 1,
2014
  February 2,
2013
  January 28,
2012
 

Stores open at beginning of period:

    1,143     1,166     1,192  

Opened

    25     37     25  

Closed

    (44 )   (60 )   (51 )
               

Stores open at end of period

    1,124     1,143     1,166  
               
               

Stores open at end of period:

                   

Men's Wearhouse

    661     638     607  

Men's Wearhouse and Tux

    248     288     343  

Moores

    121     120     117  

K&G

    94     97     99  
               

Total

    1,124     1,143     1,166  
               
               

At February 1, 2014, we also operated 35 retail dry cleaning, laundry and heirlooming facilities in the Houston, Texas area.

Under the Men's Wearhouse brand, we target the male consumer by providing a superior level of customer service and offering a broad selection of exclusive and non-exclusive merchandise brands at regular and sale prices we believe are competitive with specialty and traditional department stores. Our merchandise includes suits, suit separates, sport coats, slacks, formalwear, business casual, sportswear, outerwear, dress shirts, shoes and accessories in classic, modern and slim fits and in a wide range of sizes including a significant selection of "Big and Tall" product. We also offer a full selection of tuxedo rental product. We believe our tuxedo rental program broadens our customer base by drawing first-time and younger customers into our stores; accordingly, our offering includes an expanded merchandise assortment including dress and casual apparel targeted toward the younger customer.

Men's attire 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 to move out-of-style merchandise are more common. However, our concentration in "wear-to-work" business attire causes our sales to be impacted by macroeconomic trends, particularly unemployment levels. Furthermore, we believe that these market conditions affect us more than other

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retailers because discretionary spending for items like men's tailored apparel tends to slow sooner and to recover later than that for other retail purchases.

At February 1, 2014, we operated 661 Men's Wearhouse retail apparel stores in 50 states and the District of Columbia with an average square footage of 5,710 per store. These stores are referred to as "Men's Wearhouse stores" or "traditional stores" that offer a full selection of retail merchandise and tuxedo rental product. Men's Wearhouse stores are primarily located in regional strip and specialty retail shopping centers. In fiscal 2013, we opened 23 new Men's Wearhouse stores of which four are Men's Wearhouse outlets.

At February 1, 2014, we also operated another 248 stores in 35 states branded as Men's Wearhouse and Tux that offer a full selection of tuxedo rental product and a limited selection of retail merchandise, including dress and casual apparel targeted toward a younger customer. These stores, referred to as "rental stores", are smaller than our traditional stores, averaging 1,387 square feet per store at February 1, 2014, and are located primarily in regional malls and lifestyle centers. In fiscal 2013, we closed 40 Men's Wearhouse and Tux stores as we continued to experience a consumer driven shifting of rental revenues from the rental stores to our Men's Wearhouse stores located one mile or less in proximity.

Our Men's Wearhouse and Men's Wearhouse and Tux stores accounted for 72.1% of our total retail segment net sales in fiscal 2013, 70.3% in fiscal 2012 and 68.8% in fiscal 2011.

Moores is one of Canada's leading specialty retailers of men's apparel. Similar to the Men's Wearhouse stores, Moores stores offer a broad selection of exclusive and non-exclusive merchandise brands at regular and sale prices that we believe are competitive with traditional Canadian specialty and department stores. Moores' merchandise consists of suits, suit separates, sport coats, slacks, formalwear, business casual, sportswear, outerwear, dress shirts, shoes and accessories in classic, modern and slim fits and in a wide range of sizes including a selection of "Big and Tall" product. We also offer tuxedo rentals at all of our Moores stores which we believe broadens our customer base by drawing first-time and younger customers into our stores. To further accommodate these younger tuxedo rental customers, we also offer an expanded merchandise assortment including dress and casual apparel targeted toward a younger customer. As with our Men's Wearhouse stores, Moores' concentration in "wear-to-work" business attire causes our sales to be impacted by macroeconomic trends, particularly unemployment levels. Furthermore, we believe that these market conditions affect us more than other retailers because discretionary spending for items like men's tailored apparel tends to slow sooner and to recover later than that for other retail purchases.

At February 1, 2014, we operated 121 retail apparel stores in ten Canadian provinces averaging 6,358 square feet per store. Moores stores are primarily located in regional strip and specialty retail shopping centers. In fiscal 2013, we opened one new Moores store.

Our Moores stores accounted for 11.4% of our total retail segment net sales in fiscal 2013, 12.2% in fiscal 2012 and 12.5% in fiscal 2011.

K&G stores offer a more value-oriented superstore approach that we believe appeals to the more price sensitive customer in the apparel market. K&G offers first-quality, current-season apparel and accessories comparable in quality to that of traditional department stores, at prices we believe are typically up to 70% below the regular prices charged by such stores. K&G's merchandising strategy emphasizes broad assortments across all major categories of both men's and ladies' apparel, including tailored clothing, dress furnishings, sportswear, accessories and shoes and children's apparel in a wide depth of sizes including "Big and Tall" and "Women's plus sizes". This merchandise selection, which includes exclusive and non-exclusive merchandise brands, positions K&G to attract a wide range of customers in each of its markets.

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At February 1, 2014, we operated 94 K&G stores in 27 states, 85 of which also offer ladies' career apparel, sportswear, accessories and shoes and children's apparel. K&G stores vary in size from approximately 9,600 to 42,000 total square feet. The average square footage at February 1, 2014 was 23,710 with a 20,000 to 25,000 square foot men's and ladies' superstore prototype. K&G stores are "destination" stores located primarily in second generation strip shopping centers that are easily accessible from major highways and thoroughfares. In fiscal 2013, we opened one new K&G store and closed four K&G stores.

Our K&G stores accounted for 15.1% of our total retail segment net sales in fiscal 2013, 16.3% in fiscal 2012 and 17.5% in fiscal 2011.

In March 2013, we announced that we engaged Jefferies & Co. to assist us in evaluating strategic alternatives for our K&G operations. We believe that our core strengths lie primarily in our service culture and specialty men's apparel retailing, and that we will be better able to focus our efforts on these core operations by taking this action.

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. 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. Men's Wearhouse and Tux stores are generally smaller than our traditional stores and are staffed to facilitate the tuxedo rental and retail sales process.

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 ("Slim Fit," "Modern Fit," "Classic Fit," "Urban Fit," etc.) as a means of further assisting customers to easily select their styles and sizes. K&G employees are also available to assist customers with merchandise selection, including correct sizing.

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

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

Our advertising strategy primarily consists of television, email, online (including social networking), mobile, direct mail, telemarketing and bridal shows. We consider our integrated efforts across these channels to be the most effective means of both attracting and reaching potential new customers, as well as reinforcing our positive attributes for our various brands with our existing customer base. Our total annual advertising expenditures for the retail segment were $99.1 million, $92.2 million and $82.0 million in 2013, 2012 and 2011, respectively.

We have a preferred relationship with David's Bridal, Inc., the nation's largest bridal retailer, and TheKnot.com with respect to our tuxedo rental operations. We also have an agreement with Vera Wang that gives us the exclusive right to "Black by Vera Wang" tuxedo products for rental and retail sale.

We also offer our "Perfect Fit" loyalty program to our Men's Wearhouse, Men's Wearhouse and Tux and Moores customers. Under the loyalty program, customers receive points for purchases. Points are equivalent to dollars spent on a one-for-one basis, excluding any 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, Men's Wearhouse and Tux or Moores stores or online at www.menswearhouse.com. We

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believe that the loyalty program facilitates our ability to cultivate long-term relationships with our customers. All customers who register for our "Perfect Fit" loyalty program are eligible to participate and earn points for purchases. Approximately 82% of sales transactions at our Men's Wearhouse, Men's Wearhouse and Tux and Moores stores were to customers who participated in the loyalty program in fiscal 2013.

Our retail apparel stores offer a broad selection of exclusive and non-exclusive men's business attire, including a consistent stock of core items (such as basic suits, navy blazers and tuxedos) and a significant selection of "Big and Tall" product. Although basic styles are emphasized, each season's merchandise reflects current fit, fabric and color trends. 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 retail apparel stores. Additionally, at Men's Wearhouse stores, if the customer wants an item that is not available at the store our clothing consultants can order it through our website to fulfill the customer's purchasing needs.

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, including "Big and Tall" and boys. In addition, at Men's Wearhouse stores, we recently began offering our customers the ability to purchase a custom-made suit which can be produced in approximately three weeks and is unique to each customer's specifications. 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.

Our inventory mix includes business, business casual, casual and formal merchandise designed to meet the demand of our customers. Our assortment includes the classic fit, comprised of pleated pants and a more generous fit, and modern fit, consisting of flat front pants, narrower lapels, side vent jackets and a more tailored but still comfortable fit. In addition, we have expanded our merchandise assortment targeted toward a younger customer in our retail stores with the addition of slim fit clothing, a fit that is much closer to the body producing a slimmer, more flattering look.

During 2013, 2012 and 2011, 56.8%, 57.1% and 57.4%, respectively, of our total retail men's net clothing product sales were attributable to tailored clothing (suits, suit separates, sport coats and slacks) and 43.2%, 42.9% and 42.6%, respectively, were attributable to non-tailored clothing (casual attire, sportswear, shoes, shirts, ties, outerwear and other clothing product sales).

We do not purchase significant quantities of merchandise overruns or close-outs. We provide recognizable quality merchandise at prices that assist the customer in identifying the value available at our retail apparel stores. We believe that the merchandise at Men's Wearhouse and Moores stores, before consideration of promotional discounts, is generally offered at attractive price points that are competitive with traditional department stores and that merchandise at K&G stores is generally up to 70% below regular retail prices charged by such stores.

Our promotional pricing strategy utilizes a variety of pricing techniques such as "buy one get one free" and "buy one get one for $100" designed to encourage multiple unit sales allowing us to offer our customers excellent value while still maintaining adequate margins and remaining competitive in the current economic environment.

We purchase merchandise and tuxedo rental product from approximately 700 vendors. 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 that is supported by consistent purchasing practices.

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We purchased approximately 21% and 14% of total U.S. and Canada clothing product purchases, respectively, in fiscal 2013 through our direct sourcing program. We have no long-term merchandise supply contracts and typically transact business on a purchase order-by-purchase order basis either directly with manufacturers and fabric mills or with trading companies. We have developed long-term and reliable relationships with over half of our direct manufacturers and fabric mills, which we believe provides stability, quality and price leverage. We also work with trading companies that support our relationships with vendors for our direct sourced merchandise and contract agent offices that provide administrative functions on our behalf. In addition, the agent offices provide all quality control inspections and ensure that our operating procedures manuals are adhered to by our suppliers.

In addition, as a result of our acquisition of JA Holding, we now operate a factory located in New Bedford, Massachusetts that manufactures quality made in America tailored clothing including designer suits, tuxedos, sport coats and slacks which we sell in our Men's Wearhouse stores. We also plan to sell similar merchandise in our Moores stores, which will be produced by a third party in Canada, not JA Holding.

During 2013, approximately 90% of our direct sourced merchandise was sourced in Asia (78% from China and Indonesia) while 3% was sourced in Mexico and 7% was sourced in Europe and other regions. All of our foreign purchases are negotiated and paid for in U.S. dollars, except purchases from Italy which are negotiated and paid for in Euros. All direct sourcing vendors are expected to adhere to our compliance program. To oversee compliance, we have a direct sourcing compliance department and we also use the services of an outside audit company to conduct frequent vendor audits.

All retail apparel merchandise for Men's Wearhouse and Men's Wearhouse and Tux stores is received into our distribution center located in Houston, Texas, where it is either placed in back-stock or allocated to and picked by store for shipping. In the majority of our larger markets, we also have separate hub facilities or space within certain Men's Wearhouse stores used as redistribution facilities for their respective areas. Approximately 36% of purchased merchandise is transported to our K&G stores from our Houston distribution center; all other merchandise is direct shipped by vendors to the stores. Most purchased merchandise for our Moores stores is distributed to the stores from our distribution center in Montreal, Quebec.

Our tuxedo rental product is located in our Houston distribution center and in six additional distribution facilities located in the U.S. (five) and Canada (one). The six additional distribution facilities also receive limited quantities of retail product, primarily formalwear accessories, that is sold in our Men's Wearhouse, Men's Wearhouse and Tux and Moores stores.

All retail merchandise and new tuxedo rental product is transported from vendors to our distribution facilities via common carrier or on a dedicated fleet of long-haul vehicles operated by a third party. This dedicated fleet is also used to transport product from our Houston distribution center to the hub facilities and a fleet of leased or owned smaller vehicles is used to transport product from the hub facilities to our stores within a given geographic region.

Our primary competitors include traditional department stores, specialty men's clothing stores, online retailers, off-price retailers, manufacturer-owned and independently-owned outlet stores and their e-commerce channels and independently owned tuxedo rental stores. 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, including on-site tailoring.

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. 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.

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Corporate Apparel Segment

Our corporate apparel segment provides corporate clothing uniforms and workwear to workforces with operations conducted by Twin Hill in the U.S. and by our UK holding company operating under the Dimensions, Alexandra and Yaffy brands primarily in the UK. We offer our corporate apparel clothing products through multiple channels including managed corporate accounts, catalogs and the internet at www.dimensions.co.uk and www.alexandra.co.uk. We offer a wide variety of customer branded apparel such as shirts, blouses, trousers, skirts and suits as well as a wide range of other products from aprons to safety vests to high visibility police outerwear. With respect to our managed contracts, we generally provide complete management of our customers' corporate clothing programs from design, fabric buying and manufacture to measuring, product roll-outs and ongoing stock replacement and replenishment. The corporate apparel segment accounted for approximately 10.0%, 9.6% and 10.2% of our total net sales in fiscal 2013, 2012 and 2011, respectively.

Our customer base includes companies and organizations in the retail grocery, retail, banking, distribution, travel and leisure, postal, security, healthcare and public sectors. Sectors which tend to be strong users of third party corporate wear providers are retail, finance, utilities, hospitality and leisure. Sector characteristics tend to impact the corporate wear requirements of our individual customers. For example, retail customers typically have high staff turnover levels resulting in large replenishment volumes and significant seasonal demand, while banking customers generally have lower turnover and replenishment requirements but refresh or rebrand uniforms more frequently. The public service sector has historically consisted of fragmented regional authorities although there seems to be a move in the UK toward more consolidated sourcing units.

Our managed contract customers are generally organizations with larger numbers of uniform wearing employees or those that use uniforms as a form of brand identity. We have long established relationships with many of the UK's top employers and we currently maintain over 25 managed accounts with an average account size greater than 15,000 wearers. Our typical catalog customers are small to medium sized organizations with a relatively smaller number of employees or organizations where brand differentiation is not imperative.

Under our managed contracts, we take responsibility for dressing our customers' employees and are the exclusive supplier of corporate wear to many of our customers. Because of the nature of the managed contract model, we ensure that we are fully involved in all of our customers' uniform requirements, from daily replenishment requirements to longer term rebranding plans and wider corporate wear strategy. As a result, our relationship and level of interaction with our customers is generally far deeper and more embedded than conventional customer-supplier relationships.

Managed contracts are generally awarded through a request for proposal or tender process for multi-year contracts. Our teams continually monitor market opportunities to obtain access to such contracts. Regular contact with corporate wear buyers is supplemented with mail campaigns, attendance at trade fairs and trade magazine advertisements. Generally, we provide each managed contract customer with a specific account manager who often works two or three days a week on-site at our larger customers' offices. In addition to maintaining customer requirements, the account manager is also responsible for suggesting and implementing ways of improving the customer's corporate wear process.

During fiscal 2013, no one customer accounted for 10% or more of our total corporate apparel net sales. Management does not believe that the loss of any customer would significantly impact us.

Our catalogs are distributed via mail and, in the U.S., by sales representatives. The catalogs offer a full range of our products and offer further branding or embellishment of any product ordered. Catalog orders

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can be placed via phone, mail, fax or direct contact with our sales representatives. Our UK e-commerce platforms also allow online ordering via our websites and provide 24-hour functionality, with a full list of our products and their details. In addition, we regularly develop dedicated websites for our corporate clients for use by their employees in ordering their company specific corporate wear.

In our corporate apparel operations, we work with our customers, who are generally businesses and organizations in both the public and private sector, to create custom apparel programs designed to support and enhance their respective brands. Our comprehensive apparel collections, including basic apparel categories such as shirts, blouses, trousers, skirts and suits as well as a wide range of other products from aprons to safety vests to high visibility police outerwear, feature designs with sizes and fits that meet the performance needs of our customers' employees and utilize the latest technology in long-wearing fabrications. Career wear, casual wear and workwear make up an increasingly significant portion of the product mix as service industry customers continue to grow.

Under our managed contracts, our customers receive a full range of services including design, fabric buying and manufacturing, measuring and sizing, employee database management and replenishment forecasting, supply chain management and distribution and logistics of finished products. Customers work with our in-house design and technical teams to design and develop uniforms or other corporate wear that creates strong brand identity. We utilize our management information and garment tracking system which highlights trends, identifies issues and provides benchmark data for the customer at all levels from individual wearer to enterprise-wide. This system also allows us to identify potential cost savings and develop solutions on behalf of our customers and to respond quickly to trends or other changing needs.

With respect to our UK catalog and internet operations, customers can design an off-the-rack program that provides custom alterations and embroidery on any of our standard, ready-to-wear clothing. We work with such customers to create a distinctive, branded program that may include the addition of a company logo or other custom trim.

Most corporate apparel garment production is outsourced to third-party manufacturers and fabric mills through our direct sourcing programs. We have developed long-term relationships with most of our direct manufacturers and fabric mills, which we believe provides stability, quality and reliability. We do not have any material long-term contracts with our vendors and we do not believe that the loss of any vendor would significantly impact us. We also work with trading companies that support our relationships with our direct source vendors and with contract agent offices that provide administrative functions on our behalf. In addition, the agent offices assist with quality control inspections and ensure that our operating procedures manuals are adhered to by our suppliers.

During 2013, approximately 59% of our corporate wear product purchases was sourced in Asia (primarily Bangladesh, China, Sri Lanka, Pakistan and Indonesia) while approximately 41% was sourced from Europe and other regions. Our foreign purchases from Asia are negotiated and paid for in U.S. dollars, while our purchases from Europe and other regions are negotiated and paid for in pounds Sterling or Euros.

All corporate apparel merchandise is received into our distribution facilities located in Houston, Texas for U.S. operations and Long Eaton for the UK operations. Customer orders are dispatched to the customer or individual wearers employed by the customer via common carrier or pursuant to other arrangements specified by the customer.

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Dimensions and Alexandra are among the largest companies in the UK corporate wear market with much of the competition consisting of smaller companies that focus more on catalog business. The U.S. corporate wear market is more fragmented with several U.S. competitors being larger and having more resources than Twin Hill. We believe that the competitive factors in the corporate wear market are merchandise assortment, quality, price, customer service and delivery capabilities. We believe that our proven capability in the provision of corporate apparel programs to businesses and organizations of all sizes alongside our catalog and internet operations position us well with our existing customers and should enable us to continue to gain new catalog accounts and managed contracts.

Expansion Strategy

Our expansion strategy includes:

We believe that we can increase the number of traditional Men's Wearhouse stores in the U.S. from 661 at the end of fiscal 2013 to approximately 750 over the next several years, with 32 to 36 new stores planned for fiscal 2014. We also believe that we can increase the number of Moores stores in Canada from the current 121 to approximately 125 over the next few years, with three new stores planned for fiscal 2014. Store expansion will be in new and existing markets including single store markets and smaller stores in central business districts. We believe these additional stores will put us in closer proximity to a larger portion of our target customer base and will generate opportunities for incremental sales of our quality merchandise selection and tuxedo rentals.

By expanding our exclusive brand portfolio, we believe we will be able to expand our product margins and increase profitability. We continue to evaluate acquisition of brands and trademarks, as well as the development of brands in-house. In 2012, we named Joseph Abboud our Chief Creative Director to create exclusive brands and products for our customers. In addition, during fiscal 2013, we acquired JA Holding, the parent company of the American clothing brand Joseph Abboud® and a U.S. tailored clothing factory. We believe this transaction will accelerate our strategy of offering exclusive brands with broad appeal at attractive prices.

We believe that additional growth opportunities also exist through continuing the diversification of our merchandise mix. As a result of recent trends in men's apparel that favor trimmer fitting product, we are increasing our offerings in slim fit. We will continue to feature these products in our stores and our marketing channels to target the younger customer as well as the other demographics that will be influenced by this trend.

We plan to continue to pursue growth in our tuxedo rental business through the use of our tuxedo rental website and two mobile phone applications for tuxedo rentals. We carry an exclusive "Black by Vera Wang" tuxedo that continues to have a positive influence on our rentals and we plan to introduce a Joseph Abboud® tuxedo. We believe that our tuxedo marketing initiatives including our David's Bridal and TheKnot.com relationships, rental offerings, online website enhancements and continued emphasis on customer service will enable us to continue to grow our tuxedo rentals in fiscal 2014.

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Our future growth plans also include the integration of digital technologies to provide a sales experience that combines the advantages of our physical store with an information rich online shopping experience through our website and mobile applications. We plan to continue to make investments in technologies, business processes and personnel intended to deepen our customer relationships and increase our share of their closet. In late 2013, we also began offering international shipping to over 100 countries.

We also plan to evaluate potential opportunities for growth through acquisitions or other strategic investments.

In March 2013, we announced that we engaged Jefferies & Co. to assist us in evaluating strategic alternatives for our K&G operations. We believe that our core strengths lie primarily in our service culture and specialty men's apparel retailing, and that we will be better able to focus our efforts on these core operations by taking this action.

On March 11, 2014, we entered into an Agreement and Plan of Merger with Jos. A. Bank Clothiers, Inc. ("Jos. A. Bank") pursuant to which we will acquire all of the issued and outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of approximately $1.8 billion. Pursuant to the merger agreement, we amended our existing tender offer (as so amended, the "Offer") to acquire all of the issued and outstanding shares of common stock of Jos. A. Bank and, following the consummation of the Offer, and subject to the satisfaction or waiver of the conditions set forth in the merger agreement, Java Corp., our wholly owned subsidiary, will merge with and into Jos. A. Bank and Jos. A. Bank will survive as our wholly owned subsidiary. We believe that Jos. A. Bank's business model in conjunction with the Men's Wearhouse business model will create the opportunity for significant synergies. The transaction, which is expected to close by the third quarter of 2014, is subject to satisfaction of customary closing conditions, including, among others, there being validly tendered and not validly withdrawn prior to the expiration of the Offer that number of shares (excluding shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee) which, when added to the shares we already own, represents at least a majority of the total number of outstanding shares on a fully diluted basis, and expiration or termination of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act").

Seasonality

Our sales and net earnings are subject to seasonal fluctuations. In most years, a greater portion of our net retail clothing sales have been generated during the fourth quarter of each year when holiday season shopping peaks. On the other hand, our tuxedo rental revenues are heavily concentrated in the second and third quarters while the fourth quarter is considered the seasonal low point. With respect to corporate apparel sales and operating results, seasonal fluctuations are not significant but customer decisions to rebrand or revise their corporate wear programs can cause significant variations in period results. Because of these fluctuations in our sales, results for any quarter are not necessarily indicative of the results that may be achieved for the full year (see Note 17 of Notes to Consolidated Financial Statements).

Trademarks and Servicemarks

We are the owner in the U.S. and selected other countries of the trademarks and service marks THE MEN'S WEARHOUSE®, and MW MEN'S WEARHOUSE and design®, and MEN'S WEARHOUSE® and of federal registrations therefor. Our rights in the MEN'S WEARHOUSE marks and its variations are a significant part of our business, as the marks have become well known through our use of the marks in connection with our retail and formalwear rental services and products (both in store and online) and our advertising campaigns. Accordingly, we intend to maintain our marks and the related registrations.

We are the owner of various marks and trademark registrations in the U.S., Canada and the UK under which our stores and corporate apparel business operate or which are used to label the products we sell or

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rent, including various Joseph Abboud® labels. We intend to maintain our marks and the related registrations.

We have entered into license agreements with a limited number of parties under which we are entitled to use designer labels in return for, among other things, 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 formalwear 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 particular agreement.

Employees

At February 1, 2014, we had approximately 18,200 employees, consisting of approximately 15,700 in the U.S. and 2,500 in foreign countries, of which approximately 13,300 were full-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.

At February 1, 2014, approximately 450 of our employees at JA Holding belong to Unite Here, a New England based labor union. The current union contract expires in April 2016.

Available Information

Our website address is www.menswearhouse.com. Through the investor relations section of our website, we provide free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 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 (the "SEC"). In addition, copies of the Company's annual reports will be made available, free of charge, upon written request. The public may read and copy any materials we file with or furnish to the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains the Company's filings and other information regarding issuers who file electronically with the SEC at www.sec.gov.

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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 business is particularly sensitive to economic conditions and consumer confidence.

While economic conditions have improved in recent quarters, the U.S., UK and global economic conditions remain volatile as high unemployment levels and overall economic conditions could negatively impact consumer confidence and the level of consumer discretionary spending. The continuation and/or recurrence of these market conditions could intensify the adverse effect of such conditions on our revenues and operating results.

We believe that these market conditions affect us more than other retailers because discretionary spending for items like men's tailored apparel tends to slow sooner and to recover later than that for other retail purchases. Accordingly, sales of our products may be adversely affected by a worsening of economic conditions, increases in consumer debt levels, uncertainties regarding future economic prospects or a decline in consumer confidence. During an actual or perceived economic downturn, fewer customers may shop with us and those who do shop may limit the amounts of their purchases. As a result, we could be required to take significant markdowns and/or increase our marketing and promotional expenses in response to the lower than anticipated levels of demand for our products. In addition, promotional and/or prolonged periods of deep discount pricing by our competitors could have a material adverse effect on our business. Also, as a result of adverse economic conditions, customers may delay or postpone indefinitely roll-outs of new corporate wear programs, which could have a material adverse effect on our corporate apparel segment.

Our ability to continue to expand our core 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 February 1, 2014, we operate 661 Men's Wearhouse stores. However, we believe that our ability to increase the number of Men's Wearhouse stores in the U.S. beyond approximately 750 may be limited. Therefore, we may not be able to achieve the same rate of growth as we have historically.

Certain of our expansion strategies may present greater risks.

We are continuously assessing opportunities to expand store concepts, such as outlet stores, and complementary products and services related to our traditional business, such as corporate apparel and uniform sales. We may expend both capital and personnel resources on such business opportunities which may or may not be successful. Additionally, any new concept is subject to certain risks, including customer acceptance, competition, product differentiation and the ability to obtain suitable sites for such concepts. There can be no assurance that we will be able to develop and grow new concepts to a point where they will become profitable or generate positive cash flow.

Any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute shareholder value and harm our operating results.

In the event we complete one or more acquisitions, we may be subject to a variety of risks, including risks associated with an ability to integrate acquired assets or operations into our existing operations, diversion of management's attention from operational matters, higher costs or unexpected difficulties or problems with acquired assets or entities, outdated or incompatible technologies, labor difficulties or an inability to

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realize anticipated synergies and efficiencies, whether within anticipated time frames or at all. If one or more of these risks are realized, it could have an adverse impact on our operating results.

Our business is seasonal.

In most years, a greater portion of our net retail clothing sales have been generated during the fourth quarter of each year when holiday season shopping peaks. In addition, our tuxedo rental revenues are heavily concentrated in the second and third quarters while the fourth quarter is considered the seasonal low point. Any factors negatively affecting us during these peak quarters, including inclement weather or unfavorable economic conditions, could have a significant adverse effect on our revenues and operating results. With respect to our corporate apparel sales, seasonal fluctuations are not significant but customer decisions to rebrand, revise or delay their corporate wear programs can cause significant variations in quarterly results. Because of the seasonality of our sales, results for any quarter are not necessarily indicative of the results that may be achieved for the full year.

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

All retail apparel merchandise for Men's Wearhouse stores and a portion of the merchandise for K&G stores is received into our Houston distribution center, where the inventory is then processed, sorted and either placed in back-stock or shipped to our stores. 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 merchandise 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 that our insurance will be sufficient, or that insurance proceeds will be paid timely to us, in the event our Houston 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.

Comparable sales may continue to fluctuate on a regular basis.

Our comparable sales have fluctuated significantly in the past on both an annual and quarterly basis and are expected to continue to fluctuate in the future. We believe that a variety of factors affect comparable sales results including, but not limited to, changes in economic conditions and consumer spending patterns, weather conditions, the timing of certain holiday seasons, the number and timing of new store openings, the timing and level of promotional pricing or markdowns, store closing and remodels, changes in our merchandise mix or other competitive factors. Comparable sales fluctuations may impact our ability to leverage our fixed direct expenses, including store rent and store asset depreciation, which may adversely affect our financial condition or results of operations.

We may be negatively impacted by competition and pricing pressures from other companies who compete with us.

Both the men's retail and the corporate apparel industries are highly competitive with numerous participants. We compete with traditional department stores, specialty men's clothing stores, online retailers, off-price retailers, manufacturer-owned and independently-owned outlet stores and their e-commerce channels, independently owned tuxedo rental stores and other corporate apparel providers. We face a variety of competitive challenges including anticipating and responding to changing consumer demands, maintaining favorable brand recognition, effectively marketing to consumers in diverse

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demographic markets, and countering the aggressive promotional or other pricing activities of many of our competitors. We may not be able to compete successfully in the future without negatively impacting our operating results and business.

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:

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

Our success depends upon the personal efforts and abilities of our senior management team and other key personnel. Although we believe we have a strong management team with relevant industry expertise, the extended loss of the services of key personnel could have a material adverse effect on the securities markets' view of our prospects and materially harm our business.

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 ("CAD"). The exchange rate between CAD and U.S. dollars has fluctuated historically. If the value of the CAD 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. Moores utilizes foreign currency hedging contracts to limit exposure to changes in U.S. dollar/CAD exchange rates.

Dimensions and Alexandra, our UK-based operations, sell their products and conduct their business primarily in pounds Sterling ("GBP") but purchase most of their merchandise in transactions paid in U.S. dollars. The exchange rate between the GBP and U.S. dollars has fluctuated historically. A decline in the value of the GBP as compared to the U.S. dollar will adversely impact our UK operating results as the cost of merchandise purchases will increase, particularly in relation to longer term customer contracts that have little or no pricing adjustment provisions, and the revenues and earnings of our UK operations will be reduced when they are translated to U.S. dollars. Also, the value of our UK net assets in U.S. dollars may decline. Dimensions and Alexandra utilize foreign currency hedging contracts as well as price renegotiations to limit exposure to some of this risk.

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 and our corporate apparel operations are sourced from various foreign countries. Political or financial instability, terrorism, trade restrictions, tariffs, currency exchange rates, transport capacity limitations, disruptions, costs, strikes and other work stoppages and other factors

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relating to international trade are beyond our control and could affect the availability and the price of our inventory.

We require our vendors to operate in compliance with applicable laws and regulations and our internal policy requirements. However, we do not control our vendors or their labor and business practices. The violation of labor or other laws by one of our vendors or the divergence of a vendor's labor practices from those generally accepted by us as ethical could interrupt or otherwise disrupt the shipment of finished merchandise, damage our reputation or otherwise have a material adverse effect on our business.

A labor union dispute could cause interruptions at our U.S. tailored clothing factory.

Our U.S. tailored clothing factory manufactures a portion of the clothing offered for sale by our stores. Approximately 450 of our employees at the factory are members of Unite Here, a New England based labor union. We could experience shortages in product to sell in our stores if the factory fails to meet its production goals due to labor disputes.

Any significant interruption in fabric supply could cause interruptions at our U.S. tailored clothing factory.

The principal raw material used by our U.S. tailored clothing factory is fabric. Most of the factory's supply arrangements are seasonal. The factory 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 us in the future. If a particular mill were to experience a delay due to fire or natural disaster and become unable to meet the factory's supply needs, it could take a period of up to several months for us 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 the factory from receiving fabric shipped by its suppliers. Therefore, there could be a negative effect on the ability of the factory 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.

Our business is global in scope and can be impacted by factors beyond our control.

As a result of our international operations, we face the possibility of greater losses from a number of risks inherent in doing business in international markets and from a number of factors which are beyond our control. Such factors that could harm our results of operations and financial condition include, among other things:

Our business could be adversely affected by increased costs of the raw materials and other resources that are important to our business.

The raw materials used to manufacture our products are subject to availability constraints and price volatility caused by high demand for fabrics, weather conditions, supply conditions, government regulations, economic climate and other unpredictable factors. In addition, our transportation and labor costs are subject to price volatility caused by the price of oil, supply of labor, governmental regulations, economic climate and other unpredictable factors. Increases in demand for, or the price of, raw materials,

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distribution services and labor, including federal and state minimum wage rates, could have a material adverse effect on our business, financial condition and results of operations.

The increase in the costs of wool and other raw materials significant to the manufacturer of apparel and the other costs of manufacturing could materially affect our results of operations to the extent they cannot be mitigated through price increases and relocation to lower cost sources of supply or other cost reductions. These increased costs could particularly impact our managed contract corporate wear business which tends to have more long term contractually committed customer sales arrangements with limited price flexibility.

Our business is subject to numerous, varied and changing laws, rules and regulations, the interpretation of which can be uncertain and which may lead to litigation or administrative proceedings.

Our business is subject to rules issued by the payment card industry (PCI), and laws, rules and regulations promulgated by national, state and provincial authorities, including laws, rules and regulations relating to privacy, use of consumer information, credit cards and advertising. In addition, we have over 18,000 employees located in 50 states and in multiple foreign countries and, as a result, we are subject to numerous and varying laws, rules and regulations related to employment. All of these laws, rules and regulations and the interpretation thereof are subject to change and often application thereof may be unclear. As a result, from time to time, we are subject to inquiries, investigations, and/or litigation, including class action lawsuits, and administrative actions related to compliance with these laws, rules and regulations.

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. We also maintain multiple internet websites in the U.S. and a number of other countries. 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.

We could be subject to losses if we fail to address emerging security threats or detect and prevent privacy and security incidents.

As part of our normal operations, we maintain and transmit confidential information about our customers as well as proprietary information relating to our business operations. Our systems or our third-party service providers' systems may be vulnerable to privacy and security incidents including attacks by unauthorized users, corruption by computer viruses or other malicious software code, emerging cybersecurity risks, inadvertent or intentional release of confidential or proprietary information, or other similar events. The occurrence of any security breach involving the misappropriation, loss or other unauthorized disclosure of information about us or our customers, whether by us or by one of our third-party service providers, could, among other things:

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We may not be able to obtain insurance coverage in the future at current rates.

Our current insurance program is consistent with both our past level of coverage and our risk management policies. While we believe we will be able to obtain liability insurance in the future, because of increased selectivity by insurance providers we may only be able to obtain such insurance at increased rates and/or with reduced coverage levels which could impact our results of operations.

Compliance with changing regulations and standards for accounting, corporate governance, tax and employment laws could result in increased administrative expenses and could adversely impact our business, results of operations and reported financial results.

Our policies, procedures and internal controls are designed to help us comply with all applicable laws, accounting and reporting requirements, regulations and tax requirements, including those imposed by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC and the New York Stock Exchange, as well as applicable employment laws and the health care reform legislation. Shareholder activism, the current political environment, financial reform legislation and the current high level of government intervention and regulatory reform has led, and may continue to lead, to substantial new regulations and disclosure obligations. Any changes in regulations, the imposition of additional regulations or the enactment of any new legislation that affects employment and labor, trade, product safety, transportation and logistics, health care, tax, privacy, or environmental issues, among other things, may increase the complexity of the regulatory environment in which we operate and the related cost of compliance. Failure to comply with the various laws and regulations, as well as changes in laws and regulations, could have an adverse impact on our reputation, financial condition or results of operations.

Changes in accounting standards and estimates could materially impact our results of operations.

Generally accepted accounting principles and the related authoritative guidance for many aspects of our business, including revenue recognition, inventories, goodwill and intangible assets, leases, income taxes and are complex and involve subjective judgments. Changes in these rules or changes in the underlying estimates, assumptions or judgments by our management could have a material adverse effect on our reported results of operations. For example, proposed authoritative guidance for lease accounting, once finalized and enacted, may have a material adverse effect on our results of operations and financial position.

We may recognize impairment on long-lived assets, goodwill and intangible assets.

Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We also review our goodwill and intangible assets for indicators of impairment. Significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets may result in impairments to goodwill, intangible assets and other long-lived assets.

Our failure to protect our reputation could have a material adverse effect on our brands.

Our ability to maintain our reputation is critical to our brands. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity and customer service. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor, health and safety or environmental standards could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Public perception about our products or our stores, whether justified or not, could impair our reputation, involve us in litigation, damage our brand and have a material adverse effect on our business. Failure to comply with local laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial statement information could also hurt our reputation. Damage to our reputation or loss of

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consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.

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 10 of Notes to Consolidated Financial Statements for more information.

Provisions of our charter documents and our shareholder rights plan could make it more difficult for a third party to acquire us.

Our bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our Board of Directors. Our Board of Directors has also adopted a shareholder rights plan, or "poison pill," which would significantly dilute the ownership of a hostile acquirer. These circumstances may have the effect of lengthening the time required for a person to acquire control of us through a proxy contest or the election of a majority of our Board of Directors, may deter efforts to obtain control of us and may make it more difficult for a third party to acquire us without negotiation.

We may not be able to successfully or timely complete the pending acquisition of Jos. A. Bank and such failure could adversely impact our business and the market price of our common stock.

Risks and uncertainties related to the proposed transaction include, among others: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement to acquire Jos. A. Bank, (2) the failure to consummate the acquisition of Jos. A. Bank for reasons including that the conditions to our offer to purchase all outstanding shares of Jos. A. Bank's common stock, including the condition that a minimum number of shares be tendered and not withdrawn, are not satisfied or waived by us, (3) the risk that regulatory or other approvals required for the transaction are not obtained and (4) litigation may be filed which could prevent or delay the transaction.

The completion of the pending Jos. A. Bank transaction is subject to the satisfaction of certain conditions set forth in the Agreement and Plan of Merger, dated March 11, 2014, including the expiration or termination of applicable waiting periods (and any extensions thereof) under the HSR Act, there being no material adverse effect on Jos. A. Bank prior to the closing of the transaction and other customary conditions. We will be unable to complete the pending acquisition of Jos. A. Bank until each of the conditions to closing is either satisfied or waived.

In deciding whether to not object to the acquisition, regulatory entities may impose certain requirements or obligations as conditions in connection with their review. We can provide no assurance that we will obtain the necessary approvals or that any required conditions will not have a material adverse effect on our operations or otherwise affect us following the completion of the Jos. A. Bank transaction. In addition, we can provide no assurance that any such conditions that are imposed would not result in the termination of the Jos. A. Bank transaction. In the event that the transaction is not completed, depending on the reasons for not completing the transaction, we could be required to pay Jos. A. Bank a termination fee of $75.0 million.

We have incurred significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction, as well as the diversion of management resources, for which we will have received little or no benefit if the closing of the transaction does not occur.

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For these and other reasons, our failure to complete the Jos. A. Bank transaction could adversely our business, operating results or financial condition, and could negatively affect the trading price of our equity and debt securities.

If we complete the pending acquisition of Jos. A. Bank, we may not realize the anticipated benefits of the transaction which could adversely impact our business and our operating results.

If the Jos. A. Bank transaction is completed, we can provide no assurance that (1) the anticipated benefits of the transaction, including cost savings and synergies, will be fully realized in the time frame anticipated or at all, (2) the costs or difficulties related to the integration of Jos. A. Bank's business and operations into ours will not be greater than expected, (3) that unanticipated costs, charges and expenses will not result from the transaction, (4) litigation relating to the transaction will not be filed, (5) that we will be able to retain key personnel and (6) the transaction will not cause disruption to our business and operations and our relationships with customers, employees and other third parties. If one or more of these risks are realized, it could have an adverse impact on our operating results.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.    PROPERTIES

As of February 1, 2014, we operated 1,003 retail apparel and tuxedo rental stores in 50 states and the District of Columbia and 121 retail apparel stores in ten Canadian provinces. The following tables set forth the location, by state or province, of these stores:

United States
  Men's
Wearhouse
  Men's
Wearhouse
and Tux
  K&G   Total  

California

    84     16     1     101  

Florida

    46     22     5     73  

Texas

    59     1     11     71  

Illinois

    30     20     7     57  

New York

    38     9     4     51  

Michigan

    22     16     8     46  

Pennsylvania

    27     13     3     43  

Ohio

    23     10     5     38  

Virginia

    20     14     3     37  

Maryland

    17     11     7     35  

Massachusetts

    19     12     3     34  

Georgia

    19     9     6     34  

North Carolina

    17     11     4     32  

New Jersey

    16     10     5     31  

Tennessee

    14     6     2     22  

Minnesota

    12     7     2     21  

Louisiana

    8     8     3     19  

Indiana

    10     6     2     18  

Missouri

    11     6     1     18  

Wisconsin

    11     6     1     18  

Colorado

    14     1     3     18  

Arizona

    15     2           17  

Connecticut

    11     4     2     17  

Washington

    14     1     2     17  

South Carolina

    9     7     1     17  

Alabama

    8     5     1     14  

Oregon

    11                 11  

Kentucky

    5     4           9  

Iowa

    8     1           9  

Kansas

    6     2     1     9  

Utah

    8                 8  

Nevada

    6     1           7  

New Hampshire

    5     1           6  

Oklahoma

    5           1     6  

Mississippi

    4     1           5  

Nebraska

    3     1           4  

New Mexico

    4                 4  

Rhode Island

    1     3           4  

Arkansas

    4                 4  

Delaware

    3                 3  

South Dakota

    2     1           3  

Idaho

    2                 2  

North Dakota

    2                 2  

Alaska

    1                 1  

Hawaii

    1                 1  

Maine

    1                 1  

Montana

    1                 1  

Vermont

    1                 1  

West Virginia

    1                 1  

Wyoming

    1                 1  

District of Columbia

    1                 1  
                   

Total

    661     248     94     1,003  
                   
                   

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Canada
  Moores  

Ontario

    51  

Quebec

    24  

British Columbia

    16  

Alberta

    14  

Manitoba

    5  

Nova Scotia

    4  

New Brunswick

    3  

Saskatchewan

    2  

Newfoundland

    1  

Prince Edward Island

    1  
       

Total

    121  
       
       

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 own or lease between 3,000 and 33,100 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.

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We own or lease properties in various parts of the U.S. and Canada to facilitate the distribution of retail and rental product to our stores. We also own or lease properties in Houston, Texas and various parts of the UK to facilitate the distribution of our corporate apparel product. In addition, we have primary office locations in Houston, Texas and Fremont, California with additional satellite offices in other parts of the U.S., Canada and Europe. The following is a listing of all owned and leased non-store facilities as of February 1, 2014:

 
   
   
   
  Square Footage Used For    
 
Business Segment
  Location   Total Sq. Ft.   Owned/Leased   Warehouse/
Distribution/
Factory
  Office
Space
  Total Use  

Retail

  Houston, TX     1,100,000   Own     1,070,100     29,900     1,100,000  

  Houston, TX     241,500   Own     226,000     15,500     241,500  

  Houston, TX(1)     22,000   Own     18,000     4,000     22,000  

  Norcross, GA     89,300   Lease     68,700     20,600     89,300  

  Addison, IL     71,000   Lease     65,000     6,000     71,000  

  Pittston, PA     419,600   Lease     411,200     8,400     419,600  

  Richmond, VA     54,900   Own     53,500     1,400     54,900  

  Bakersfield, CA     222,400   Lease     211,700     10,700     222,400  

  New Bedford, MA     525,500   Lease     477,100         477,100  

 

Various locations(2)

   
370,900
 

Own/Lease

   
305,200
   
24,700
   
329,900
 

 

Atlanta, GA(3)

   
100,000
 

Lease

   
23,000
   
35,000
   
58,000
 

 

Toronto, Ontario

   
36,700
 

Lease

   
19,800
   
16,900
   
36,700
 

  Cambridge, Ontario     214,600   Own     207,800     6,800     214,600  

  Montreal, Quebec     173,000   Own     167,300     5,700     173,000  

  Vancouver, BC     2,100   Lease         2,100     2,100  

Corporate apparel

 

Houston, TX

   
146,500
 

Own

   
136,200
   
10,300
   
146,500
 

  Long Eaton, UK     362,200   Lease     357,200     5,000     362,200  

  Castle Donington, UK     19,400   Lease         19,400     19,400  

  Various locations, UK     45,000   Lease     18,000     27,000     45,000  

Retail and corporate apparel

 

Houston, TX

   
206,400
 

Lease

   
   
206,400
   
206,400
 

  Houston, TX     25,000   Own         25,000     25,000  

  New York, NY     13,900   Lease         13,900     13,900  

  Fremont, CA     116,800   Own         107,900     107,900  
                           

        4,578,700         3,835,800     602,600     4,438,400  
                           
                           

(1)
This facility houses the laundry and dry cleaning plant for our retail laundry, dry cleaning and heirlooming services.

(2)
Various locations consist primarily of hub warehouse and factory facilities located throughout the U.S. Owned warehouse facilities comprise 79,700 square feet of the total square footage.

(3)
Total square footage includes 42,000 square feet used for a retail store.

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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.    MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'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 and the quarterly dividends declared on each share of common stock:

 
  High   Low   Dividend  

Fiscal Year 2013

                   

First quarter

  $ 35.30   $ 27.48   $ 0.18  

Second quarter

    41.02     33.58     0.18  

Third quarter

    47.29     32.46     0.18  

Fourth quarter

    52.72     41.31     0.18  

Fiscal Year 2012

                   

First quarter

  $ 40.96   $ 33.79   $ 0.18  

Second quarter

    38.47     26.03     0.18  

Third quarter

    38.56     25.97     0.18  

Fourth quarter

    34.77     27.87     0.18  

On March 21, 2014, there were approximately 1,000 shareholders of record and approximately 8,000 beneficial shareholders of our common stock.

The cash dividend of $0.18 per share declared by our Board of Directors (the "Board") in January 2014 is payable on March 28, 2014 to shareholders of record on March 18, 2014. The dividend payout is approximately $9.0 million.

The information required by this item regarding securities authorized for issuance under equity compensation plans is incorporated by reference from Item 12 of this Form 10-K.

Issuer Purchases of Equity Securities

We did not purchase any of our equity securities during the fourth quarter of fiscal 2013. In March 2013, the Board approved a $200.0 million share repurchase program for our common stock, which amended and replaced the Company's existing $150.0 million share repurchase program authorized in January 2011, which had a remaining authorization of $45.2 million at the time of amendment. At February 1, 2014, the remaining balance available under the Board's March 2013 authorization was $48.0 million.

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Performance Graph

The following Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

The following graph compares, as of each of the dates indicated, the percentage change in the Company's cumulative total shareholder return on the Common Stock with the cumulative total return of the NYSE Composite Index, the S&P 500 Index and the Dow Jones US Apparel Retailers Index. Next year we do not intend to include the NYSE Composite Index in our comparison of cumulative total return. We are changing to the S&P 500 Index because we believe it to be a more commonly used index by our peer retail companies.

The graph assumes that the value of the investment in our Common Stock and each index was $100 at January 31, 2009 and that all dividends paid by those companies included in the indices were reinvested.

GRAPHIC

 
  January 31,
2009
  January 30,
2010
  January 29,
2011
  January 28,
2012
  February 2,
2013
  February 1,
2014
 

Measurement Period (Fiscal Year Covered)

                                     

The Men's Wearhouse, Inc

  $ 100.00   $ 175.51   $ 229.74   $ 310.60   $ 268.18   $ 449.76  

NYSE Composite Index

    100.00     136.11     164.64     162.43     189.13     226.66  

S&P 500

    100.00     133.14     162.67     169.54     197.98     240.58  

Dow Jones US Apparel Retailers

    100.00     189.38     234.92     279.66     350.19     398.21  

The foregoing graph is based on historical data and is not necessarily indicative of future performance.

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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's 52-week or 53-week fiscal year, which ends on the Saturday nearest January 31 in the following calendar year. For example, references to "2013" mean the fiscal year ended February 1, 2014. All fiscal years for which financial information is included herein had 52 weeks with the exception of the fiscal year ended February 2, 2013 which had 53 weeks.

As a result of the acquisition of JA Holding on August 6, 2013, the statement of earnings data and the cash flow information below for the year ended February 1, 2014 include the results of operations and cash flows, respectively, of JA Holding since that date. In addition, the balance sheet information below as of February 1, 2014 includes the fair values of the assets acquired and liabilities assumed as of the acquisition date for JA Holding.

As a result of the acquisitions of Dimensions and Alexandra on August 6, 2010, the statement of earnings data and the cash flow information below for the year ended January 29, 2011 include the results of operations and cash flows, respectively, of Dimensions and Alexandra since that date. In addition, the balance sheet information below as of January 29, 2011 includes the fair values of the assets acquired and liabilities assumed as of the acquisition date for Dimensions and Alexandra.

In the third quarter of fiscal 2010, we changed the method of determining cost under the lower of cost or market inventory valuation method used for our K&G brand from the retail inventory method to the average cost method. The cumulative effect of this change in accounting principle was recorded retrospectively as of February 1, 2009. The cumulative effect of this change in accounting principle as of February 1, 2009 was an increase in inventory of $2.2 million, a decrease in deferred tax assets of $0.9 million and a net increase in retained earnings of $1.3 million.

 
  2013   2012   2011   2010   2009  
 
  (Dollars and shares in thousands, except per share and per square foot data)
 

Statement of Earnings Data:

                               

Total net sales

  $ 2,473,233   $ 2,488,278   $ 2,382,684   $ 2,102,664   $ 1,909,575  

Total gross margin

    1,089,010     1,108,148     1,048,927     898,433     798,898  

Operating income

    129,628     198,568     185,432     101,671     69,376  

Net earnings attributable to common shareholders

    83,791     131,716     120,601     67,697     46,215  

Per Common Share Data:

                               

Diluted net earnings per common share attributable to common shareholders

  $ 1.70   $ 2.55   $ 2.30   $ 1.27   $ 0.88  

Cash dividends declared

  $ 0.72   $ 0.72   $ 0.54   $ 0.39   $ 0.30  

Weighted-average common shares outstanding plus dilutive potential common shares

    49,162     51,026     51,692     52,853     52,280  

Operating Information:

                               

Percentage increase/(decrease) in comparable sales(1):

                               

Men's Wearhouse

    0.7 %   4.8 %   9.1 %   4.7 %   (4.0 )%

Moores

    (4.1 )%   1.5 %   4.5 %   2.2 %   (0.9 )%

K&G

    (5.5 )%   (4.3 )%   3.6 %   (1.5 )%   (1.9 )%

Average square footage(2):

   
 
   
 
   
 
   
 
   
 
 

Men's Wearhouse

    5,710     5,721     5,705     5,673     5,653  

Men's Wearhouse and Tux

    1,387     1,372     1,384     1,381     1,373  

Moores

    6,358     6,362     6,339     6,306     6,278  

K&G

    23,710     23,704     23,750     23,472     23,137  

Average net sales per square foot of selling space(3):

   
 
   
 
   
 
   
 
   
 
 

Men's Wearhouse

  $ 472   $ 471   $ 451   $ 410   $ 387  

Moores

  $ 419   $ 439   $ 432   $ 416   $ 408  

K&G

  $ 176   $ 186   $ 191   $ 181   $ 182  

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  2013   2012   2011   2010   2009  
 
  (Dollars in thousands)
 

Number of retail stores:

                               

Open at beginning of the period

    1,143     1,166     1,192     1,259     1,294  

Opened

    25     37     25     10     6  

Closed

    (44 )   (60 )   (51 )   (77 )   (41 )
                       

Open at end of the period

    1,124     1,143     1,166     1,192     1,259  
                       
                       

Men's Wearhouse

    661     638     607     585     581  

Men's Wearhouse and Tux

    248     288     343     388     454  

Moores

    121     120     117     117     117  

K&G

    94     97     99     102     107  
                       

Total

    1,124     1,143     1,166     1,192     1,259  
                       
                       

Cash Flow Information:

                               

Capital expenditures

  $ 108,200   $ 121,433   $ 91,820   $ 58,868   $ 56,912  

Depreciation and amortization

    88,749     84,979     75,968     75,998     86,090  

Repurchases of common stock

    152,129     41,296     63,988     144     90  

 

 
  February 1,
2014
  February 2,
2013
  January 28,
2012
  January 29,
2011
  January 30,
2010
 

Balance Sheet Information:

                               

Cash and cash equivalents

  $ 59,252   $ 156,063   $ 125,306   $ 136,371   $ 186,018  

Inventories

    599,486     556,531     572,502     486,499     434,881  

Working capital

    479,808     560,970     544,108     497,352     486,341  

Total assets

    1,555,230     1,496,347     1,405,952     1,320,318     1,234,152  

Long-term debt, including current portion

    97,500                 43,491  

Total equity

    1,023,149     1,109,235     1,031,819     983,853     904,390  

(1)
Comparable 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 and include e-commerce net sales, beginning in 2013. The inclusion of e-commerce net sales did not have a significant effect on comparable sales. Comparable sales percentages for Moores are calculated using Canadian dollars.

(2)
Average square footage 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)
Average net 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. The calculation for Men's Wearhouse includes Men's Wearhouse and Tux stores. The calculation for Moores is based upon the Canadian dollar. For 2012, the calculation excludes total sales for the 53rd week.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Men's Wearhouse, Inc. is a men's specialty apparel retailer offering suits, suit separates, sport coats, slacks, sportswear, outerwear, dress shirts, shoes and accessories and tuxedo rentals. We offer our products and services through multiple channels including The Men's Wearhouse, Men's Wearhouse and Tux, Moores Clothing for Men, K&G and the internet at www.menswearhouse.com. Our stores are located throughout the U.S. and Canada and carry a wide selection of exclusive and non-exclusive merchandise brands. In addition, we offer our customers alteration services and most of our K&G stores also offer ladies' career apparel, sportswear, accessories and shoes, and children's apparel. We also conduct retail dry cleaning, laundry and heirlooming operations through MW Cleaners in the Houston, Texas area. These operations comprise our retail segment.

Additionally, we operate two corporate apparel providers—our UK-based operations, the largest provider in the UK under the Dimensions, Alexandra and Yaffy brands, and our Twin Hill operations in the U.S. These operations provide corporate clothing uniforms and workwear to workforces through multiple channels including managed corporate accounts, catalogs and the internet. We acquired 86% of the UK-based holding company in 2010. Certain previous shareholders of Dimensions control 14% of the UK-based holding company and we have the right to acquire this 14% after fiscal 2013. These operations comprise our corporate apparel segment.

In March 2013, we announced that we engaged Jefferies & Co. to assist us in evaluating strategic alternatives for our K&G operations. We believe that our core strengths lie primarily in our service culture and specialty men's apparel retailing, and that we will be better able to focus our efforts on these core operations by taking this action. During fiscal 2013, based on estimates provided to us by market participants during our review of strategic alternatives for the K&G brand, we concluded that the carrying value of the K&G brand exceeded its fair value. Based on further analysis, it was determined that the entire carrying value of K&G's goodwill was impaired resulting in a non-cash pre-tax goodwill impairment charge of $9.5 million.

On August 6, 2013, we acquired JA Holding, the parent company of the American clothing brand Joseph Abboud® and a U.S. tailored clothing factory, for $97.5 million in cash consideration, subject to certain adjustments. The total net cash consideration paid after these adjustments was $94.9 million. We believe this transaction will accelerate our strategy of offering exclusive brands with broad appeal at attractive prices. JA Holding is a component of our Men's Wearhouse brand and therefore has been included in our retail reportable segment.

On March 11, 2014, we entered into an Agreement and Plan of Merger with Jos. A. Bank pursuant to which we will acquire all of the issued and outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of approximately $1.8 billion. Pursuant to the merger agreement, we amended our existing tender offer (as so amended, the "Offer") to acquire all of the issued and outstanding shares of common stock of Jos. A. Bank and, following the consummation of the Offer, and subject to the satisfaction or waiver of the conditions set forth in the merger agreement, Java Corp., our wholly owned subsidiary, will merge with and into Jos. A. Bank and Jos. A. Bank will survive as our wholly owned subsidiary. We believe that Jos. A. Bank's business model in conjunction with the Men's Wearhouse business model will create the opportunity for significant synergies. The transaction, which is expected to close by the third quarter of 2014, is subject to satisfaction of customary closing conditions, including, among others, there being validly tendered and not validly withdrawn prior to the expiration of the Offer that number of shares (excluding shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee) which, when added to the shares we already own, represents at least a majority of the total number of outstanding shares on a fully diluted basis, and expiration or termination of the applicable waiting period (and any extension thereof) under the HSR Act.

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Refer to Note 15 of Notes to Consolidated Financial Statements for additional information and disclosures regarding our reportable segments and the discussion included in "Results of Operations" below.

We follow the standard fiscal year of the retail industry, which is a 52-week or 53-week period ending on the Saturday closest to January 31. Fiscal year 2013 ended on February 1, 2014, fiscal year 2012 ended on February 2, 2013 and fiscal year 2011 ended on January 28, 2012. Fiscal year 2013 included 52 weeks, fiscal year 2012 included 53 weeks and fiscal year 2011 included 52 weeks.

Overview

Highlights of our performance for the year ended February 1, 2014, a 52-week fiscal year, compared to the prior year ended February 2, 2013, a 53-week fiscal year, are presented below, followed by a more comprehensive discussion under "Results of Operations":

During fiscal 2013, we opened 25 stores (23 Men's Wearhouse stores, one Moores store and one K&G store) and closed 44 stores (four K&G stores due to substandard performance and 40 Men's Wearhouse and Tux stores: 22 due to lease expiration and 18 due to substandard performance).

In fiscal 2014, we plan to open approximately 32 to 36 Men's Wearhouse stores and three Moores stores and to expand and/or relocate approximately 20 existing Men's Wearhouse stores and one existing Moores

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store. We also plan to close approximately two Men's Wearhouse stores, one Moores store and two K&G stores and approximately 32 Men's Wearhouse and Tux stores as their lease terms expire or acceptable lease termination arrangements can be established.

Results of Operations

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

 
  Fiscal Year(1)  
 
  2013   2012   2011  

Net sales:

                   

Retail clothing product

    67.4 %   68.0 %   68.0 %

Tuxedo rental services

    16.7     16.3     15.8  

Alteration and other services

    5.9     6.1     6.0  
               

Total retail sales

    90.0     90.4     89.8  

Corporate apparel clothing product sales

    10.0     9.6     10.2  
               

Total net sales

    100 %   100 %   100 %

Cost of sales(2):

                   

Retail clothing product

    44.5     44.7     44.7  

Tuxedo rental services

    15.6     13.9     14.0  

Alteration and other services

    77.4     75.3     75.6  

Occupancy costs

    13.1     12.6     12.8  
               

Total retail cost of sales

    54.4     53.8     54.1  

Corporate apparel clothing product cost of sales

    70.2     71.1     72.4  
               

Total cost of sales

    56.0     55.5     56.0  

Gross margin(2):

                   

Retail clothing product

    55.5     55.3     55.3  

Tuxedo rental services

    84.4     86.1     86.0  

Alteration and other services

    22.6     24.7     24.4  

Occupancy costs

    (13.1 )   (12.6 )   (12.8 )
               

Total retail gross margin

    45.6     46.2     45.9  

Corporate apparel clothing product gross margin

    29.8     28.9     27.6  
               

Total gross margin

    44.0     44.5     44.0  

Goodwill impairment charge

    0.4     0.0     0.0  

Asset impairment charges

    0.1     0.0     0.1  

Selling, general and administrative expenses

    38.3     36.5     36.2  
               

Operating income

    5.2     8.0     7.8  

Interest income

    0.0     0.0     0.0  

Interest expense

    (0.1 )   (0.1 )   (0.1 )
               

Earnings before income taxes

    5.1     7.9     7.7  

Provision for income taxes

    1.7     2.6     2.7  
               

Net earnings including non-controlling interest

    3.4     5.3     5.1  

Net (earnings) loss attributable to non-controlling interest

    0.0     0.0     0.0  
               

Net earnings attributable to common shareholders. 

    3.4 %   5.3 %   5.1 %
               
               

(1)
Percentage line items may not sum to totals due to the effect of rounding.

(2)
Calculated as a percentage of related sales.

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Total net sales decreased $15.0 million, or 0.6%, to $2,473.2 million for fiscal 2013 as compared to fiscal 2012.

Total retail sales decreased $22.4 million, or 1.0%, to $2,226.4 million for fiscal 2013 as compared to fiscal 2012 due mainly to a $23.7 million decrease in retail clothing product revenues and a $4.1 million decrease in alteration and other services offset by a $5.4 million increase in tuxedo rental services revenues. The net decrease in total retail sales is attributable to the following:

(in millions)   Amount attributed to
$ 10.2   0.7% increase in comparable sales at Men's Wearhouse / Men's Wearhouse and Tux.
  (10.1 ) 4.1% decrease in comparable sales at Moores.
  (18.7 ) 5.5% decrease in comparable sales at K&G.
  (25.8 ) Impact of 53rd week in 2012 (based on trailing 52 weeks in 2012).
  32.0   Increase from net sales of stores opened in 2012, relocated stores and expanded stores not yet included in comparable sales.
  18.4   Increase in net sales from 25 new stores opened in 2013.
  (23.8 ) Decrease in net sales resulting from closed stores.
  (10.3 ) Decrease in net sales resulting from change in U.S./Canadian dollar exchange rate.
  5.7   Other.
     
$ (22.4 ) Decrease in total retail sales.
     
     

Comparable sales exclude 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 and, beginning in 2013, include e-commerce net sales. The inclusion of e-commerce net sales did not have a significant effect on comparable sales. The increase at Men's Wearhouse/Men's Wearhouse and Tux resulted primarily from increased average unit retails (net selling prices) that more than offset decreased units sold per transaction and average transactions per store. The decrease at Moores was driven by decreased units sold per transaction, average unit retails and average transactions per store. The decrease at K&G was due to decreased average transactions per store and average unit retails which more than offset an increase in units sold per transaction. Tuxedo rental service revenues increased primarily due to increased unit rental rates which more than offset decreased unit rentals and tuxedo fees.

Total corporate apparel clothing product sales increased $7.4 million to $246.8 million for fiscal 2013 as compared to fiscal 2012. UK corporate apparel sales decreased $0.8 million due mainly to the impact of a weaker pound Sterling this year compared to last year, which more than offset an increase in sales from existing customer programs. U.S. corporate apparel sales increased $8.2 million due primarily to increased sales from new customer rollouts and existing customer programs as well as increased catalog sales.

Buying and distribution costs are included in determining our retail and corporate apparel clothing product gross margins. Our gross margin may not be comparable to other specialty retailers, as some companies exclude costs related to their distribution network from cost of goods sold while others, like us, include all or a portion of such costs in cost of goods sold and exclude them from SG&A expenses. Tuxedo distribution costs are not included in determining our tuxedo rental services gross margin as these costs are included in SG&A expenses.

Our total gross margin decreased $19.1 million, or 1.7%, to $1,089.0 million for fiscal 2013 as compared to fiscal 2012. Total retail segment gross margin decreased $23.5 million or 2.3% from fiscal 2012 to $1,015.5 million in fiscal 2013. For the retail segment, total gross margin as a percentage of related sales decreased from 46.2% in fiscal 2012 to 45.6% in fiscal 2013 driven primarily by a decrease in tuxedo rental services gross margin rate due to increased royalty expenses and higher per unit rental costs. This was partially offset by a slight increase in retail clothing product gross margin rate due to increased average

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unit retails. Occupancy costs as a percentage of retail sales, 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, increased from 12.6% in fiscal 2012 to 13.1% in fiscal 2013 due to deleveraging of occupancy expenses caused by our decreased retail sales. On an absolute dollar basis, occupancy costs increased $7.5 million primarily due to higher rent and depreciation expense.

On an absolute dollar basis, corporate apparel gross margin increased $4.3 million or 6.3% from fiscal 2012 to $73.5 million in fiscal 2013. For the corporate apparel segment, total gross margin as a percentage of related sales increased from 28.9% in fiscal 2012 to 29.8% in fiscal 2013 driven by higher sales and changes in the sales mix at our U.S. operations.

During fiscal 2013, based on estimates provided to us by market participants during our review of strategic alternatives for the K&G brand, we concluded that the carrying value of the K&G brand exceeded its fair value. Based on further analysis, it was determined that the entire carrying value of K&G's goodwill was impaired resulting in a non-cash pre-tax goodwill impairment charge of $9.5 million.

During fiscal 2013, we recorded $2.2 million of asset impairment charges related to impaired tradename and store assets in our retail segment.

SG&A expenses increased to $947.7 million in fiscal 2013 from $909.1 million in fiscal 2012, an increase of $38.6 million or 4.2%. As a percentage of total net sales, these expenses increased from 36.5% in fiscal 2012 to 38.3% in fiscal 2013. The components of this 1.8% net increase in SG&A expenses as a percentage of total net sales and the related absolute dollar changes were as follows:

 
  %   Attributed to
      1.7   Increase in other SG&A expenses as a percentage of sales from 19.6% in fiscal 2012 to 21.3% in fiscal 2013. On an absolute dollar basis, other SG&A expenses increased $38.5 million with $11.0 million primarily due to increased employee related and non-store payroll costs and $27.5 million due to acquisition and integration costs related to JA Holding, costs related to strategic projects, separation costs associated with former executives, K&G e-commerce closure costs and a New York store related closure costs, partially offset by a gain on the sale of an office building.
      0.3   Increase in advertising expense as a percentage of sales from 3.8% in fiscal 2012 to 4.1% in fiscal 2013. On an absolute dollar basis, advertising expense increased $6.7 million.
      (0.2 ) Decrease in store salaries as a percentage of sales from 13.1% in fiscal 2012 to 12.9% in fiscal 2013. Store salaries on an absolute dollar basis decreased $6.6 million primarily due to decreased store sales support salaries and decreased store bonuses.
         
      1.8 % Total

In the retail segment, SG&A expenses as a percentage of related net sales increased from 37.5% in fiscal 2012 to 39.7% in fiscal 2013. On an absolute dollar basis, retail segment SG&A expenses increased $39.7 million primarily due to increased employee related and non-store payroll costs, acquisition and integration costs related to JA Holding, costs related to strategic projects, separation costs associated with former executives, K&G e-commerce closure costs and a New York store related closure costs, partially offset by a gain on the sale of an office building.

In the corporate apparel segment, SG&A expenses as a percentage of related net sales decreased from 27.3% in fiscal 2012 to 26.0% in fiscal 2013. On an absolute dollar basis, corporate apparel segment SG&A expenses decreased $1.1 million primarily due to reduced UK operating expenses partially offset by higher U.S. operating expenses and separation costs associated with a former executive.

Corporate apparel segment operating income of $9.4 million for fiscal 2013 includes $9.7 million of operating income in the UK and $0.3 million of operating losses in the U.S. compared to corporate apparel

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segment operating income of $3.9 million in fiscal 2012 which consisted of $7.4 million of operating income in the UK and $3.5 million of operating losses in the U.S.

Interest expense increased to $3.2 million in fiscal 2013 from $1.5 million in fiscal 2012 primarily due to interest expense related to our Term Loan in August 2013 to fund the JA Holding acquisition.

Our effective income tax rate increased from 33.2% for fiscal 2012 to 33.6% for fiscal 2013 mainly due to the reduced tax benefit related to audit settlements, closed statutes of limitation and a one-time adjustment in the prior year.

These factors resulted in net earnings attributable to common shareholders of $83.8 million or 3.4% of total net sales for fiscal 2013, a decrease of $47.9 million or 36.4% from net earnings of $131.7 million or 5.3% of total net sales for fiscal 2012.

Our total net sales increased $105.6 million, or 4.4%, to $2,488.3 million for fiscal 2012 as compared to fiscal 2011.

Total retail sales increased $109.7 million, or 5.1%, to $2,248.8 million for fiscal 2012 as compared to fiscal 2011 due mainly to a $71.6 million increase in retail clothing product revenues, a $29.6 million increase in tuxedo rental services revenues and a $5.4 million increase in alteration services revenues. These increases in total retail sales are attributable to the following:

 
  (in millions)   Amount attributed to
    $ 62.6   4.8% increase in comparable store sales at Men's Wearhouse / Men's Wearhouse and Tux.
      3.8   1.5% increase in comparable store sales at Moores.
      (15.1 ) 4.3% decrease in comparable store sales at K&G.
      26.4   Increase in net sales from impact of 53rd week.
      24.3   Increase from net sales of stores opened in 2011, relocated stores and expanded stores not yet included in comparable sales.
      17.2   Increase in net sales from 37 new stores opened in 2012.
      13.0   Increase in e-commerce, alteration and other services sales.
      (20.5 ) Decrease in net sales resulting from closed stores.
      (2.0 ) Decrease in net sales resulting from change in U.S./Canadian dollar exchange rate.
         
    $ 109.7   Increase in total retail sales.
         
         

Comparable store sales exclude 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. The increase at Men's Wearhouse/Men's Wearhouse and Tux resulted primarily from increased average unit retails (net selling prices) and a slight increase in units sold per transaction that more than offset a decrease in average transactions per store. The increase at Moores was driven by increased units sold per transaction and average unit retails that more than offset a decrease in average transactions per store. The decrease at K&G was due to decreased units sold per transaction, average transactions per store and average unit retails. Tuxedo rental service revenues increased primarily due to increased unit rental rates and unit rentals as well as increased sales of tuxedo accessories.

Total corporate apparel clothing product sales decreased $4.1 million to $239.4 million for fiscal 2012 as compared to fiscal 2011. UK corporate apparel sales decreased $8.2 million due mainly to a lower level of customer directed new uniform rollouts in fiscal 2012 as compared to fiscal 2011, which included the largest single customer rollout in Dimensions' operating history. U.S. corporate apparel sales increased $4.1 million due primarily to increased sales from a large customer program and increased catalog sales.

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Buying and distribution costs are included in determining our retail and corporate apparel clothing product gross margins. Our gross margin may not be comparable to other specialty retailers, as some companies exclude costs related to their distribution network from cost of goods sold while others, like us, include all or a portion of such costs in cost of goods sold and exclude them from SG&A expenses. Tuxedo distribution costs are not included in determining our tuxedo rental services gross margin as these costs are included in SG&A expenses.

In the retail segment, total gross margin as a percentage of related sales increased from 45.9% in fiscal 2011 to 46.2% in fiscal 2012. Total retail segment gross margin increased $57.2 million or 5.8% from fiscal 2011 to $1,039.0 million in fiscal 2012. The retail clothing product gross margin rate remained flat at 55.3% in fiscal 2011 and fiscal 2012, while on an absolute dollar basis, retail clothing product margin increased $39.2 million. The tuxedo rental services gross margin increased slightly from 86.0% in fiscal 2011 to 86.1% in fiscal 2012 primarily due to a decrease in per unit rental costs in 2012 offset by increased royalty expenses. Occupancy costs as a percentage of retail sales, 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 from 12.8% in fiscal 2011 to 12.6% in fiscal 2012 mainly due to cost leverage from increased retail sales. On an absolute dollar basis, occupancy costs increased $10.1 million primarily due to higher rent and depreciation expense.

In the corporate apparel segment, total gross margin as a percentage of related sales increased from 27.6% in fiscal 2011 to 28.9% in fiscal 2012 mainly as a result of cost synergies following the consolidation of Dimensions and Alexandra distribution facilities and supporting service functions and changes in the sales mix. On an absolute dollar basis, corporate apparel gross margin increased $2.0 million as the cost synergies and sales mix changes more than offset the impact of decreased sales.

SG&A expenses increased to $909.1 million in fiscal 2012 from $861.5 million in fiscal 2011, an increase of $47.6 million or 5.5%. As a percentage of total net sales, these expenses increased from 36.2% in fiscal 2011 to 36.5% in fiscal 2012. The components of this 0.3% net increase in SG&A expenses as a percentage of total net sales and the related absolute dollar changes were as follows:

 
  %   Attributed to
      0.3   Increase in advertising expense as a percentage of total net sales from 3.5% in fiscal 2011 to 3.8% in fiscal 2012. On an absolute dollar basis, advertising expense increased $10.1 million.
      0.0   Store salaries as a percentage of total net sales remained flat at 13.1% in fiscal 2011 and fiscal 2012. Store salaries on an absolute dollar basis increased $13.5 million primarily due to increased commissions associated with increased sales and increased store sales support salaries, offset partially by decreased store bonuses.
      0.0   Other SG&A expenses as a percentage of total net sales remained flat at 19.6% in fiscal 2011 and fiscal 2012. On an absolute dollar basis, other SG&A expenses increased $24.0 million primarily due to increased payroll-related costs.
         
      0.3 % Total

In the retail segment, SG&A expenses as a percentage of related net sales increased from 36.9% in fiscal 2011 to 37.5% in fiscal 2012. On an absolute dollar basis, retail segment SG&A expenses increased $54.1 million primarily due to increased advertising expense, store salaries and payroll-related costs.

In the corporate apparel segment, SG&A expenses as a percentage of related net sales decreased from 29.5% in fiscal 2011 to 27.3% in fiscal 2012. On an absolute dollar basis, corporate apparel segment SG&A expenses decreased $6.5 million primarily due to reduced UK operating expenses following the consolidation of Dimensions and Alexandra distribution facilities and supporting service functions and the absence in fiscal 2012 of $3.8 million in integration costs incurred in fiscal 2011 associated with our UK corporate apparel operations acquired on August 6, 2010.

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Corporate apparel segment operating income of $3.9 million for fiscal 2012 includes $7.4 million of operating income in the UK and $3.5 million of operating losses in the U.S.

Our effective income tax rate decreased from 34.7% for fiscal 2011 to 33.2% for fiscal 2012 mainly due to a decrease in foreign statutory tax rates and a one-time adjustment in fiscal 2012. As of February 2, 2013, we had $3.9 million in unrecognized tax benefits, of which $2.8 million, if recognized, would reduce our income tax expense and effective tax rate. It is reasonably possible that there would be a reduction in the balance of unrecognized tax benefits of up to $1.2 million in the next twelve months.

These factors resulted in net earnings attributable to common shareholders of $131.7 million or 5.3% of total net sales for fiscal 2012, an increase of $11.1 million or 9.2% over net earnings of $120.6 million or 5.1% of total net sales for fiscal 2011.

Liquidity and Capital Resources

At February 1, 2014 and February 2, 2013, cash and cash equivalents totaled $59.3 million and $156.1 million, respectively. At February 1, 2014, cash and cash equivalents held by foreign subsidiaries totaled $40.9 million. Under current tax laws and regulations, if cash and cash equivalents held outside the U.S. are repatriated to the U.S., in certain circumstances we may be subject to additional U.S. income taxes and foreign withholding taxes.

We had working capital of $479.8 million and $561.0 million at February 1, 2014 and February 2, 2013, respectively. Our primary sources of working capital are cash flows from operations and borrowings under our Credit Agreement (as defined below). The $81.2 million decrease in working capital at February 1, 2014 compared to February 2, 2013 resulted mainly from the impact of cash used to repurchase common stock in fiscal 2013 as well as increases in current liabilities, which more than offset the impact of increases in inventories and other current assets.

On April 12, 2013, we entered into a Third Amended and Restated Credit Agreement (the "Credit Agreement") with a group of banks to amend and restate our existing credit facility, which provided us with a revolving credit facility that was scheduled to mature on January 26, 2016.

On August 6, 2013, we borrowed $100.0 million under the term loan provision of our Credit Agreement (the "Term Loan"), which will be repaid over five years, with 10% payable annually in quarterly installments and the remainder due at maturity. The interest rate on the Term Loan is based on the monthly LIBOR rate plus 1.75%. In conjunction with the Term Loan, we also entered into an interest rate swap, in which the variable rate payments due under the Term Loan were exchanged for a fixed rate of 1.27%, resulting in a combined interest rate of 3.02%. As of February 1, 2014, there was $97.5 million outstanding under the Term Loan.

The Credit Agreement provides for a senior revolving credit facility of $300.0 million, with possible future increases to $450.0 million under an expansion feature, which matures on April 12, 2018. The Credit Agreement is secured by the stock of certain of our subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (i) adjusted LIBO rate, (ii) adjusted EURIBO rate, (iii) CDOR rate, (iv) Canadian prime rate or (v) an alternate base rate (equal to the greater of the prime rate, the federal funds rate plus 0.5% or the adjusted LIBO rate for a one-month period plus 1.0%). Advances under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin of up to 2.50%. The Credit Agreement also provides for fees applicable to amounts available to be drawn under outstanding letters of credit which range from 1.75% to 2.50%, and a fee on unused commitments which ranges from 0.35% to 0.50%. As of February 1, 2014, there were no borrowings outstanding under the senior revolving credit facility.

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The Credit Agreement contains certain restrictive and financial covenants, including the requirement to maintain certain financial ratios. The restrictive provisions in the Credit Agreement reflect an overall covenant structure that is generally representative of a commercial loan made to an investment-grade company. We were in compliance with the covenants in the Credit Agreement as of February 1, 2014.

We utilize letters of credit primarily to secure inventory purchases and as collateral for workers compensation claims. At February 1, 2014, letters of credit totaling approximately $19.2 million were issued and outstanding. Borrowings available under our Credit Agreement at February 1, 2014 were $280.8 million.

On March 11, 2014, we entered into an Agreement and Plan of Merger with Jos. A. Bank pursuant to which we will acquire all of the issued and outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of approximately $1.8 billion. Concurrently with the signing of the merger agreement, we entered into a financing commitment letter with various lenders, as further discussed in "Futures sources and uses of cash" below.

Operating activities—Our primary source of operating cash flow is from sales to our customers. Our primary uses of cash include clothing product inventory and tuxedo rental product purchases, personnel related expenses, occupancy costs, advertising costs and income tax payments. Our operating activities provided net cash of $188.9 million in 2013, due mainly to net earnings, adjusted for non-cash charges, a decrease in accounts receivable and an increase in accounts payable, accrued expenses and other current liabilities, offset by increases in inventories and tuxedo rental product.

During fiscal 2012, our operating activities provided net cash of $225.7 million, due mainly to net earnings, adjusted for non-cash charges, a decrease in inventories and an increase in accounts payable, accrued expenses and other current liabilities, offset by increases in tuxedo rental product and other assets.

During fiscal 2011, our operating activities provided net cash of $162.8 million, due mainly to net earnings, adjusted for non-cash charges, offset in part by increases in inventories and tuxedo rental product.

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Investing activities—Our cash outflows from investing activities are primarily for capital expenditures and, in 2013, the acquisition of JA Holding for $94.9 million. Our investing activities used net cash of $199.0 million, $123.5 million and $91.8 million in 2013, 2012 and 2011, respectively. We made capital expenditures of $108.2 million, $121.4 million and $91.8 million in 2013, 2012 and 2011, respectively. In 2013, we received $3.9 million in proceeds from the sale of an office building. In 2012, we made investments in trademarks, tradenames and other assets of $2.1 million.

Our capital expenditures relate mainly 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 (in millions):

 
  2013   2012   2011  

Retail segment capital expenditures:

                   

Relocation and remodeling of existing stores

  $ 54.5   $ 47.5   $ 42.0  

New store construction

    13.4     19.1     12.3  

Information technology

    24.6     18.7     15.5  

Distribution facilities

    4.6     9.6     9.6  

Other(1)

    8.7     22.9     2.6  
               

Total retail segment capital expenditures

    105.8     117.8     82.0  

Corporate apparel segment capital expenditures

    2.4     3.6     9.8  
               

Total capital expenditures

  $ 108.2   $ 121.4   $ 91.8  
               
               

(1)
Fiscal 2012 includes the $13.4 million purchase, completed in June 2012, of approximately 7.7 acres with three buildings in Fremont, California utilized for offices following the consolidation of our California office locations.

Property additions relating to new retail apparel stores include stores in various stages of completion at the end of the fiscal year (13 stores at the end of 2013, six stores at the end of 2012 and four stores at the end of 2011).

Financing activities—Our cash outflows from financing activities consist primarily of cash dividend payments and repurchases of common stock, while cash inflows from financing activities consist primarily of proceeds from the issuance of common stock and, in 2013, proceeds from our Term Loan. In 2013, our financing activities used net cash of $82.9 million, due mainly to the repurchase of common stock of $152.1 million and cash dividends paid of $35.5 million, offset by $100.0 million of proceeds from our Term Loan and $10.7 million of proceeds from the issuance of common stock. In 2012, our financing activities used net cash of $71.3 million, due mainly to the repurchase of common stock of $41.3 million and cash dividends paid of $37.1 million, offset by $8.5 million proceeds from the issuance of common stock. In 2011, our financing activities used net cash of $81.8 million, due mainly to the repurchase of common stock of $64.0 million and cash dividends paid of $25.1 million, offset by $8.4 million proceeds from the issuance of common stock.

Share repurchase program—In March 2013, the Board of Directors (the "Board") approved a $200.0 million share repurchase program for our common stock. This approval amended and replaced our existing $150.0 million share repurchase program authorized by the Board in January 2011, which had a remaining authorization of $45.2 million at the time of amendment.

In July 2013, we entered into an accelerated share repurchase agreement ("ASR Agreement") with J.P. Morgan Securities LLC ("JPMorgan"), as agent for JPMorgan Chase Bank, National Association, London Branch, to purchase $100.0 million of our common stock. In July, we paid $100.0 million to JPMorgan and received an initial delivery of 2,197,518 shares. The value of the initial shares received was approximately $85.0 million, reflecting a $38.68 price per share. In September 2013, JPMorgan delivered

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an additional 455,769 shares valued at approximately $15.0 million, reflecting a $32.91 price per share. All repurchased shares under the ASR Agreement were immediately retired.

In addition to the ASR Agreement, during fiscal 2013, 1,489,318 shares at a cost of $52.0 million were repurchased in open market transactions at an average price per share of $34.89 under the Board's March 2013 authorization. At February 1, 2014, the remaining balance available under the Board's March 2013 authorization was $48.0 million.

During fiscal 2012, 1,121,484 shares at a cost of $41.0 million were repurchased at an average price per share of $36.59 under the Board's January 2011 authorization. During fiscal 2011, 2,322,340 shares at a cost of $63.8 million were repurchased at an average price per share of $27.47 under the Board's January 2011 authorization.

During fiscal 2013, 2012 and 2011, 5,378 shares, 7,041 shares and 7,132 shares, respectively, at a cost of $0.2 million, $0.3 million and $0.2 million, respectively, were repurchased at an average price per share of $30.03, $37.28 and $27.77, respectively, in private transactions to satisfy minimum tax withholding obligations arising upon the vesting of certain restricted stock.

The following table summarizes our common stock repurchases during fiscal 2013, 2012 and 2011 (in thousands, except share data and average price per share):

 
  Fiscal Year  
 
  2013   2012   2011  

Shares repurchased

    4,147,983     1,128,525     2,329,472  

Total costs

  $ 152,129   $ 41,296   $ 63,988  

Average price per share

  $ 36.68   $ 36.59   $ 27.47  

Dividends—Cash dividends paid were approximately $35.5 million, $37.1 million and $25.1 million during fiscal 2013, 2012 and 2011, respectively. In fiscal 2013 and 2012, a dividend of $0.18 per share was declared in the first, second, third and fourth quarters, for an annual dividend of $0.72 per share, respectively. In fiscal 2011, a dividend of $0.12 per share was declared in the first, second and third quarters and a dividend of $0.18 per share was declared in the fourth quarter, for an annual dividend of $0.54 per share.

The cash dividend of $0.18 per share declared by the Board in January 2014 is payable on March 28, 2014 to shareholders of record on March 18, 2014. The dividend payout is approximately $9.0 million and is included in accrued expenses and other current liabilities on the consolidated balance sheet as of February 1, 2014.

Our primary use of cash is to finance working capital requirements of our operations. In addition, we will use cash to fund capital expenditures, income taxes, dividend payments, repayment of long-term debt, repurchases of common stock, operating leases and various other obligations, including the commitments discussed in the "Contractual Obligations" table below, as they arise.

Capital expenditures are anticipated to be in the range of $80.0 to $90.0 million for 2014. This amount includes the anticipated costs to open approximately 32 to 36 Men's Wearhouse stores and three Moores stores and to expand and/or relocate approximately 20 existing Men's Wearhouse stores and one existing Moores store. The average cost (excluding telecommunications and point-of-sale equipment and inventory) of opening a new store is expected to be approximately $0.4 million in 2014. The balance of the capital expenditures for 2014 will be used for telecommunications, point-of-sale and other computer equipment and systems, store remodeling, distribution facilities and investment in other corporate assets. We anticipate that each Men's Wearhouse and Moores store will require, on average, an initial inventory costing approximately $0.4 million (subject to the seasonal patterns that affect inventory at all stores). These inventory purchases will be funded by cash from operations, trade credit and, if necessary,

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borrowings under our Credit Agreement. 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, as well as on industry trends consistent with our anticipated operating plans.

Additionally, market conditions may produce attractive opportunities for us to make acquisitions 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 existing or any future credit agreement and issuances of debt or equity securities, to take advantage of any significant acquisition opportunities.

On March 11, 2014, we entered into an Agreement and Plan of Merger with Jos. A. Bank pursuant to which we will acquire all of the issued and outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of approximately $1.8 billion. Concurrently with the signing of the merger agreement, we entered into a financing commitment letter (the "Commitment Letter") with Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC (collectively, the "Lenders"). We expect the financing under the Commitment Letter, together with cash balances, to be sufficient to provide the financing necessary to consummate our offer to acquire all of the issued and outstanding shares of common stock of Jos. A. Bank and to refinance certain of our existing indebtedness. The Commitment Letter provides for (i) $1.1 billion aggregate principal amount of senior secured term B loans, (ii) a $500.0 million asset-based revolving facility of the Company and certain of its subsidiaries and (iii) $600.0 million aggregate principal amount of unsecured bridge loans to the extent $600.0 million in gross proceeds are not raised from the issuance and sale by the Company of senior unsecured notes prior to the effective time of the merger. The financing commitments of the Lenders are subject to certain conditions set forth in the Commitment Letter.

Current domestic and global economic conditions, including high unemployment levels, reduced public sector spending and constrained credit markets, could negatively affect our future operating results as well as our existing cash and cash equivalents balances. In addition, conditions in the financial markets could limit our access to further capital resources, if needed, and could increase associated costs. Based on our current business plan, we believe that our existing cash and cash flows from operations and availability under our existing or any future credit agreement will be sufficient to fund our planned store openings, relocations and remodelings, other capital expenditures and operating cash requirements, and that we will be able to maintain compliance with the covenants in our Credit Agreement for at least the next 12 months. Borrowings available under our Credit Agreement were $280.8 million as of February 1, 2014.

We are exposed to market risk associated with foreign currency exchange rate fluctuations as a result of our direct sourcing programs and our operations in foreign countries. In connection with our direct sourcing programs, we may enter into merchandise purchase commitments that are denominated in a currency different from the functional currency of the operating entity. Our risk management policy is to hedge a significant portion of forecasted merchandise purchases for our direct sourcing programs that bear foreign exchange risk using foreign exchange forward contracts.

In addition, we are exposed to interest rate risk associated with our outstanding indebtedness. In connection with this indebtedness, we entered into an interest rate swap in which the variable rate payments due under our Term Loan were exchanged for a fixed rate. Our risk management policy is to hedge our exposure to fluctuations in interest rates using this swap agreement.

As the foreign exchange forward contracts and interest rate swap agreement are with financial institutions, we are exposed to credit risk in the event of nonperformance by these parties. However, due to the creditworthiness of these major financial institutions, full performance is anticipated.

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Contractual Obligations

As of February 1, 2014, we are obligated to make cash payments in connection with our non-cancelable operating leases and other contractual obligations in the amounts listed below. In addition, we utilize letters of credit primarily for inventory purchases and as collateral for workers compensation claims. At February 1, 2014, letters of credit totaling approximately $19.2 million were issued and outstanding.

 
  Payments Due by Period  
(In millions)
Contractual obligations
  Total   <1 Year   1 - 3 Years   4 - 5 Years   > 5 Years  

Long-term debt(1)

  $ 107.5   $ 12.9   $ 36.8   $ 57.8   $  

Operating lease base rentals(2)

    902.8     177.1     300.6     189.8     235.3  

Other contractual obligations(3)

    29.4     17.3     9.0     2.7     0.4  
                       

Total contractual obligations(4)

  $ 1,039.7   $ 207.3   $ 346.4   $ 250.3   $ 235.7  
                       
                       

(1)
Included in the required debt payments disclosed above are estimated total interest payments of $10.0 million as of February 1, 2014, payable over the remaining life of the debt. On August 6, 2013, we borrowed $100.0 million under the Term Loan provision of our Credit Agreement, which will be repaid over five years, with 10% payable annually in quarterly installments and the remainder due at maturity. See Note 4 of Notes to Consolidated Financial Statements for more information.

(2)
We lease retail business locations, office and warehouse facilities, copier equipment and automotive equipment under various non-cancelable operating leases. See Note 16 of Notes to Consolidated Financial Statements for more information.

(3)
Other contractual obligations consist primarily of minimum payments under our agreement with Vera Wang that gives us the exclusive right to "Black by Vera Wang" tuxedo products and our marketing agreement with David's Bridal, Inc. Pursuant to our marketing agreement with David's Bridal, Inc., there are performance conditions that may impact future payments to be made beginning in fiscal year 2015. These potential future payments are not included in the table above as such amounts are not readily determinable.

(4)
Excluded from the table above is $3.6 million, which includes $0.7 million in interest, related to uncertain tax positions. These amounts are not included due to our inability to predict the timing of the settlement of these amounts. Refer to Note 5 of Notes to Consolidated Financial Statements for more information.

In the normal course of business, we issue purchase orders to vendors/suppliers for merchandise. The purchase orders represent executory contracts requiring performance by the vendors/suppliers, including the delivery of the merchandise prior to a specified cancellation date and compliance with product specifications, quality standards and other requirements. In the event of the vendor's failure to meet the agreed upon terms and conditions, we may cancel the order.

Off-Balance Sheet Arrangements

Other than the non-cancelable operating leases, other contractual obligations and letters of credit discussed above, we do not have any off-balance sheet arrangements that are material to our financial position or results of operations.

Inflation

We believe the impact of inflation on the results of operations during the periods presented has been minimal. However, there can be no assurance that our business will not be affected by inflation in the future.

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Critical Accounting Policies and 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 our current business model. However, because 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 accounting policies to be appropriate and our estimates and assumptions reasonable. Our critical accounting policies, which are those most significant to the presentation of our financial position and results of operations and those that require significant judgment or complex estimates by management, are discussed below.

Revenue Recognition—Clothing product 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 tuxedo rental, alteration and other services are recognized upon completion of the services.

We present all non-income government-assessed taxes (sales, use and value added taxes) collected from our customers and remitted to governmental agencies on a net basis (excluded from net sales) in our consolidated financial statements. The government-assessed taxes are recorded in accrued expenses and other current liabilities until they are remitted to the government agency.

Inventories—Our inventory is carried at the lower of cost or market. Cost is determined based on the average cost method. Our inventory cost also includes estimated buying and distribution costs (warehousing, freight, hangers and merchandising costs) associated with the inventory, with the balance of such costs included in cost of sales. Buying and distribution costs are allocated to inventory based on the ratio of annual product purchases to inventory cost. If this ratio were to change significantly, it could materially affect the amount of buying and distribution 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 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.

Impairment of Long-Lived Assets—Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows, which is generally at a store level. Assets are reviewed using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to the assets, compared to the carrying value of the assets. If the sum of the undiscounted future cash flows of the assets does not exceed the carrying value of the assets, full or partial impairment may exist. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined using an income approach, which requires discounting the estimated future cash flows associated with the asset. Estimating future cash flows requires management to make assumptions and to apply judgment, including forecasting future sales, costs and useful lives of assets. Significant judgment is also involved in selecting the appropriate discount rate to be applied in determining the estimated fair value of an asset. Changes to our key assumptions related to future

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performance, market conditions and other economic factors can significantly affect our impairment evaluation. For example, unanticipated long-term adverse market conditions can cause individual stores to become unprofitable and can result in an impairment charge for the property and equipment assets in those stores.

Pre-tax non-cash asset impairment charges, which were all related to the retail segment, totaled $2.2 million, $0.5 million and $2.0 million in fiscal 2013, 2012 and 2011, respectively. Of the $2.2 million recorded in fiscal 2013, $1.8 million was related to an impaired tradename. All other asset impairment charges were related to store assets.

Changes to our key assumptions related to future performance, market conditions and other economic factors could result in future impairment charges for stores or other long-lived assets where the carrying amount of the assets may not be recoverable.

Goodwill and Other Intangible Assets—Goodwill and other intangible assets are initially recorded at their fair values. Trademarks, tradenames, customer relationships and other identifiable intangible assets with finite useful lives are amortized to expense over their estimated useful lives of five to 20 years using the straight-line method and are periodically evaluated for impairment. Identifiable intangible assets with an indefinite useful life, including goodwill, are not amortized but are evaluated annually as of our fiscal year end for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment, decisions to significantly modify or dispose of operations and a significant sustained decline in the market price of our stock.

Goodwill, which totaled $126.0 million at February 1, 2014, represents the excess cost of businesses acquired over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in prior business combinations. For purposes of our goodwill impairment evaluation, the reporting units are our operating brands identified in Note 15 of Notes to Consolidated Financial Statements. Goodwill has been assigned to the reporting units based on prior business combinations related to the brands. The goodwill impairment evaluation is performed in two steps. The first step is intended to determine if potential impairment exists and is performed by comparing each reporting unit's fair value to its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its estimated fair value, goodwill is considered potentially impaired, and we must complete the second step of the testing to determine the amount of any impairment. The second step requires an allocation of the reporting unit's first step estimated fair value to the individual assets and liabilities of the reporting unit in the same manner as if the reporting unit was being acquired in a business combination. Any excess of the estimated fair value over the amounts allocated to the individual assets and liabilities represents the implied fair value of goodwill for the reporting unit. If the implied fair value of goodwill is less than the recorded goodwill, we would recognize an impairment charge for the difference.

In our step one process, we estimate the fair value of our reporting units using a combined income and market comparable approach. Our income approach uses projected future cash flows that are discounted using a weighted-average cost of capital analysis that reflects current market conditions. The market comparable approach primarily considers market price multiples of comparable companies and applies those price multiples to certain key drivers of the reporting unit. We engage an independent valuation firm to assist us in estimating the fair value of our reporting units.

Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions. Critical assumptions that are used as part of these evaluations include:

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As discussed above, the fair values of reporting units in 2013 were determined using a combined income and market comparable approach. We believe these two approaches are appropriate valuation techniques and we generally weight the two values equally as an estimate of reporting unit fair value for the purposes of our impairment testing. However, we may weigh one value more heavily than the other when conditions merit doing so. The fair value derived from the weighting of these two methods provided appropriate valuations that, in aggregate, reasonably reconciled to our market capitalization, taking into account observable control premiums. Therefore, we used the valuations in evaluating goodwill for possible impairment and determined that, as of February 1, 2014, none of our goodwill was impaired.

The goodwill impairment evaluation process requires management to make estimates and assumptions with regard to the fair value of the reporting units. Actual values may differ significantly from these judgments, particularly if there are significant adverse changes in the operating environment for our reporting units. Sustained declines in our market capitalization could also increase the risk of goodwill impairment. Such occurrences could result in future goodwill impairment charges that would, in turn, negatively impact our results of operations; however, any such goodwill impairments would be non-cash charges that would not affect our cash flows or compliance with our current debt covenants.

During fiscal 2013, based on estimates provided to us by market participants during our review of strategic alternatives for the K&G brand, we concluded that the carrying value of the K&G brand exceeded its fair value. Based on further analysis, it was determined that the entire carrying value of K&G's goodwill was impaired, resulting in a non-cash pre-tax goodwill impairment charge of $9.5 million. No goodwill impairment was identified in fiscal 2012 or 2011.

Tuxedo Rental Product—The cost of our tuxedo rental product is amortized to cost of sales based on the cost of each unit rented, which is estimated based on the number of times the unit is expected to be rented and the average cost of the rental product. Lost, damaged and retired rental product is also charged to cost of sales. Tuxedo rental product is amortized to expense generally over a two to three year period. We make assumptions, based primarily on historical experience and information obtained from tuxedo rental industry sources, as to the number of times each unit can be rented. If the actual number of times a unit can be rented were to vary significantly from our estimates, it could materially affect the amount of tuxedo rental product amortization included in cost of sales.

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Self-Insurance—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. 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.

Income Taxes—Income taxes are accounted for using the asset and liability method. Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in enacted tax rates expected to be in effect when the temporary differences reverse. The deferred tax assets are reduced, if necessary, by a valuation allowance to the extent future realization of those tax benefits is uncertain.

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 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.

The tax benefit from an uncertain tax position is recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and/or penalties related to uncertain tax positions are recognized in income tax expense. Significant judgment is required in determining our uncertain tax positions. We have established accruals for uncertain tax positions using our best judgment and adjust these accruals, as warranted, due to changing facts and circumstances. A change in our uncertain tax positions, in any given period, could have a significant impact on our financial position, results of operations and cash flows for that period.

Operating Leases—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. 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. Rental costs associated with ground or building operating leases that are incurred during a construction period are recognized as rental expense. 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. Contingent rentals are generally based on percentages of sales and are recognized as store rent expense as they accrue.

Recent Accounting Pronouncements

We have considered all new accounting pronouncements and have concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition, or cash flows, based on current information.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We are subject to exposure from fluctuations in U.S. dollar/Euro exchange rates, U.S. dollar/pound Sterling ("GBP") exchange rates and U.S. dollar/Canadian dollar ("CAD") exchange rates as a result of our direct sourcing programs and our operations in foreign countries. Our UK-based operations in particular are subject to exposure from fluctuations in U.S. dollar/GBP exchange rates as Dimensions and Alexandra sell their products and conduct their business primarily in GBP but purchase most of their merchandise in transactions paid in U.S. dollars.

As further described in Note 14 of Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Information and Results of Operations—Liquidity and Capital Resources", our risk management policy is to hedge a significant portion of forecasted merchandise purchases for our direct sourcing programs that bear foreign exchange risk using foreign exchange forward contracts. We have not elected to apply hedge accounting to these transactions denominated in a foreign currency. At February 1, 2014, we had 28 contracts maturing in varying increments to purchase U.S. dollars ("USD") for an aggregate notional amount of GBP £17.5 million maturing at various dates through June 2014. For the fiscal year ended February 1, 2014, we recognized a net pre-tax loss of $0.3 million in cost of sales in the consolidated statement of earnings for our derivative financial instruments not designated as hedging instruments.

A hypothetical 10% increase or decrease in applicable February 1, 2014 forward rates could impact the fair value of the derivative financial instruments by $2.9 million. 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.

Dimensions and Alexandra, our UK-based operations, sell their products and conduct their business primarily in GBP but purchase most of their merchandise in transactions paid in USD. The exchange rate between the GBP and USD has fluctuated over the last ten years. A decline in the value of the GBP as compared to the USD will adversely impact our UK operating results as the cost of merchandise purchases will increase and the revenues and earnings of our UK operations will be reduced when they are translated to USD. Also, the value of our UK net assets in USD may decline. Dimensions and Alexandra utilize foreign currency hedging contracts as discussed above to limit exposure to changes in USD/GBP exchange rates.

Moores conducts its business in CAD. The exchange rate between CAD and USD has fluctuated over the last ten years. If the value of the CAD against the USD weakens, then the revenues and earnings of our Canadian operations will be reduced when they are translated to USD. Also, the value of our Canadian net assets in USD may decline. Moores utilizes foreign currency hedging contracts, from time to time, to limit exposure to changes in USD/CAD exchange rates.

Interest Rate Risk

We are also exposed to risk under our Credit Agreement. Interest rates under our Credit Agreement vary with the (i) adjusted LIBO rate, (ii) adjusted EURIBO rate, (iii) CDO rate, (iv) Canadian prime rate or (v) an alternate base rate (equal to the greater of the prime rate, the federal funds rate plus 0.5% or the adjusted LIBO rate for a one month period plus 1.0%). Advances under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin up to 2.75%. See Note 4 of Notes to Consolidated Financial Statements. At February 1, 2014, there were no borrowings outstanding under the Credit Agreement.

In August 2013, we entered into a Term Loan due April 2018 with variable-rate interest payments (see Note 4). To minimize the impact of changes in interest rates on our interest payments, in August 2013, we entered into an interest rate swap agreement with a financial institution to swap variable-rate interest

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payments for fixed-rate interest payments. The interest rate swap agreement matures in April 2018 and has periodic interest settlements, both consistent with the terms of our Term Loan. We have designated the interest rate swap as a cash flow hedge of the variability of interest payments under the Term Loan due to changes in the LIBOR benchmark interest rate. Under this agreement, we receive a floating rate based on the 1-month LIBOR rate and pay a fixed rate of 3.02% (including the applicable margin of 1.75%) on the outstanding notional amount. The swap fixed rate was structured to mirror the payment terms of the Term Loan.

Our risk management policy is to hedge our exposure to fluctuations in interest rates using this swap agreement. The interest rate swap derivative financial instrument is recorded in the consolidated balance sheet at fair value which approximates the amount at which the swap could be settled using projected future interest rates as provided by counterparties. If, at any time, the swap is determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlying debt agreements, the fair value of the portion of the swap determined to be ineffective will be recognized as a gain or loss in the statement of earnings for the applicable period.

At February 1, 2014, the fair value of the interest rate swap was a liability of $0.7 million and was recorded in our consolidated balance sheet within other noncurrent liabilities with the effective portion of the loss reported as a component of accumulated other comprehensive income. There was no hedge ineffectiveness during as of February 1, 2014. Changes in fair value are reclassified from accumulated other comprehensive income into earnings in the same period that the hedged item affects earnings. Over the next 12 months, approximately $1.0 million of the effective portion of the loss is expected to be reclassified from accumulated other comprehensive income into earnings.

We also have exposure to market rate risk for changes in interest rates as those rates relate to our investment portfolio. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. As of February 1, 2014, we have highly liquid investments classified as cash equivalents in our consolidated balance sheet. Future investment income earned on our cash equivalents will fluctuate in line with short-term interest rates.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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 February 1, 2014 and February 2, 2013, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended February 1, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements 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 February 1, 2014 and February 2, 2013, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 2014, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of February 1, 2014, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2014 expressed an unqualified opinion on the Company's internal control over financial reporting.

Houston, Texas
April 1, 2014

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

 
  February 1,
2014
  February 2,
2013
 

ASSETS

             

CURRENT ASSETS:

             

Cash and cash equivalents

  $ 59,252   $ 156,063  

Accounts receivable, net

    63,153     63,010  

Inventories

    599,486     556,531  

Other current assets

    93,206     79,549  
           

Total current assets

    815,097     855,153  
           

PROPERTY AND EQUIPMENT, AT COST:

             

Land

    19,229     18,524  

Buildings

    112,837     107,073  

Leasehold improvements

    467,307     439,079  

Furniture, fixtures and equipment

    491,948     473,450  
           

    1,091,321     1,038,126  

Less accumulated depreciation and amortization

    (683,159 )   (649,008 )
           

Net property and equipment

    408,162     389,118  
           

TUXEDO RENTAL PRODUCT, net

    142,816     126,825  

GOODWILL

    126,003     87,835  

INTANGIBLE ASSETS, net

    58,027     32,442  

OTHER ASSETS

    5,125     4,974  
           

TOTAL ASSETS

  $ 1,555,230   $ 1,496,347  
           
           

LIABILITIES AND EQUITY

             

CURRENT LIABILITIES:

             

Accounts payable

  $ 148,762   $ 123,983  

Accrued expenses and other current liabilities

    175,797     164,344  

Income taxes payable

    730     5,856  

Current maturities of long-term debt

    10,000      
           

Total current liabilities

    335,289     294,183  

LONG-TERM DEBT

   
87,500
   
 

DEFERRED TAXES AND OTHER LIABILITIES

    109,292     92,929  
           

Total liabilities

    532,081     387,112  
           

COMMITMENTS AND CONTINGENCIES

             

EQUITY:

   
 
   
 
 

Preferred stock, $.01 par value, 2,000,000 shares authorized, no shares issued

         

Common stock, $.01 par value, 100,000,000 shares authorized, 47,701,829 and 72,550,652 shares issued

    476     725  

Capital in excess of par

    412,043     386,254  

Retained earnings

    572,712     1,190,246  

Accumulated other comprehensive income

    27,311     36,924  

Treasury stock, 137,900 and 21,570,052 shares at cost

    (3,407 )   (517,894 )
           

Total equity attributable to common shareholders

    1,009,135     1,096,255  

Non-controlling interest

    14,014     12,980  
           

Total equity

    1,023,149     1,109,235  
           

TOTAL LIABILITIES AND EQUITY

  $ 1,555,230   $ 1,496,347  
           
           

   

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

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Years Ended
February 1, 2014, February 2, 2013 and January 28, 2012

(In thousands, except per share amounts)

 
  Fiscal Year  
 
  2013   2012   2011  

Net sales:

                   

Retail clothing product

  $ 1,667,535   $ 1,691,248   $ 1,619,671  

Tuxedo rental services

    411,864     406,454     376,857  

Alteration and other services

    147,023     151,147     142,665  
               

Total retail sales

    2,226,422     2,248,849     2,139,193  

Corporate apparel clothing product sales

    246,811     239,429     243,491  
               

Total net sales

    2,473,233     2,488,278     2,382,684  

Cost of sales:

   
 
   
 
   
 
 

Retail clothing product

    741,957     756,048     723,658  

Tuxedo rental services

    64,308     56,567     52,621  

Alteration and other services

    113,729     113,846     107,836  

Occupancy costs

    290,896     283,382     273,300  
               

Total retail cost of sales

    1,210,890     1,209,843     1,157,415  

Corporate apparel clothing product cost of sales

    173,333     170,287     176,342  
               

Total cost of sales

    1,384,223     1,380,130     1,333,757  

Gross margin:

   
 
   
 
   
 
 

Retail clothing product

    925,578     935,200     896,013  

Tuxedo rental services

    347,556     349,887     324,236  

Alteration and other services

    33,294     37,301     34,829  

Occupancy costs

    (290,896 )   (283,382 )   (273,300 )
               

Total retail gross margin

    1,015,532     1,039,006     981,778  

Corporate apparel clothing product gross margin

    73,478     69,142     67,149  
               

Total gross margin

    1,089,010     1,108,148     1,048,927  

Goodwill impairment charge

   
9,501
   
   
 

Asset impairment charges

    2,216     482     2,042  

Selling, general and administrative expenses

    947,665     909,098     861,453  
               

Operating income

    129,628     198,568     185,432  

Interest income

   
385
   
648
   
424
 

Interest expense

    (3,205 )   (1,544 )   (1,446 )
               

Earnings before income taxes

    126,808     197,672     184,410  

Provision for income taxes

    42,591     65,609     63,944  
               

Net earnings including non-controlling interest

    84,217     132,063     120,466  

Net (earnings) loss attributable to non-controlling interest

    (426 )   (347 )   135  
               

Net earnings attributable to common shareholders

  $ 83,791   $ 131,716   $ 120,601  
               
               

Net earnings per common share attributable to common shareholders:

                   

Basic

  $ 1.71   $ 2.56   $ 2.32  
               
               

Diluted

  $ 1.70   $ 2.55   $ 2.30  
               
               

Weighted-average common shares outstanding:

                   

Basic

    48,849     50,793     51,423  
               
               

Diluted

    49,162     51,026     51,692  
               
               

   

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

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended
February 1, 2014, February 2, 2013 and January 28, 2012

(In thousands)

 
  For the Fiscal Year Ended  
 
  2013   2012   2011  

Net earnings including non-controlling interest

  $ 84,217   $ 132,063   $ 120,466  

Currency translation adjustments

    (8,606 )   (23 )   (1,551 )

Unrealized loss on cash flow hedge, net of tax

    (399 )        
               

Other comprehensive loss, net of tax

    (9,005 )   (23 )   (1,551 )
               

Comprehensive income including non-controlling interest

    75,212     132,040     118,915  
               

Comprehensive (income) loss attributable to non-controlling interest:

                   

Net (earnings) loss

    (426 )   (347 )   135  

Currency translation adjustments

    (608 )   26     106  
               

Amounts attributable to non-controlling interest

    (1,034 )   (321 )   241  
               

Comprehensive income attributable to common shareholders

  $ 74,178   $ 131,719   $ 119,156  
               
               

   

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

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except shares)

 
  Common
Stock
  Capital
in Excess
of Par
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income
  Treasury
Stock, at
Cost
  Total Equity
Attributable to
Common
Shareholders
  Non-
controlling
Interest
  Total Equity  

BALANCES—January 29, 2011

    710     341,663     1,002,975     38,366     (412,761 )   970,953     12,900     983,853  

Net earnings (loss)

            120,601             120,601     (135 )   120,466  

Other comprehensive loss

                (1,445 )       (1,445 )   (106 )   (1,551 )

Cash dividends—$0.54 per share

            (28,041 )           (28,041 )       (28,041 )

Share-based compensation

        13,798                 13,798         13,798  

Common stock issued under share-based award plans and to stock discount plan—841,543 shares

    8     8,346                 8,354         8,354  

Tax payments related to vested deferred stock units

        (2,955 )               (2,955 )       (2,955 )

Tax benefit related to share-based plans

        1,883                 1,883         1,883  

Repurchases of common stock—2,329,472 shares

                    (63,988 )   (63,988 )       (63,988 )
                                   

BALANCES—January 28, 2012

    718     362,735     1,095,535     36,921     (476,749 )   1,019,160     12,659     1,031,819  

Net earnings

            131,716             131,716     347     132,063  

Other comprehensive income (loss)

                3         3     (26 )   (23 )

Cash dividends—$0.72 per share

            (37,005 )           (37,005 )       (37,005 )

Share-based compensation

        16,515                 16,515         16,515  

Common stock issued under share-based award plans and to stock discount plan—722,659 shares

    7     8,450                 8,457         8,457  

Tax payments related to vested deferred stock units

        (4,421 )               (4,421 )       (4,421 )

Tax benefit related to share-based plans

        2,949                 2,949         2,949  

Treasury stock reissued—6,295 shares

        26             151     177         177  

Repurchases of common stock—1,128,525 shares

                    (41,296 )   (41,296 )       (41,296 )
                                   

BALANCES—February 2, 2013

    725     386,254     1,190,246     36,924     (517,894 )   1,096,255     12,980     1,109,235  

Net earnings

            83,791             83,791     426     84,217  

Other comprehensive (loss) income

                (9,613 )       (9,613 )   608     (9,005 )

Cash dividends—$0.72 per share

            (35,252 )           (35,252 )       (35,252 )

Share-based compensation

        17,120                 17,120         17,120  

Common stock issued under share-based award plans and to stock discount plan—719,551 shares

    7     10,732                 10,739         10,739  

Tax payments related to vested deferred stock units

        (3,865 )               (3,865 )       (3,865 )

Tax benefit related to share-based plans

        1,664                 1,664         1,664  

Treasury stock reissued—11,761 shares

        138             287     425         425  

Repurchases of common stock—4,147,983 shares

    (27 )       (99,973 )       (52,129 )   (152,129 )       (152,129 )

Retirement of treasury stock—22,915,087 shares

    (229 )       (566,100 )       566,329              
                                   

BALANCES—February 1, 2014

  $ 476   $ 412,043   $ 572,712   $ 27,311   $ (3,407 ) $ 1,009,135   $ 14,014   $ 1,023,149  
                                   
                                   

   

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

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended
February 1, 2014, February 2, 2013 and January 28, 2012

(In thousands)

 
  Fiscal Year  
 
  2013   2012   2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

                   

Net earnings including non-controlling interest

  $ 84,217   $ 132,063   $ 120,466  

Adjustments to reconcile net earnings to net cash provided by operating activities:

                   

Depreciation and amortization

    88,749     84,979     75,968  

Tuxedo rental product amortization

    32,266     28,315     28,858  

Loss on disposition of assets

    158     1,958     2,778  

Goodwill impairment charge

    9,501          

Asset impairment charges

    2,216     482     2,042  

Share-based compensation

    17,120     16,515     13,798  

Excess tax benefits from share-based plans

    (2,145 )   (2,997 )   (1,903 )

Deferred tax provision

    2,272     5,180     29,428  

Deferred rent expense and other

    2,884     1,030     1,084  

Changes in operating assets and liabilities:

                   

Accounts receivable

    14,517     (6,447 )   3,615  

Inventories

    (39,342 )   16,026     (86,726 )

Tuxedo rental product

    (50,577 )   (55,281 )   (39,194 )

Other assets

    (5,816 )   (11,089 )   7,088  

Accounts payable, accrued expenses and other current liabilities

    34,514     9,103     5,351  

Income taxes payable

    (2,713 )   5,172     683  

Other liabilities

    1,109     721     (539 )
               

Net cash provided by operating activities

    188,930     225,730     162,797  
               

CASH FLOWS FROM INVESTING ACTIVITIES:

                   

Capital expenditures

    (108,200 )   (121,433 )   (91,820 )

Acquisition of business, net of cash

    (94,906 )        

Proceeds from sales of property and equipment

    4,127     33     59  

Investment in trademarks, tradenames and other assets

        (2,075 )    
               

Net cash used in investing activities

    (198,979 )   (123,475 )   (91,761 )
               

CASH FLOWS FROM FINANCING ACTIVITIES:

                   

Proceeds from issuance of common stock

    10,739     8,457     8,354  

Proceeds from term loan

    100,000          

Payments on term loan

    (2,500 )        

Deferred financing costs

    (1,776 )        

Cash dividends paid

    (35,549 )   (37,084 )   (25,098 )

Tax payments related to vested deferred stock units

    (3,865 )   (4,421 )   (2,955 )

Excess tax benefits from share-based plans

    2,145     2,997     1,903  

Repurchases of common stock

    (152,129 )   (41,296 )   (63,988 )
               

Net cash used in financing activities

    (82,935 )   (71,347 )   (81,784 )
               

Effect of exchange rate changes

    (3,827 )   (151 )   (317 )
               

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

    (96,811 )   30,757     (11,065 )

Balance at beginning of period

    156,063     125,306     136,371  
               

Balance at end of period

  $ 59,252   $ 156,063   $ 125,306  
               
               

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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Years Ended
February 1, 2014, February 2, 2013 and January 28, 2012

(In thousands)

 
  Fiscal Year  
 
  2013   2012   2011  

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                   

Cash paid for:

                   

Interest

  $ 2,338   $ 1,154   $ 1,047  
               
               

Income taxes, net

  $ 52,591   $ 60,437   $ 23,127  
               
               

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

                   

Additional capital in excess of par resulting from tax benefit related to share-based plans

  $ 1,664   $ 2,949   $ 1,883  
               
               

Cash dividends declared

  $