aug10q.htm

Note 7 – Acquisitions

On August 14, 2007, the Company acquired certain assets and operations of Monarchy, LLC, a designer and marketer of premium casual sportswear to leading specialty stores nationwide under the Monarchy, Manchester Escapes and Garden of Earthly Delights brands. The purchase price for Monarchy as of the acquisition date was $12 million plus assumption of certain liabilities. Additional cash purchase consideration is due if Monarchy achieves certain specified financial performance targets over a seven-year period commencing December 1, 2007. This additional contingent cash purchase consideration is calculated based on a formula applied to operating results. A minimum level of performance, as defined in the purchase agreement, must be achieved during any of the annual periods in order for the additional cash consideration to be paid. At the minimum level of performance (annualized operating earnings, as defined in the purchase agreement, of at least $3.0 million), additional annual consideration of $.75 million would be paid over the seven-year period commencing December 1, 2007. The amount of consideration increases with increased level of earnings and there is no maximum amount of incremental purchase price.

Effective December 11, 2006, the Company acquired certain assets and operations related to the Zooey brand, marketed principally to upscale women’s specialty stores. The purchase price for Zooey as of the acquisition date was $3.0 million. Additional cash purchase consideration is due if Zooey achieves certain specified financial performance targets over a five-year period commencing December 1, 2006. This additional contingent cash purchase consideration is calculated based on a formula applied to operating results. A minimum level of performance, as defined in the purchase agreement, must be achieved during any of the annual periods in order for the additional consideration to be paid. At the minimum level of performance (annualized operating earnings, as defined in the purchase agreement, of at least $1.0 million), additional annual consideration of $.15 million would be paid over the five-year period commencing December 1, 2006. The amount of consideration increases with increased levels of earnings and there is no maximum amount of incremental purchase price. No additional consideration was recorded for the nine months ended August 31, 2007.

On August 29, 2006, the Company acquired certain assets and operations of Sweater.com, a designer and marketer of high quality women’s knitwear, tops and related products sold to leading specialty stores under its One Girl Who ... brand and directly through its Sweater.com website. The purchase price for Sweater.com as of the acquisition date was $12.4 million. Additional cash purchase consideration is due if Sweater.com achieves certain specified financial performance targets over a five-year period commencing December 1, 2006. This additional contingent cash purchase consideration is calculated based on a formula applied to operating results. A minimum level of performance, as defined in the purchase agreement, must be achieved during any of the annual periods in order for the additional cash consideration to be paid. At the minimum level of performance (annualized operating earnings, as defined in the purchase agreement, of at least $2.0 million), additional annual consideration of $.5 million would be paid over the five-year period commencing December 1, 2006. The amount of consideration increases with increased level of earnings and there is no maximum amount of incremental purchase price. No additional consideration was recorded for the nine months ended August 31, 2007.

The acquisitions of Monarchy, Sweater.com and Zooey are expected to provide for strategic growth opportunities in premium casual sportswear and womenswear and further diversification of product categories.

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These acquisitions are being accounted for under the purchase method of accounting. Accordingly, the results of Monarchy, Sweater.com and Zooey are included in the consolidated financial statements from the respective acquisition dates. Monarchy results of operations and assets are included in the Men’s Apparel Group segment, while Sweater.com and Zooey results of operations and assets are included in the Women’s Apparel Group segment.

The Company has allocated the purchase price to the Monarchy, Sweater.com and Zooey assets acquired and liabilities assumed at estimated fair values, considering a number of factors, including the assistance of an independent third party appraisal for Monarchy and Sweater.com. For Sweater.com, the excess of fair value of the net assets acquired compared to the amount paid as of the acquisition date has been reflected as “estimated amount due seller”, in accordance with SFAS No. 141 (“Business Combinations”). Any contingent consideration payable subsequent to the acquisition date is first applied to reduce the amount recorded as “estimated amount due seller”, and thereafter to goodwill. For Monarchy and Zooey, any contingent consideration payable subsequent to acquisition will increase goodwill. The allocation for Monarchy is subject to revision; subsequent revisions, if any, are not expected to be material. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (000's omitted):

	Monarchy			Sweater.com			Zooey
Cash consideration	$	12,000		$	12,354		$	3,000
Direct acquisition costs		125			135			75
Total purchase price	$	12,125		$	12,489		$	3,075
Allocation of purchase price:
Cash	$	-		$	6		$	-
Accounts receivable		2,371			1,315			18
Inventories		2,749			2,620			604
Other current assets		456			312			58
Intangible assets		9,460			8,765			1,255
Goodwill		1,920			-			1,414
Property, plant and equipment		202			228			24
Other assets		-			52			-
Current liabilities		(5,033	)		(475	)		(298	)
Estimated amount due seller		-			(334	)		-
Total purchase price	$	12,125		$	12,489		$	3,075

The components of the Intangible Assets listed in the above table as of the acquisition date for Monarchy and Sweater.com were determined by the Company with the assistance of an independent third party appraisal. Intangible assets for Monarchy, Sweater.com and Zooey included the following (000's omitted):

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	Monarchy			Sweater.com			Zooey
	Amount		Life	Amount		Life	Amount		Life
Tradename	$	8,130	Indefinite	$	6,540	Indefinite	$	625	Indefinite
Customer relationships		1,080	10 years		2,050	10 years		600	10 years
License agreement		-			75	5 years		-
Covenant not to compete		250	5 years		100	10 years		30	10 years
	$	9,460		$	8,765		$	1,255

The tradenames were deemed to have an indefinite life and, accordingly, are not being amortized, but will be subject to periodic impairment testing at future periods in accordance with SFAS No. 142 (“Goodwill and Other Intangible Assets”). The customer relationships, license agreement and covenant not to compete are being amortized based on estimated weighted cash flows over their life. Pro forma financial information is not included as the amounts would not be significant.

These acquisitions were financed utilizing borrowing availability under the Company’s Credit Facility.

In July 2004 and October 2005, the Company acquired certain assets and operations of Misook and Simply Blue, respectively. Additional cash purchase consideration is due to the extent that Misook achieves specified performance targets over a five-year period commencing August 1, 2004 and Simply Blue achieves specified performance targets over a five-year period commencing December 1, 2005. The amount of contingent consideration related to fiscal 2006 accrued as of November 30, 2006 for Misook of approximately $4.7 million was paid in the first quarter of fiscal 2007 and for Simply Blue of approximately $1.7 million was paid in the second quarter of fiscal 2007.

Note 8 – Shipping and Handling

Amounts billed to customers for shipping and handling are included in sales. The cost of goods sold caption includes the following components: product cost, including inbound freight, duties, internal inspection costs, internal transfer costs, production labor and other manufacturing overhead costs. The cost of warehousing, picking and packing of finished products totaled $5.2 million in the third quarter of 2007 and $5.6 million for the third quarter of 2006; for the nine months, the total was $16.6 million in 2007 and $16.7 million in 2006. Such amounts are included as a component of Selling, General and Administrative Expenses.

Note 9 – Operating Segments

The Company is engaged in the manufacturing and marketing of apparel and has two operating segments for purposes of allocating resources and assessing performance, which are based on products distributed. The Company's customers comprise major department and specialty stores, value oriented retailers and direct mail companies. Products are sold over a wide range of price points under a broad variety of apparel brands, both owned

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and under license, to an extensive range of retail channels. The Company’s operations are comprised of the Men’s Apparel Group and Women’s Apparel Group. The Men's Apparel Group designs, manufactures and markets tailored clothing, slacks, sportswear, including denim products and golfwear, and dress furnishings (shirts and ties). The Women's Apparel Group designs and markets women's career apparel, designer knitwear, sportswear, including denim products, and accessories to both retailers and to individuals who purchase women's apparel through its catalogs and e-commerce websites.

Information on the Company's operations and total assets for the three months and nine months ended and as of August 31, 2007 and August 31, 2006 is summarized as follows (in millions):

	Men's Apparel Group		Women's Apparel Group		Adj.			Consol.
Three Months Ended August 31,
2007
Sales	$	100.0	$	35.2	$	-		$	135.2
Earnings (loss) before taxes		1.9		4.2		(5.2	)		0.9

2006
Sales	$	106.9	$	30.8	$	-		$	137.7
Earnings (loss) before taxes		3.5		4.2		(6.8	)		0.9

Nine Months Ended August 31,
2007
Sales	$	312.8	$	98.4	$	-		$	411.2
Earnings (loss) before taxes		10.2		12.2		(18.3	)		4.1
Total assets		299.0		111.9		90.1			501.0
2006
Sales	$	350.5	$	84.0	$	-		$	434.5
Earnings (loss) before taxes		21.0		9.6		(19.4	)		11.2
Total assets		307.2		104.8		93.0			505.0

During the three months and nine months ended August 31, 2007, there was $.2 million of sales from the Men’s Apparel Group to the Women’s Apparel Group (none in 2006). These sales have been eliminated from Men’s Apparel Group sales. During each period, there was no change in the basis of measurement of group earnings or loss.

Operating expenses incurred by the Company in generating sales are charged against the respective group; indirect operating expenses are allocated to the groups benefitted. Group results exclude any allocation of general corporate expense, interest expense or income taxes.

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Amounts included in the "adjustment" column for earnings (loss) before taxes consist principally of interest expense and general corporate expenses. Adjustments of total assets are for cash, deferred income taxes, investments, other assets, corporate properties and the prepaid/intangible pension asset.

Goodwill and intangible assets related to acquisitions were as follows (in millions):

	Aug. 31, 2007		Nov. 30, 2006		Aug. 31, 2006
Men’s Apparel Group:
Intangible assets	$	9.4	$	-	$	-
Goodwill	$	26.2	$	24.2	$	24.2
Women’s Apparel Group:
Intangible assets	$	54.6	$	55.5	$	56.3
Goodwill	$	9.5	$	3.8	$	2.9

Sales and long-lived assets by geographic region are as follows (in millions):

	Sales								Long-Lived Assets
	Three Months Ended August 31,				Nine Months Ended August 31,				Aug. 31,		Nov. 30,		Aug. 31,
	2007		2006		2007		2006		2007		2006		2006
USA	$	129.9	$	134.3	$	394.0	$	418.9	$	181.5	$	159.4	$	158.4
Canada		5.1		3.2		16.1		14.8		3.7		3.2		3.3
All Other		.2		.2		1.1		.8		-		-		.1
	$	135.2	$	137.7	$	411.2	$	434.5	$	185.2	$	162.6	$	161.8

Sales by Canadian subsidiaries to customers in the United States are included in USA sales. Sales to customers in countries other than the USA or Canada are included in All Other.

Long-lived assets includes the prepaid/intangible pension asset, net properties, goodwill, intangible assets and other assets.

Note 10 – Other Comprehensive Income

Comprehensive income, which includes all changes in the Company’s equity during the period, except transactions with stockholders, was as follows (000's omitted):

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	Nine Months Ended August 31,
	2007		2006
Net earnings	$	2,509	$	6,955
Other comprehensive income:
Change in fair value of foreign exchange contracts		4		15
Currency translation adjustment		1,257		719
Comprehensive earnings	$	3,770	$	7,689

The pre-tax amounts, the related income tax provision and after-tax amounts allocated to each component of the change in other comprehensive income was as follows (000's omitted):

	Pre-tax			Tax				After-Tax
Nine months ended August 31, 2007
Fair value of foreign exchange contracts		$	7		$	(3	)		$	4
Foreign currency translation adjustment			1,257			-				1,257
		$	1,264		$	(3	)		$	1,261
Nine months ended August 31, 2006
Fair value of foreign exchange contracts		$	25		$	(10	)		$	15
Foreign currency translation adjustment			719			-				719
		$	744		$	(10	)		$	734

The change in Accumulated Other Comprehensive Income (Loss) was as follows (000's omitted):

	Minimum Pension Liability				Fair Value of Foreign Exchange Contracts			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Fiscal 2007
Balance November 30, 2006		$	-			$	-		$	2,423		$	2,423
Change in fiscal 2007			-				4			1,257			1,261
Balance August 31, 2007		$	-			$	4		$	3,680		$	3,684
Fiscal 2006
Balance November 30, 2005		$	(9,895	)		$	1		$	2,166		$	(7,728	)
Change in fiscal 2006			-				15			719			734
Balance August 31, 2006		$	(9,895	)		$	16		$	2,885		$	(6,994	)

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Note 11 – Recent Accounting Pronouncements

The Company adopted SFAS 154, “Accounting for Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3” as of December 1, 2006. SFAS 154 changes the requirements with regard to the accounting for and reporting a change in an accounting principle. The provisions of SFAS 154 require, unless impracticable, retrospective application to prior periods presented in financial statements for all voluntary changes in an accounting principle and changes required by the adoption of a new accounting pronouncement in the unusual instance that the new pronouncement does not indicate a specific transition method. SFAS 154 also requires that a change in depreciation, amortization or depletion method for long-lived, non-financial assets be accounted for as a change in an accounting estimate, which requires prospective application of the new method. Adoption of SFAS 154 had no effect on the Company’s financial condition, results of operations or cash flows.

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of SFAS No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. FIN 48 is effective for the Company’s 2008 fiscal year beginning December 1, 2007. The Company has not yet determined the impact, if any, of adopting FIN 48 on its financial statements. However, the Company believes that adoption of FIN 48 will not have a material effect on its financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. SFAS 157 is effective for the Company’s 2008 fiscal year beginning December 1, 2007. The Company has not yet determined the impact, if any, of adopting SFAS 157 on its financial statements.

In September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R”. SFAS 158 requires employers to recognize, on a prospective basis, the funded status of their defined benefit pension and other postretirement plans on their consolidated balance sheet and recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit costs. SFAS 158 also requires additional disclosures in the notes to financial statements. SFAS 158 is effective no later than the end of the Company’s fiscal year ending November 30, 2007. The Company is currently assessing the impact of adopting SFAS 158 on its consolidated financial statements. Based on the unfunded obligation as of November 30, 2006, the adoption of SFAS 158 would have decreased total assets by approximately $18 million, increased total liabilities by approximately $12 million and reduced total shareholders’ equity by approximately $30 million. The adoption of SFAS 158 will not affect the Company’s results of operations. The ultimate amounts recorded are dependent on a number of factors, including the discount rate utilized at November 30, 2007, the actual rate of return on pension assets for 2007 and the effective tax rate of the adjustment upon adoption. Changes in those assumptions since the last measurement date could increase or decrease the expected impact of implementing SFAS 158 on the Company’s consolidated financial statements at November 30, 2007. Adoption of SFAS 158 will not have any effect on the Company’s compliance with its debt covenants.

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In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities; Including an Amendment of FASB Statement No. 115". SFAS 159 gives entities the option to measure eligible items at fair value at specified dates. Unrealized gains and losses on the eligible items for which the fair value option has been elected should be reported in earnings. SFAS 159 is effective for the Company’s 2008 fiscal year beginning December 1, 2007. The Company has not yet determined the impact, if any, of adopting SFAS 159 on its financial statements.

Item 2.

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

Overview

The Company operates exclusively in the apparel business. Its operations are comprised of the Men's Apparel Group and Women’s Apparel Group. The Men’s Apparel Group designs, manufactures and markets men's tailored clothing, slacks, sportswear (including denim products and golfwear) and dress furnishings (shirts and ties). Products are sold at luxury, premium and moderate price points under a broad variety of apparel brands, both owned and under license, to an extensive range of retail channels. The Women's Apparel Group designs and markets women's career apparel, designer knitwear, sportswear, including denim products, and accessories to department and specialty stores under owned and licensed brand names and directly to consumers, through its catalogs and its e-commerce websites. For the nine months ended August 31, Men’s Apparel Group segment sales represented 76% of consolidated sales in 2007 compared to 81% in 2006; Women’s Apparel Group segment sales represented 24% of consolidated sales in 2007 compared to 19% in 2006.

The Company’s principal operational challenges have been to address the following:

The trend to casual dressing in the workplace has been a major contributor to the overall market decline for tailored clothing products (suits and sportcoats) over the past decade, especially for tailored suits, the Company’s core product offering.

The need to diversify the Company’s product offerings in non-tailored product categories in light of the reduced demand for tailored clothing, largely affecting the moderate priced category, i.e., at retail price points below $350.

The consolidation and ownership changes of national and regional retailers, an important distribution channel for the Company, has resulted in increased gross margin pressures on several tailored clothing product lines marketed by the Company, along with certain large retailers increasing emphasis on direct sourcing of their product offerings.

Ongoing deflation of apparel prices and related shifting of product sourcing.

Regarding its tailored clothing product offerings, the Company began reducing the number of its domestically owned tailored clothing facilities during the 1990's in response to declining demand, and initiated sourcing of moderate-priced tailored clothing to non-domestic unaffiliated contractors in order to lower costs and improve margins. During 2001, the recessionary economic climate and generally weak retail apparel sales resulted in the Company accelerating its gross margin improvement and cost reduction actions initiated previously. The actions during 2001 included the wind-up of certain moderate-priced tailored clothing

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operations, the closing of six facilities engaged in fabric cutting and sewing operations, one distribution center and several administrative offices, early voluntary retirement programs and other administrative workforce reductions. One additional manufacturing facility was closed in 2002. During the 2003-2005 period, operating earnings improved significantly on small revenue increases, as product mix changes, largely from acquisitions and a more stable tailored clothing environment, resulted in improved gross margins.

The year-to-date decline in consolidated earnings this year compared to 2006 as well as the 2006 full year decline compared to 2005 has been largely attributable to the moderate priced tailored clothing and pant product categories marketed principally to the mainstream department store channel included in the Men’s Apparel Group segment results. Moderate priced tailored clothing and pant profitability has been adversely impacted by, among other things, wholesale pricing and allowance pressures from certain large retailers, as well as revenue declines from certain retailers reducing the number of different lines carried and increasing their direct sourcing of apparel products, including tailored clothing. The Company also elected not to renew two tailored clothing licenses which generated fiscal 2006 revenues of over $19 million. The Company has accelerated its actions to reduce its overall investment relating to this product category. Actions have included the closing of one pant manufacturing facility, one coat sewing facility and one cutting facility, completed in December 2006, the first month of the Company’s fiscal 2007 year, as well as ongoing reductions in staffing levels. Although the Company’s men’s and women’s product lines marketed at the higher price points to upscale specialty store retailers have experienced higher sales and margins compared to the prior year, men’s moderate priced tailored clothing marketed to the mainstream department store channel has continued to encounter intense revenue and margin pressures, which have adversely impacted 2007 third quarter and year-to-date consolidated results.

Sales of non-tailored apparel product categories (men’s sportswear, golfwear, slacks and womenswear) represented 51% of total sales during the first nine months of 2007 compared to 47% for the first nine months of 2006. For the fiscal year ended November 30, non-tailored apparel sales represented 48% of total sales in 2006 compared to 46% in 2005.

Regarding product diversification, the Company has continued to expand its non-tailored clothing product offerings, most importantly through acquisitions, but also from internally developed programs and new licensing arrangements. The Company’s most recent acquisitions are as follows:

Company	Date of Acquisition	Principal Product Lines
Monarchy	August 14, 2007	Men’s premium casual sportswear
Zooey	December 11, 2006	Women’s upscale tops
Sweater.com / One Girl Who ...	August 29, 2006	Women’s high quality knitwear and tops
Simply Blue	October 31, 2005	Women’s upscale denim products
Misook	July 20, 2004	Women’s designer knitwear

The product lines acquired over the past year had aggregate fiscal 2007 revenues of $4.9 million and $10.5 million for the three months and nine months, respectively. These acquisitions incurred a $.02 diluted loss per share for the three months and $.06 diluted loss per share for the nine months and reflected product development and infrastructure investments and required purchased accounting adjustments. These acquisitions, financed through the Company’s Credit Facility and from cash generated from operating activities, provide for strategic growth opportunities in womenswear and further diversification of non-tailored men’s product categories.

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Liquidity and Capital Resources

November 30, 2006 to August 31, 2007

For the nine months ended August 31, 2007, net cash provided by operating activities was $13.2 million compared to $12.0 million for the nine months ended August 31, 2006. The $1.2 million higher cash provided by operating activities was primarily attributable to lower working capital requirements, substantially offset by the lower year-to-date earnings. Since November 30, 2006, net accounts receivable decreased $16.7 million or 15% to $97.0 million, principally attributable to the lower sales. Inventories of $166.5 million increased $20.1 million or 14%, reflecting the seasonal production or receipt of goods in advance of anticipated shipments during the fourth quarter. Cash used in investing activities was $30.3 million in 2007 compared to $18.8 million in 2006. The current year amount reflected $15.3 million related to the Monarchy and Zooey acquisitions, higher contingent earnout payments applicable to acquisitions consummated in prior years and $6.6 million of capitalized software acquisition and related costs applicable to the future upgrading of certain of the Company’s computer systems. Cash provided by financing activities was $19.9 million this year compared to $8.1 million last year. The $11.8 million higher cash provided by financing activities primarily reflected higher borrowings under the Credit Facility this year compared to last year. Total debt, including current maturities, increased $21.0 million to $134.3 million reflecting both seasonal increases and the amounts utilized for acquisitions; total debt represented 34% of total capitalization at August 31, 2007 compared to 30% at November 30, 2006.

In addition to the information provided below relating to debt, credit facilities, guarantees, future commitments, liquidity and risk factors, the reader should also refer to the Company’s Annual Report on Form 10-K for the year ended November 30, 2006.

The Company’s borrowing arrangements consist of a senior revolving credit facility (“Credit Facility”), mortgages and industrial development bonds. The current $200 million Credit Facility expires in February 2009 with an additional one-year renewal at the Company’s option (i.e., until February 2010), and also provides for a $50 million letter of credit sub-facility. Interest rates under the Credit Facility are based on a spread in excess of either LIBOR or prime as the benchmark rate and on the level of excess availability. The weighted average interest rate was 7.2% at August 31, 2007, based on LIBOR and prime rate loans. The facility provides for an unused commitment fee of .375% per annum, based on the $200 million maximum, less the outstanding borrowings and letters of credit issued. Eligible receivables and inventories provide the principal collateral for the borrowings, along with certain other tangible and intangible assets of the Company. The weighted average interest rate on all borrowings was approximately 7.5% at August 31, 2007 compared to 7.4% at August 31, 2006.

The Credit Facility includes various events of default and contains certain restrictions on the operation of the business, including covenants pertaining to minimum net worth, operating leases, incurrence or existence of additional indebtedness and liens, asset sales and limitations on dividends, as well as other customary covenants, representations and warranties, and events of default. As of and for the period ending August 31, 2007, the Company was in compliance with all covenants under the Credit Facility and its other borrowing agreements.

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There are several factors which are discussed in Item 1-A Risk Factors of the Company’s 2006 Annual Report on Form 10-K, which could affect the Company’s ability to remain in compliance with the financial covenants currently contained in its Credit Facility, and to a lesser extent, in its other borrowing arrangements.

At August 31, 2007, the Company had approximately $17.5 million of letters of credit outstanding, relating to either contractual commitments for the purchase of inventories from unrelated third parties or for such matters as workers’ compensation requirements in lieu of cash deposits. Such letters of credit are issued pursuant to the Credit Facility and are considered as usage for purposes of determining borrowing availability. Availability levels on any date are impacted by the level of outstanding borrowings under the Credit Facility, the level of eligible receivables and inventory and outstanding letters of credit. Availability levels generally decline towards the end of the first and third quarters and increase during the second and fourth quarters. For the trailing twelve months, additional availability levels have ranged from $40 million to $101 million. At August 31, 2007, additional borrowing availability under the Credit Facility was approximately $40 million. The Company has also entered into surety bond arrangements aggregating approximately $12 million with unrelated parties, primarily for the purposes of satisfying workers’ compensation deposit requirements of various states where the Company has operations. At August 31, 2007, there were an aggregate of approximately $.7 million of outstanding foreign exchange contracts attributable to the sale of approximately 78 million Japanese Yen primarily for anticipated licensing revenues to be received in the next six months. The Company has no commitments or guarantees of other lines of credit, repurchase obligations, etc., with respect to the obligations for any unconsolidated entity or to any unrelated third party.

The Company’s various borrowing arrangements are either fixed rate or variable rate borrowing arrangements. None of the arrangements have rating agency “triggers” which would impact either the borrowing rate or borrowing commitment.

Off-Balance Sheet Arrangements. The Company has not entered into off balance sheet financing arrangements, other than operating leases, and has made no financial commitments or guarantees with any unconsolidated subsidiaries or special purpose entities. All of the Company’s subsidiaries are wholly owned and included in the accompanying consolidated financial statements. There have been no related party transactions nor any other transactions which have not been conducted on an arm’s-length basis.

The Company believes its liquidity and expected cash flows are sufficient to finance its operations after due consideration of its various borrowing arrangements, other contractual obligations and earnings prospects.

August 31, 2006 to August 31, 2007

Net accounts receivable of $97.0 million decreased $16.7 million, principally attributable to the lower year-to-date sales. The current period included $3.3 million of net receivables related to the Zooey and Monarchy product lines acquired during fiscal 2007. Inventories of $166.5 million decreased $5.9 million or 3.4% and included $5.4 million attributable to Zooey and Monarchy. Actions have been implemented which have reduced tailored clothing inventories compared to the year earlier period commensurate with reduced sales levels in this product category. Inventories have been valued at the lower of cost or market at August 31, 2007. The increase in intangible assets to $64.0 million from $56.3 million in the year earlier period was attributable to the fair value of intangible assets acquired in the Zooey and Monarchy transactions, less amortization of intangibles assets with finite lives. Net properties of $32.2 million decreased $3.5 million. Total debt of $134.3 million increased $2.2 million compared to the year earlier level and reflected favorable

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working capital reductions from the year earlier period which were substantially offset by $21.4 million of payments related to acquisitions during the past twelve months as well as $3.1 million of incremental treasury share expenditures. Total debt represented 34% of total capitalization at August 31, 2007 compared to 35% at August 31, 2006.

Results of Operations

Third Quarter 2007 Compared to Third Quarter 2006

Third quarter consolidated sales were $135.2 million compared to $137.7 million in 2006. Men’s Apparel Group revenues were $100.0 million compared to $106.9 million in the year earlier period, and reflected more than $8 million of fall advance tailored clothing orders shifted from the third quarter last year to the fourth quarter this year. The third quarter revenue comparison was also impacted by approximately $1.2 million lower men’s tailored clothing sales related to licenses that were not renewed, as well as reduced sales of other moderate priced tailored clothing. Women's Apparel Group revenues increased $4.4 million to $35.2 million, which included $4.0 million attributable to the One Girl Who ... and Zooey acquired product lines, and represented approximately 26% of consolidated sales in 2007 compared to 22% in 2006. Aggregate sportswear and other non-tailored clothing product categories, including women’s, represented approximately 50% of total third quarter revenues in 2007 compared to 44% in 2006.

Men’s Apparel Group product mix changes impacted comparability of both unit sales and average wholesale selling prices. Suit unit sales decreased approximately 26%, while sport coat units decreased approximately 29%. Tailored clothing average wholesale selling prices increased 17% from 2006. These changes reflected the above noted shift of certain fall advance orders to the fourth quarter this year as well as a shift in product mix to more higher price point units, fewer moderate tailored clothing unit sales and less off-price dispositions. Slack average wholesale selling prices decreased approximately 10% on a 4% unit increase. Unit sales of sportswear products decreased approximately 15% while average wholesale selling prices were approximately 27% higher than 2006, reflecting fewer off-price dispositions this year compared to the prior year.

In the Women’s Apparel Group, the addition of the One Girl Who ... and Zooey product lines significantly increased the number of women’s units sold at an average unit price point lower than the other women’s products taken as a whole, resulting in an increase in women’s units and a decrease in average unit price. Excluding the newly acquired One Girl Who ... and Zooey product lines, unit sales of women’s apparel decreased approximately 5% and average selling prices increased approximately 8%, attributable to fewer off-price dispositions this year.

The third quarter consolidated gross margin percentage was 34.5% this year, the same as in 2006, as the favorable impact from product mix changes to higher margin product categories was offset by significantly lower margins attributable principally to the moderate priced tailored clothing lines. Gross margins may not be comparable to those of other entities since some entities include all of the costs related to their distribution network in arriving at gross margin, whereas the Company included $5.2 million in 2007 and $5.6 million in 2006 of costs related to warehousing, picking and packing of finished products as a component in Selling, General and Administrative Expenses. Consolidated selling, general and administrative expenses were $44.4 million in 2007 compared to $45.4 million in 2006; the ratio to sales was 32.8% in 2007 compared to 33.0% in 2006. The $1.0 million consolidated decrease reflected, among other things, lower expenses overall, partially offset by $3.4 million of incremental expenses related to the Monarchy, Sweater.com and Zooey product lines.

- 23 -

Operating earnings were $3.0 million both in 2007 and 2006 and represented 2.2% of sales in each period. Men’s Apparel Group operating earnings decreased to $1.9 million compared to earnings of $3.5 million in 2006, principally attributable to lower moderate tailored clothing sales and gross margins. Women’s Apparel Group operating earnings were $4.2 million in both 2007 and 2006, as improvements in ongoing product lines were about offset by product development and administrative expenditures and required purchase accounting adjustments associated with the newly acquired One Girl Who ... and Zooey product lines.

Interest expense was $2.0 million in 2007 compared to $2.1 million in 2006. Consolidated pre-tax earnings were $.9 million in both 2007 and 2006. After reflecting the applicable tax provision, consolidated earnings were $.5 million in each period. Diluted earnings per share of $.01 in 2007 was the same as 2006.

Nine Months 2007 Compared to Nine Months 2006

Consolidated sales for the nine months ended August 31, 2007 were $411.2 million compared to $434.5 million in 2006. Men’s Apparel Group revenues were $312.8 million in the current year compared to $350.5 million in the year earlier period. The year-to-date revenue decline in the Men’s Apparel Group reflected more than $8 million of fall advance tailored clothing orders shifted from the third quarter last year to the fourth quarter this year, approximately $7.3 million lower men’s tailored sales related to licenses that were not renewed and lower sales of other men’s tailored clothing lines, principally at moderate price points. Sales of product lines directed to the mainstream department store channel represented approximately 12% of consolidated sales for the nine months compared to 17% last year. Women's Apparel Group revenues of $98.4 million increased $14.4 million, attributable to both ongoing and newly acquired product lines; the current year included $9.6 million attributable to One Girl Who ... and Zooey. Women’s Apparel Group revenues represented approximately 24% of consolidated sales in 2007 and 19% in 2006, reflecting both the higher women’s sales and lower Men’s Apparel Group revenues. Aggregate sportswear and other non-tailored clothing product categories, including women’s, represented approximately 51% of nine month revenues in fiscal 2007 compared to 47% in 2006.

Men’s Apparel Group product mix changes impacted comparability of both unit sales and average wholesale selling prices. Tailored clothing average wholesale selling prices increased 19% from 2006, reflecting a shift in product mix in 2007 compared to 2006 to more higher price point units, fewer moderate priced tailored clothing unit sales and less off-price dispositions. Suit unit sales decreased approximately 24%, while sport coat units decreased approximately 31%. Slack product units decreased approximately 8%. Slack average wholesale selling prices increased approximately 8%, reflecting a shift in product mix. Unit sales of sportswear products decreased approximately 23% and average wholesale selling prices were approximately 13% higher than 2006, reflecting lower moderate priced sportswear business.

In the Women’s Apparel Group, the addition of One Girl Who ... and Zooey product lines significantly increased the number of women’s units sold at an average unit price lower than the other women’s products taken as a whole, resulting in an increase in women’s units and a decrease in average unit price. Excluding the newly acquired One Girl Who ... and Zooey product lines, unit sales of women’s apparel increased approximately 8% and average selling prices declined approximately 2%, each attributable to Simply Blue with its lower per unit cost relative to other women’s products.

The consolidated gross margin percentage to sales improved to 34.7% in the current year compared to 33.5% in the prior year, reflecting the favorable impact of product mix changes which were in part offset by lower tailored clothing margins adversely impacted by retailer chargebacks and allowances and the residual effects of unfavorable manufacturing overhead from reduced production schedules in several manufacturing

- 24 -

facilities, including the final winddown of a coat sewing facility closed during the first quarter of fiscal 2007. Gross margins may not be comparable to those of other entities since some entities include all of the costs related to their distribution network in arriving at gross margin, whereas the Company included $16.6 million in 2007 and $16.7 million in 2006 of costs related to warehousing, picking and packing of finished products as a component in selling, general and administrative expenses. Consolidated selling, general and administrative expenses were $133.5 million in 2007 compared to $129.7 million in 2006, representing 32.5% of sales in 2007 and 29.9% in 2006. The $3.8 million consolidated increase reflected, among other things, incremental expenses of $7.9 million related to Monarchy, One Girl Who ... and Zooey. The increase relative to sales was attributable, in part, to changes in revenue mix towards more women’s products with higher gross margin and operating expense ratios to sales compared to tailored clothing product lines.

Operating earnings were $10.9 million in 2007 compared to $17.8 million in 2006 and represented 2.6% of sales in 2007 and 4.1% of sales in 2006. Men’s Apparel Group operating earnings declined to $10.2 million in 2007 compared to $21.0 million in 2006, attributable to its $37.7 million lower sales and a slightly lower gross margin rate. Women’s Apparel Group operating earnings improved to $12.2 million in 2007 compared to $9.6 million in 2006, attributable to its higher sales and improved operating margins.

Interest expense was $6.8 million in 2007 compared to $6.6 million in 2006 with the increase attributable to borrowings associated with acquisitions and share repurchases. Consolidated pre-tax earnings were $4.1 million in 2007 compared to $11.2 million in 2006. After reflecting the applicable tax provision, consolidated net earnings were $2.5 million in 2007 compared to $7.0 million in 2006. Diluted earnings per share were $.07 in 2007 compared to $.19 per share in 2006.

The ongoing disruptive conditions in the mainstream department store channel have continued to result in intense margin pressures adversely impacting the Company’s 2007 year-to-date operating results. Product lines directed to the mainstream department store channel represented approximately 12% of revenues for the nine months this year compared to 17% last year, and this declining trend is expected to continue over the balance of the year. The Company continues to take additional actions to improve profitability associated with these product lines, including the further paring down of internal staffing levels and renegotiating reduced licensee commitments or accelerating the conclusion of certain licensing arrangements.

Overall debt reduction is anticipated by year-end 2007, excluding the impact of acquisitions and share repurchases. Pursuant to the October 2005 authorization to repurchase up to two million shares of the Company’s common stock, approximately 1.74 million shares have been purchased through October 8, 2007, at an average cost of $6.66 per share, including approximately .575 million shares acquired to date in fiscal 2007.

The Company’s longer term objectives continue to be directed to increasing revenues and improving pre-tax margins from a combination of both internal revenue growth and from acquisitions. The Company considers those acquisition opportunities which can produce positive cash flows, are accretive to earnings in the near to mid-term and which do not create excessive debt leverage.

This quarterly report on Form 10-Q contains forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements could be significantly impacted by such factors as the level of consumer spending for men’s and women’s apparel, the prevailing retail environment, the Company’s relationships with its suppliers, customers, lenders, licensors and licensees, actions of competitors that may impact the Company’s business and the impact of unforeseen economic changes, such as interest rates, or in other external economic and political factors over

- 25 -

which the Company has no control. The reader is also directed to the Company’s 2006 Annual Report on Form 10-K for additional factors that may impact the Company’s results of operations and financial condition. Forward-looking statements are not guarantees as actual results could differ materially from those expressed or implied in forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3 -- Quantitative and Qualitative Disclosures About Market Risk

The Company does not hold financial instruments for trading purposes or engage in currency speculation. The Company enters into foreign exchange forward contracts from time to time to limit the currency risks primarily associated with purchase obligations denominated in foreign currencies. Foreign exchange contracts are generally for amounts not to exceed forecasted purchase obligations or receipts and require the Company to exchange U.S. dollars for foreign currencies at rates agreed to at the inception of the contracts. These contracts are typically settled by actual delivery of goods or receipt of funds. The effects of movements in currency exchange rates on these instruments, which have not been significant, are recognized in earnings in the period in which the purchase obligations are satisfied or funds are received. As of August 31, 2007, the Company had entered into foreign exchange contracts, aggregating approximately $.7 million principally attributable to the sale of approximately 78 million Japanese yen primarily for anticipated licensing revenues to be received in the next six months.

The Company is subject to the risk of fluctuating interest rates in the normal course of business, primarily as a result of the variable rate borrowings under its Credit Facility. Rates may fluctuate over time based on economic conditions, and the Company could be subject to increased interest payments if market interest rates rise rapidly. A 1% change in the effective interest rate on the Company’s anticipated borrowings under its Credit Facility would impact annual interest expense by approximately $1.1 million based on borrowings under the Credit Facility at August 31, 2007. In the last three years, the Company has not used derivative financial instruments to manage interest rate risk.

The Company’s customers include major U.S. retailers, certain of which are under common ownership and control. The ten largest customers represented approximately 54% of consolidated sales during fiscal 2006 with the two largest customers representing approximately 21% and 12% of sales, respectively. Recently, there were several changes in ownership control regarding certain of the Company’s customers, including Federated’s acquisition of the May Company stores and the sale of certain store groups formerly owned by Saks, Inc. During 2006, the Company experienced declining sales largely in its moderate priced tailored clothing brands marketed to the mainstream department store channel, which has been most impacted by such ownership changes, and decreases have continued during 2007.

Item 4 – Controls and Procedures

(A) Evaluation of Disclosure Controls and Procedures. The Company’s management, under the supervision of and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective and are reasonably designed to ensure that all material information relating to the Company required to be included in the Company’s reports filed

- 26 -

or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(B) Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the Company’s fiscal quarter ended August 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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

- 27 -

Part II -- OTHER INFORMATION

Item 2.

Unregistered Sales of Equity and Use of Proceeds

(a)	Purchase of equity securities by the issuer and affiliated purchasers.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares That May Yet Be Purchased Under the Plan
June 1, 2007 to June 30, 2007		51,500	$	6.51		51,500		447,468

July 1, 2007 to July 31, 2007		-				-		447,468

August 1, 2007 to August 31, 2007		85,700	$	7.03		85,700		361,768

Total		137,200				137,200

On October 28, 2005, the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s $2.50 par value common stock from time to time in the open market, through privately negotiated transactions, block transactions or otherwise. The authorization expires on December 31, 2007.

All shares purchased above were acquired in open-market transactions.

Item 6. Exhibits

31.1	Certification of Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

- 28 -

SIGNATURES

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

	HARTMARX CORPORATION


October 10, 2007	By:	/s/ Glenn R. Morgan
	Glenn R. Morgan Executive Vice President, Chief Financial Officer and Treasurer

	(Principal Financial Officer)



October 10, 2007	By	/s/ Andrew A. Zahr
	Andrew A. Zahr Vice President and Controller

	(Principal Accounting Officer)

- 29 -

Delaware		36-3217140
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

101 North Wacker Drive Chicago, Illinois		60606
(Address of principal executive offices)		(Zip Code)

	Three Months Ended August 31,				Nine Months Ended August 31,
	2007		2006		2007		2006
Net sales	$	135,202	$	137,691	$	411,182	$	434,461
Licensing and other income		656		875		1,665		2,056
		135,858		138,566		412,847		436,517
Cost of goods sold		88,494		90,146		268,467		288,977
Selling, general and administrative expenses		44,407		45,427		133,498		129,704
		132,901		135,573		401,965		418,681
Operating earnings		2,957		2,993		10,882		17,836
Interest expense		2,018		2,053		6,795		6,601
Earnings before taxes		939		940		4,087		11,235
Tax provision		397		450		1,578		4,280
Net earnings	$	542	$	490	$	2,509	$	6,955

Earnings per share:
Basic	$	.02	$	.01	$	.07	$	.19
Diluted	$	.01	$	.01	$	.07	$	.19

Dividends per common share	$	-	$	-	$	-	$	-
Average shares outstanding:
Basic		36,045		36,130		36,053		36,580
Diluted		36,652		36,712		36,639		37,231

	Aug. 31, 2007			Nov. 30, 2006			Aug. 31, 2006
CURRENT ASSETS
Cash and cash equivalents	$	5,015		$	2,304		$	2,527
Accounts receivable, less allowance for doubtful accounts of $5,752, $4,792 and $5,475		96,950			113,688			113,681
Inventories		166,548			146,440			172,410
Prepaid expenses		8,628			8,708			9,063
Deferred income taxes		23,067			21,990			28,832
Total current assets		300,208			293,130			326,513

GOODWILL		35,701			27,957			27,113

INTANGIBLE ASSETS		63,974			55,501			56,342

DEFERRED INCOME TAXES		15,515			17,322			16,729

OTHER ASSETS		15,495			8,660			6,672

PREPAID / INTANGIBLE PENSION ASSET		37,843			36,550			35,963

PROPERTIES
Land		1,878			1,883			1,883
Buildings and building improvements		42,788			42,676			44,171
Furniture, fixtures and equipment		95,235			103,667			105,497
Leasehold improvements		27,569			28,183			28,224
		167,470			176,409			179,775
Accumulated depreciation and amortization		(135,243	)		(142,445	)		(144,075	)
Net properties		32,227			33,964			35,700
TOTAL ASSETS	$	500,963		$	473,084		$	505,032

	Aug. 31, 2007			Nov. 30, 2006			Aug. 31, 2006
CURRENT LIABILITIES
Current portion of long-term debt	$	20,820		$	25,040		$	24,762
Accounts payable and accrued expenses		75,363			70,105			76,896
Total current liabilities		96,183			95,145			101,658

NON-CURRENT LIABILITIES		17,439			20,659			21,142

LONG-TERM DEBT		113,518			88,315			107,390

ACCRUED PENSION LIABILITY		8,477			8,309			25,843

SHAREHOLDERS' EQUITY
Preferred shares, $1 par value; 2,500,000 authorized and unissued		-			-			-
Common shares, $2.50 par value; 75,000,000 shares authorized; 38,286,867 shares issued at August 31, 2007, 37,748,354 shares issued at November 30, 2006 and 37,579,190 shares issued at August 31, 2006.		95,717			94,371			93,948
Capital surplus		90,072			87,322			85,836
Retained earnings		86,925			84,416			84,085
Common shares in treasury, at cost, 1,644,780 shares at August 31, 2007, 1,167,800 shares at November 30, 2006 and 1,167,800 shares August 31, 2006.		(11,052	)		(7,876	)		(7,876	)
Accumulated other comprehensive income (loss)		3,684			2,423			(6,994	)
Total shareholders' equity		265,346			260,656			248,999

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	500,963		$	473,084		$	505,032

	FASB	Financial Accounting Standards Board
	SFAS	Statement of Financial Accounting Standards
	FIN	FASB Interpretation Number
	SEC	Securities and Exchange Commission
	Monarchy	Monarchy Group, Inc.
	Zooey	Zooey Apparel, Inc.
	Sweater.com	Sweater.com Apparel, Inc.
	Simply Blue	Simply Blue Apparel, Inc.
	Misook	Exclusively Misook Apparel

			Page Number

Part I - FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Unaudited Consolidated Statement of Earnings for the three and nine months ended August 31, 2007 and August 31, 2006.	4

		Unaudited Condensed Consolidated Balance Sheet as of August 31, 2007, November 30, 2006 and August 31, 2006	5

		Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended August 31, 2007 and August 31, 2006.	7

		Notes to Unaudited Condensed Consolidated Financial Statements.	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

	Item 4.	Controls and Procedures	26


Part II - OTHER INFORMATION

	Item 2.	Unregistered Sales of Equity and Use of Proceeds	28

	Item 6.	Exhibits	28

	Signatures		29

	Nine Months Ended August 31,
Increase (Decrease) in Cash and Cash Equivalents	2007			2006
Cash Flows from operating activities:
Net earnings	$	2,509		$	6,955
Reconciling items to adjust net earnings to net cash provided by operating activities:
Depreciation and amortization of fixed assets		4,005			4,192
Amortization of intangible assets and long lived assets		3,033			2,823
Stock compensation expense		1,754			1,590
Taxes and deferred taxes on earnings		727			3,294
Changes in assets and liabilities:
Accounts receivable, inventories, prepaid expenses and other assets		3,194			(2,185	)
Accounts payable, accrued expenses and non-current liabilities		(2,058	)		(4,678	)
Net cash provided by operating activities		13,164			11,991
Cash Flows from investing activities:
Payments made re: acquisitions		(21,461	)		(16,143	)
Capital expenditures		(8,893	)		(2,648	)
Net cash used in investing activities		(30,354	)		(18,791	)
Cash Flows from financing activities:
Borrowings under Credit Facility		25,821			13,184
Payment of other debt		(4,838	)		(545	)
Grant proceeds related to facility modernization		-			759
Change in checks drawn in excess of bank balances		(293	)		798
Proceeds from sale of shares to employee benefit plans and other equity transactions		1,133			1,170
Proceeds from exercise of stock options		856			417
Tax effect of option exercises		353			163
Purchase of treasury shares		(3,131	)		(7,876	)
Net cash provided by financing activities		19,901			8,070
Net increase in cash and cash equivalents		2,711			1,270
Cash and cash equivalents at beginning of period		2,304			1,257
Cash and cash equivalents at end of period	$	5,015		$	2,527

	Three Months Ended August 31,				Nine Months Ended August 31,
	2007		2006		2007		2006
Stock options	$	204	$	341	$	1,007	$	962
Restricted stock awards		118		179		621		496
Discount on shares sold to Company sponsored defined contribution plan		38		54		126		132
	$	360	$	574	$	1,754	$	1,590

	Aug. 31, 2007		Nov. 30, 2006		Aug. 31, 2006
Raw materials	$	41,046	$	38,621	$	42,754
Work-in-process		6,767		5,756		6,420
Finished goods		118,735		102,063		123,236
	$	166,548	$	146,440	$	172,410