Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

þ

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

 

 

 

For the quarterly period ended JULY 31, 2010

 

 

 

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: 1-4365

 

OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

Georgia

 

58-0831862

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

222 Piedmont Avenue, N.E., Atlanta, Georgia  30308

(Address of principal executive offices)         (Zip Code)

 

                              (404) 659-2424                              

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

 

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.

 

Large accelerated filer £

Accelerated filer þ

Non-accelerated filer £

Smaller reporting company £

 

 

(Do not check if a smaller reporting company)

 

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Number of shares outstanding

Title of each class

 

as of August 27, 2010

Common Stock, $1 par value

 

16,560,787

 

 

 



 

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the second quarter of fiscal 2010

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

Condensed Consolidated Statements of Operations (Unaudited)

4

Condensed Consolidated Balance Sheets (Unaudited)

5

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

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

14

Item 3. Quantitative and Qualitative Disclosures About Market Risk

28

Item 4. Controls and Procedures

28

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

28

Item 1A. Risk Factors

28

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

29

Item 3. Defaults Upon Senior Securities

29

Item 4. Reserved

29

Item 5. Other Information

29

Item 6. Exhibits

29

Signatures

29

 

2



Table of Contents

 

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

 

Our SEC filings and public announcements may include forward-looking statements about future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. We intend for all forward-looking statements contained herein, in our press releases or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Important assumptions relating to these forward-looking statements include, among others, assumptions regarding the impact of economic conditions on consumer demand and spending, demand for our products, timing and cost of shipments requested by our wholesale customers, expected pricing levels, competitive conditions, the timing and cost of planned capital expenditures, costs of products and raw materials we purchase, access to capital and/or credit markets, costs of labor, expected outcomes of pending or potential litigation and regulatory actions and disciplined execution by key management. Forward-looking statements reflect our current expectations, based on currently available information, and are not guarantees of performance. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for fiscal 2009, as updated by Part II, Item 1A. Risk Factors in this report and those described from time to time in our future reports filed with the SEC.

 

We caution that one should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

DEFINITIONS

 

Unless the context requires otherwise, the following terms, or words of similar import, have the following meanings:

 

Our, us or we: Oxford Industries, Inc. and its consolidated subsidiaries

 

SG&A: Selling, general and administrative expenses

 

11 3/8% Senior Secured Notes: Our 11.375% senior secured notes due 2015.

 

8 7/8% Senior Unsecured Notes: Our 8.875% senior unsecured notes due 2011, which were satisfied and discharged in June 2009.

 

SEC: U.S. Securities and Exchange Commission

 

Securities Exchange Act: the Securities Exchange Act of 1934, as amended

 

FASB: Financial Accounting Standards Board

 

U.S. GAAP: Generally accepted accounting principles in the United States

 

ASC: FASB Accounting Standards Codification

 

Fiscal 2010

 

52 weeks ending January 29, 2011

Fiscal 2009

 

52 weeks ended January 30, 2010

First half fiscal 2010

 

26 weeks ended July 31, 2010

First half fiscal 2009

 

26 weeks ended August 1, 2009

Fourth quarter fiscal 2010

 

13 weeks ending January 29, 2011

Third quarter fiscal 2010

 

13 weeks ending October 30, 2010

Second quarter fiscal 2010

 

13 weeks ended July 31, 2010

First quarter fiscal 2010

 

13 weeks ended May 1, 2010

Fourth quarter fiscal 2009

 

13 weeks ended January 30, 2010

Third quarter fiscal 2009

 

13 weeks ended October 31, 2009

Second quarter fiscal 2009

 

13 weeks ended August 1, 2009

First quarter fiscal 2009

 

13 weeks ended May 2, 2009

 

3



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)

 

 

 

Second
Quarter

Fiscal 2010

 

Second
Quarter

Fiscal 2009

 

First
Half
Fiscal 2010

 

First
Half
Fiscal 2009

 

Net sales

 

$186,531

 

 

$192,887

 

 

$404,281

 

 

$ 409,618

 

 

Cost of goods sold

 

98,701

 

 

115,514

 

 

214,869

 

 

242,311

 

 

Gross profit

 

87,830

 

 

77,373

 

 

189,412

 

 

167,307

 

 

SG&A

 

76,246

 

 

73,637

 

 

159,998

 

 

152,320

 

 

Amortization of intangible assets

 

249

 

 

315

 

 

499

 

 

623

 

 

 

 

76,495

 

 

73,952

 

 

160,497

 

 

152,943

 

 

Royalties and other operating income

 

4,031

 

 

2,916

 

 

7,872

 

 

5,385

 

 

Operating income

 

15,366

 

 

6,337

 

 

36,787

 

 

19,749

 

 

Interest expense, net

 

5,143

 

 

6,245

 

 

10,152

 

 

10,810

 

 

Earnings before income taxes

 

10,223

 

 

92

 

 

26,635

 

 

8,939

 

 

Income taxes

 

3,004

 

 

272

 

 

6,919

 

 

2,508

 

 

Net earnings (loss)

 

$    7,219

 

 

$      (180

)

 

$  19,716

 

 

$     6,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$      0.44

 

 

$     (0.01

)

 

$      1.19

 

 

$       0.40

 

 

Diluted

 

$      0.44

 

 

$     (0.01

)

 

$      1.19

 

 

$       0.40

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

16,540

 

 

16,288

 

 

16,515

 

 

16,083

 

 

Dilution

 

12

 

 

 

 

12

 

 

 

 

Diluted

 

16,552

 

 

16,288

 

 

16,527

 

 

16,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$      0.11

 

 

$      0.09

 

 

$     0.22

 

 

$      0.18

 

 

 

See accompanying notes.

 

4



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par amounts)

 

 

 

July 31,
2010

 

January 30,
2010

 

August 1,
2009

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$  28,171

 

 

$    8,288

 

 

$    5,461

 

 

Receivables, net

 

74,611

 

 

74,398

 

 

78,467

 

 

Inventories, net

 

76,330

 

 

77,029

 

 

86,828

 

 

Prepaid expenses, net

 

15,484

 

 

10,713

 

 

13,312

 

 

Deferred tax assets

 

15,384

 

 

13,875

 

 

10,208

 

 

Total current assets

 

209,980

 

 

184,303

 

 

194,276

 

 

Property, plant and equipment, net

 

73,919

 

 

79,540

 

 

86,365

 

 

Intangible assets, net

 

136,233

 

 

137,490

 

 

138,880

 

 

Other non-current assets, net

 

22,623

 

 

23,841

 

 

22,932

 

 

Total Assets

 

$442,755

 

 

$425,174

 

 

$442,453

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

Trade accounts payable and other accrued expenses

 

$  79,105

 

 

$  81,831

 

 

$  75,827

 

 

Accrued compensation

 

18,844

 

 

11,514

 

 

11,132

 

 

Income taxes payable

 

 

 

2,517

 

 

 

 

Short-term debt and current maturities of long-term debt

 

1,195

 

 

 

 

20,417

 

 

Total current liabilities

 

99,144

 

 

95,862

 

 

107,376

 

 

Long-term debt, less current maturities

 

146,736

 

 

146,408

 

 

160,357

 

 

Other non-current liabilities

 

46,965

 

 

50,066

 

 

46,804

 

 

Non-current deferred income taxes

 

28,143

 

 

28,421

 

 

30,013

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

 

 

Common stock, $1.00 par value per common share

 

16,561

 

 

16,461

 

 

16,520

 

 

Additional paid-in capital

 

94,442

 

 

91,840

 

 

89,253

 

 

Retained earnings

 

35,437

 

 

19,356

 

 

14,136

 

 

Accumulated other comprehensive loss

 

(24,673

)

 

(23,240

)

 

(22,006

)

 

Total shareholders’ equity

 

121,767

 

 

104,417

 

 

97,903

 

 

Total Liabilities and Shareholders’ Equity

 

$442,755

 

 

$425,174

 

 

$442,453

 

 

 

See accompanying notes.

 

5



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

First Half
Fiscal 2010

 

First Half
Fiscal 2009

 

Cash Flows From Operating Activities:

 

 

 

 

 

Net earnings

 

$ 19,716

 

 

$    6,431

 

 

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

 

 

 

 

 

 

 

Depreciation

 

8,754

 

 

9,259

 

 

Amortization of intangible assets

 

499

 

 

623

 

 

Amortization/write-off of deferred financing costs and bond discount

 

977

 

 

2,392

 

 

Stock compensation expense

 

2,767

 

 

1,637

 

 

(Gain) loss on sale of property, plant and equipment

 

(3

)

 

42

 

 

Deferred income taxes

 

(1,587

)

 

(3,043

)

 

Changes in working capital:

 

 

 

 

 

 

 

Receivables

 

(630

)

 

2,574

 

 

Inventories

 

357

 

 

35,396

 

 

Prepaid expenses

 

(4,824

)

 

(2,255

)

 

Current liabilities

 

2,018

 

 

(17,601

)

 

Other non-current assets

 

570

 

 

157

 

 

Other non-current liabilities

 

(3,078

)

 

(506

)

 

Net cash provided by operating activities

 

25,536

 

 

35,106

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(3,370

)

 

(5,840

)

 

Proceeds from sale of property, plant and equipment

 

78

 

 

 

 

Net cash used in investing activities

 

(3,292

)

 

(5,840

)

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

Repayment of revolving credit arrangements

 

(33,925

)

 

(138,135

)

 

Proceeds from revolving credit arrangements

 

35,097

 

 

138,859

 

 

Repurchase of 8 7/8% Senior Unsecured Notes

 

 

 

(166,805

)

 

Proceeds from the issuance of 11 3/8% Senior Secured Notes

 

 

 

146,029

 

 

Deferred financing costs paid

 

 

 

(4,878

)

 

Proceeds from issuance of common stock

 

230

 

 

193

 

 

Dividends on common stock

 

(3,638

)

 

(2,919

)

 

Net cash used in financing activities

 

(2,236

)

 

(27,656

)

 

Net change in cash and cash equivalents

 

20,008

 

 

1,610

 

 

Effect of foreign currency translation on cash and cash equivalents

 

(125

)

 

561

 

 

Cash and cash equivalents at the beginning of year

 

8,288

 

 

3,290

 

 

Cash and cash equivalents at the end of period

 

$ 28,171

 

 

$    5,461

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest, net

 

$   9,114

 

 

$    9,626

 

 

Cash paid for income taxes

 

$ 14,762

 

 

$    7,088

 

 

 

See accompanying notes.

 

6



Table of Contents

 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SECOND QUARTER OF FISCAL 2010

 

1.                                Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP.  We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented.  Results of operations for the interim periods presented are not necessarily indicative of results to be expected for our full fiscal year.  The accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Annual Report on Form 10-K for fiscal 2009.

 

2.                                Inventories:  The components of inventories as of the dates specified are summarized as follows (in thousands):

 

 

 

July 31,
2010

 

January 30,
2010

 

August 1,
2009

 

Finished goods

 

$111,220

 

 

$108,788

 

 

$121,306

 

 

Work in process

 

6,466

 

 

6,972

 

 

5,677

 

 

Fabric, trim and supplies

 

3,082

 

 

5,707

 

 

6,568

 

 

LIFO reserve

 

(44,438

)

 

(44,438

)

 

(46,723

)

 

Total

 

 76,330

 

 

 77,029

 

 

 86,828

 

 

 

3.                                Comprehensive Income:  Comprehensive income is calculated as follows for the periods presented (in thousands):

 

 

 

Second Quarter
Fiscal 2010

 

Second Quarter
Fiscal 2009

 

First Half
Fiscal 2010

 

First Half
Fiscal 2009

 

Net earnings (loss)

 

$7,219

 

 

$  (180

)

 

$19,716

 

 

 6,431

 

 

Gain (loss) on foreign currency translation, net of tax

 

686

 

 

4,326

 

 

(1,241

)

 

5,599

 

 

Net unrealized gains (losses) on forward foreign exchange contracts, net of tax

 

(192

)

 

 

 

(192

)

 

 

 

Comprehensive income

 

$7,713

 

 

$4,146

 

 

$18,283

 

 

$12,030

 

 

 

4.                                Operating Group Information:  Our business is operated through our four operating groups: Tommy Bahama, Ben Sherman, Lanier Clothes and Oxford Apparel. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, elimination of inter-group sales,  LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups.

 

The table below presents certain information about our operating groups (in thousands).

 

 

 

Second
Quarter
Fiscal 2010

 

Second
Quarter
Fiscal 2009

 

First
Half
Fiscal 2010

 

First
Half
Fiscal 2009

 

Net Sales

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$  99,349

 

$  94,439

 

$208,454

 

$192,859

 

Ben Sherman

 

18,346

 

23,627

 

40,500

 

47,846

 

Lanier Clothes

 

22,736

 

25,204

 

53,164

 

56,711

 

Oxford Apparel

 

45,551

 

49,464

 

101,893

 

112,668

 

Corporate and Other

 

549

 

153

 

270

 

(466)

 

Total

 

$186,531

 

$192,887

 

$404,281

 

$409,618

 

 

7



Table of Contents

 

 

 

Second
Quarter
Fiscal 2010

 

Second
Quarter
Fiscal 2009

 

First
Half
Fiscal 2010

 

First
Half
Fiscal 2009

 

Depreciation

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$  3,289

 

 3,643

 

$   6,563

 

$   7,305

 

Ben Sherman

 

524

 

606

 

1,060

 

1,161

 

Lanier Clothes

 

118

 

135

 

237

 

280

 

Oxford Apparel

 

183

 

195

 

365

 

399

 

Corporate and Other

 

274

 

57

 

529

 

114

 

Total

 

$  4,388

 

 4,636

 

$   8,754

 

$   9,259

 

Amortization of Intangible Assets

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$     173

 

$     222

 

$      346

 

$      444

 

Ben Sherman

 

65

 

84

 

132

 

160

 

Lanier Clothes

 

 

 

 

 

Oxford Apparel

 

11

 

9

 

21

 

19

 

Corporate and Other

 

 

 

 

 

Total

 

$     249

 

$     315

 

$      499

 

$      623

 

Operating Income (Loss)

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$14,172

 

$13,379

 

$ 32,033

 

$ 25,629

 

Ben Sherman

 

(598

)

(6,308

)

(76)

 

(8,284)

 

Lanier Clothes

 

2,809

 

2,701

 

7,168

 

5,438

 

Oxford Apparel

 

3,358

 

4,129

 

9,329

 

9,322

 

Corporate and Other

 

(4,375

)

(7,564

)

(11,667

)

(12,356

)

Total Operating Income

 

$15,366

 

$  6,337

 

$ 36,787

 

$ 19,749

 

Interest Expense, net

 

5,143

 

6,245

 

10,152

 

10,810

 

Earnings Before Income Taxes

 

$10,223

 

$       92

 

$ 26,635

 

$   8,939

 

 

5.                                Consolidating Financial Data of Subsidiary Guarantors:  Our 11 3/8% Senior Secured Notes due 2015 are guaranteed by substantially all of our wholly-owned domestic subsidiaries (“Subsidiary Guarantors”). All guarantees are full and unconditional. For consolidated financial reporting purposes, non-guarantors consist of our subsidiaries which are organized outside the United States and certain domestic subsidiaries. We use the equity method with respect to our investment in subsidiaries included in other non-current assets in our condensed consolidating financial statements. Set forth below are our condensed consolidating balance sheets as of July 31, 2010, January 30, 2010 and August 1, 2009 (in thousands) as well as our condensed consolidating statements of operations for the second quarter and first half of each of fiscal 2010 and fiscal 2009 (in thousands) and our condensed consolidating statements of cash flows for the first half of fiscal 2010 and fiscal 2009 (in thousands).

 

8



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

July 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

ASSETS

 

Cash and cash equivalents

 

$  25,251

 

$       595

 

$    2,325

 

$          —

 

 28,171

 

Receivables, net

 

32,537

 

6,860

 

44,879

 

(9,665

)

74,611

 

Inventories, net

 

10,744

 

52,677

 

13,632

 

(723

)

76,330

 

Prepaid expenses and deferred tax assets

 

19,038

 

9,086

 

4,457

 

(1,713

)

30,868

 

Total current assets

 

87,570

 

69,218

 

65,293

 

(12,101

)

209,980

 

Property, plant and equipment, net

 

13,014

 

55,786

 

5,119

 

 

73,919

 

Intangible assets, net

 

7

 

112,826

 

23,400

 

 

136,233

 

Other non-current assets, net

 

518,307

 

148,912

 

6,994

 

(651,590

)

22,623

 

Total Assets

 

$618,898

 

$386,742

 

$100,806

 

$(663,691

)

$442,755

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

Current liabilities

 

$  17,886

 

$   47,195

 

$  41,370

 

$    (7,307

)

 99,144

 

Long-term debt, less current maturities

 

146,736

 

 

 

 

146,736

 

Other non-current liabilities

 

336,825

 

(325,463

)

144,157

 

(108,554

)

46,965

 

Non-current deferred income taxes

 

(4,316

)

26,005

 

6,454

 

 

28,143

 

Total shareholders’/invested equity

 

121,767

 

639,005

 

(91,175

)

(547,830

)

121,767

 

Total Liabilities and Shareholders’ Equity

 

$618,898

 

$ 386,742

 

$100,806

 

$(663,691

)

$442,755

 

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

January 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

ASSETS

 

Cash and cash equivalents

 

$    5,954

 

$      782

 

 1,552

 

$          —

 

$   8,288

 

Receivables, net

 

35,943

 

2,412

 

45,958

 

(9,915

)

74,398

 

Inventories, net

 

14,218

 

51,911

 

11,897

 

(997

)

77,029

 

Prepaid expenses and deferred tax assets

 

17,292

 

8,111

 

3,103

 

(3,918

)

24,588

 

Total current assets

 

73,407

 

63,216

 

62,510

 

(14,830

)

184,303

 

Property, plant and equipment, net

 

13,997

 

59,939

 

5,604

 

 

79,540

 

Intangible assets, net

 

28

 

113,173

 

24,289

 

 

137,490

 

Other non-current assets, net

 

499,389

 

148,932

 

4,216

 

(628,696

)

23,841

 

Total Assets

 

$586,821

 

$385,260

 

$96,619

 

$(643,526

)

$425,174

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

Current liabilities

 

39,507

 

27,319

 

38,686

 

(9,650

)

95,862

 

Long-term debt, less current maturities

 

146,408

 

 

 

 

146,408

 

Other non-current liabilities

 

300,896

 

(288,230

)

145,195

 

(107,795

)

50,066

 

Non-current deferred income taxes

 

(4,407

)

27,000

 

6,794

 

(966

)

28,421

 

Total shareholders’/invested equity

 

104,417

 

619,171

 

(94,056

)

(525,115

)

104,417

 

Total Liabilities and Shareholders’ Equity

 

$586,821

 

$385,260

 

$96,619

 

$(643,526

)

$425,174

 

 

9



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

August 1, 2009

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

ASSETS

Cash and cash equivalents

 

$    1,675

 

$         —

 

$    3,786

 

$         —

 

 

$    5,461

 

Receivables, net

 

37,314

 

10,752

 

38,882

 

(8,481

)

 

78,467

 

Inventories, net

 

10,950

 

58,525

 

19,105

 

(1,752

)

 

86,828

 

Prepaid expenses and deferred tax assets

 

9,931

 

9,068

 

3,977

 

544

 

 

23,520

 

Total current assets

 

59,870

 

78,345

 

65,750

 

(9,689

)

 

194,276

 

Property, plant and equipment, net

 

9,793

 

70,320

 

6,252

 

 

 

86,365

 

Intangible assets, net

 

47

 

113,616

 

25,217

 

 

 

138,880

 

Other non-current assets, net

 

473,815

 

145,802

 

35,273

 

(631,958

)

 

22,932

 

Total Assets

 

$543,525

 

$ 408,083

 

$132,492

 

$(641,647

)

 

$442,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

 

$  37,644

 

$   29,710

 

$  47,518

 

$    (7,496

)

 

$107,376

 

Long-term debt, less current maturities

 

160,357

 

 

 

 

 

160,357

 

Other non-current liabilities

 

251,608

 

(205,878

)

110,229

 

(109,155

)

 

46,804

 

Non-current deferred income taxes

 

(3,987

)

27,305

 

6,695

 

 

 

30,013

 

Total shareholders’/invested equity

 

97,903

 

556,946

 

(31,950

)

(524,996

)

 

97,903

 

Total Liabilities and Shareholders’ Equity

 

$543,525

 

$ 408,083

 

$132,492

 

$(641,647

)

 

$442,453

 

 

10



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Second Quarter Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

74,164

 

$

100,899

 

$

20,366

 

$

(8,898

)

$

186,531

 

Cost of goods sold

 

55,564

 

38,637

 

8,424

 

(3,924

)

98,701

 

Gross profit

 

18,600

 

62,262

 

11,942

 

(4,974

)

87,830

 

SG&A including amortization of intangible assets

 

15,844

 

53,194

 

12,825

 

(5,368

)

76,495

 

Royalties and other operating income

 

27

 

2,503

 

1,800

 

(299

)

4,031

 

Operating income

 

2,783

 

11,571

 

917

 

95

 

15,366

 

Interest (income) expense, net

 

5,097

 

(1,078

)

717

 

407

 

5,143

 

Income from equity investment

 

8,549

 

 

 

(8,549

)

 

Earnings before income taxes

 

6,235

 

12,649

 

200

 

(8,861

)

10,223

 

Income taxes (benefit)

 

(1,186

)

4,294

 

5

 

(109

)

3,004

 

Net earnings

 

$

7,421

 

$

8,355

 

$

195

 

$

(8,752

)

$

7,219

 

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

First Half Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

166,840

 

$

211,856

 

$

42,698

 

$

(17,113

)

$

404,281

 

Cost of goods sold

 

124,184

 

81,375

 

16,907

 

(7,597

)

214,869

 

Gross profit

 

42,656

 

130,481

 

25,791

 

(9,516

)

189,412

 

SG&A including amortization of intangible assets

 

38,535

 

107,836

 

25,722

 

(11,596

)

160,497

 

Royalties and other operating income

 

64

 

5,433

 

3,368

 

(993

)

7,872

 

Operating income

 

4,185

 

28,078

 

3,437

 

1,087

 

36,787

 

Interest (income) expense, net

 

10,062

 

(2,119

)

1,399

 

810

 

10,152

 

Income from equity investment

 

21,359

 

 

 

(21,359

)

 

Earnings before income taxes

 

15,482

 

30,197

 

2,038

 

(21,082

)

26,635

 

Income taxes (benefit)

 

(4,052

)

10,360

 

514

 

97

 

6,919

 

Net earnings

 

$

19,534

 

$

19,837

 

$

1,524

 

$

(21,179

)

$

19,716

 

 

11



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Second Quarter Fiscal 2009

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

74,081

 

$

102,239

 

$

25,848

 

$

(9,281

)

$

192,887

 

Cost of goods sold

 

62,270

 

42,965

 

14,596

 

(4,317

)

115,514

 

Gross profit

 

11,811

 

59,274

 

11,252

 

(4,964

)

77,373

 

SG&A including amortization of intangible assets

 

11,175

 

52,187

 

15,821

 

(5,231

)

73,952

 

Royalties and other operating income

 

22

 

2,057

 

1,203

 

(366

)

2,916

 

Operating income (loss)

 

658

 

9,144

 

(3,366

)

(99

)

6,337

 

Interest (income) expense, net

 

6,684

 

(1,370

)

931

 

 

6,245

 

Income from equity investment

 

4,594

 

 

 

(4,594

)

 

Earnings (loss) before income taxes

 

(1,432

)

10,514

 

(4,297

)

(4,693

)

92

 

Income taxes (benefit)

 

(1,316

)

2,821

 

(1,199

)

(34

)

272

 

Net earnings (loss)

 

$

(116

)

$

7,693

 

$

(3,098

)

$

(4,659

)

$

(180

)

 

First Half Fiscal 2009

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

166,874

 

$

210,304

 

$

51,133

 

$

(18,693

)

$

409,618

 

Cost of goods sold

 

136,776

 

88,929

 

25,384

 

(8,778

)

242,311

 

Gross profit

 

30,098

 

121,375

 

25,749

 

(9,915

)

167,307

 

SG&A including amortization of intangible assets

 

25,162

 

109,221

 

29,800

 

(11,240

)

152,943

 

Royalties and other operating income

 

34

 

4,276

 

2,184

 

(1,109

)

5,385

 

Operating income (loss)

 

4,970

 

16,430

 

(1,867

)

216

 

19,749

 

Interest (income) expense, net

 

11,640

 

(2,717

)

1,887

 

 

10,810

 

Income from equity investment

 

11,550

 

 

 

(11,550

)

 

Earnings (loss) before income taxes

 

4,880

 

19,147

 

(3,754

)

(11,334

)

8,939

 

Income taxes (benefit)

 

(1,411

)

5,084

 

(1,241

)

76

 

2,508

 

Net earnings (loss)

 

$

6,291

 

$

14,063

 

$

(2,513

)

$

(11,410

)

$

6,431

 

 

12



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Half Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

$

(14,632

)

 

$

39,115

 

 

$ 1,053

 

 

$ —

 

$25,536

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(485

)

 

 

(2,430

)

 

(377

)

 

 

(3,292

)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in debt

 

 

 

 

 

 

 

1,172

 

 

 

1,172

 

 

Proceeds from issuance of common stock

 

 

230

 

 

 

 

 

 

 

 

230

 

 

Change in intercompany payable

 

 

37,822

 

 

 

(36,872

)

 

(950

)

 

 

 

 

Dividends on common stock

 

 

(3,638

)

 

 

 

 

 

 

 

(3,638

)

 

Net cash (used in) provided by financing activities

 

 

34,414

 

 

 

(36,872

)

 

222

 

 

 

(2,236

)

 

Net change in cash and cash equivalents

 

 

19,297

 

 

 

(187

)

 

898

 

 

 

20,008

 

 

Effect of foreign currency translation

 

 

 

 

 

 

 

(125

)

 

 

(125

)

 

Cash and cash equivalents at the beginning of year

 

 

5,954

 

 

 

782

 

 

1,552

 

 

 

8,288

 

 

Cash and cash equivalents at the end of period

 

$

25,251

 

 

$

595

 

 

$ 2,325

 

 

$ —

 

$28,171

 

 

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Half Fiscal 2009

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

$

(97

)

 

$

35,965

 

 

$

(762

)

 

$ —

 

$

35,106

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(1,496

)

 

 

(3,212

)

 

 

(1,132

)

 

 

 

(5,840

)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in debt

 

 

(24,221

)

 

 

 

 

 

4,169

 

 

 

 

(20,052

)

 

Payments of debt issuance costs

 

 

(4,878

)

 

 

 

 

 

 

 

 

 

(4,878

)

 

Proceeds from issuance of common stock

 

 

193

 

 

 

 

 

 

 

 

 

 

193

 

 

Change in intercompany payable

 

 

33,566

 

 

 

(33,290

)

 

 

(276

)

 

 

 

 

 

Dividends on common stock

 

 

(2,919

)

 

 

 

 

 

 

 

 

 

(2,919

)

 

Net cash (used in) provided by financing activities

 

 

1,741

 

 

 

(33,290

)

 

 

3,893

 

 

 

 

(27,656

)

 

Net change in cash and cash equivalents

 

 

148

 

 

 

(537

)

 

 

1,999

 

 

 

 

1,610

 

 

Effect of foreign currency translation

 

 

 

 

 

 

 

 

561

 

 

 

 

561

 

 

Cash and cash equivalents at the beginning of year

 

 

1,527

 

 

 

537

 

 

 

1,226

 

 

 

 

3,290

 

 

Cash and cash equivalents at the end of period

 

$

1,675

 

 

$

 

 

$

3,786

 

 

$ —

 

$

5,461

 

 

 

13



Table of Contents

 

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

 

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for fiscal 2009.

 

OVERVIEW

 

We generate revenues and cash flow primarily through the design, production, sale and distribution of branded and private label consumer apparel for men and women and the licensing of company-owned trademarks. Our principal markets and customers are located in the United States and, to a lesser extent, the United Kingdom. We source substantially all of our products through third-party manufacturers located outside of the United States and United Kingdom. We distribute the majority of our products through our wholesale customers, which include chain stores, department stores, specialty stores, specialty catalog retailers, mass merchants and Internet retailers. Our products for certain owned brands are also sold through our owned and licensed retail stores and e-commerce websites.

 

As a result of the weak global economic conditions, fiscal 2009 was a particularly challenging year for each of our operating groups. While we have seen some signs of recovery, we believe these challenging economic conditions will continue to persist and impact each of our operating groups through the end of fiscal 2010, or beyond. Thus, we have purchased inventory for fiscal 2010 at levels which we believe should mitigate inventory markdown risk and promotional pressure; however, these precautions may also limit our growth opportunities. In the current economic environment, we also believe it is important to continue to focus on maintaining a strong balance sheet and ample liquidity. We believe that the measures we have taken to reduce working capital requirements, moderate capital expenditures for retail stores, reduce our overhead and refinance our significant debt agreements have significantly enhanced our balance sheet and liquidity.

 

The apparel and retail industry is cyclical and dependent upon the overall level of discretionary consumer spending, which changes as regional, domestic and international economic conditions change. The impact of negative economic conditions may have a longer and more severe impact on the apparel and retail industry than the same conditions have on other industries. Therefore, even if conditions improve in the general economy, the negative impact on the apparel and retail industry may continue.

 

The following table sets forth our consolidated operating results (in thousands, except per share amounts) for the first half of fiscal 2010 compared to the first half of fiscal 2009:

 

 

 

First Half

 

 

 

 

 

 

Fiscal 2010

 

 

Fiscal 2009

 

 

$ Change

 

Net sales

 

$404,281

 

 

$409,618

 

 

$ (5,337

)

Net earnings

 

$  19,716

 

 

$    6,431

 

 

$13,285

 

Diluted net earnings per common share

 

$      1.19

 

 

$      0.40

 

 

$    0.79

 

Weighted average common shares outstanding—diluted

 

16,527

 

 

16,083

 

 

444

 

 

The primary reasons for the improvement in net earnings were:

 

·                  A change in our net sales mix, with Tommy Bahama sales, which generally have higher gross margins than our other operating groups, representing a higher proportion of consolidated net sales and sales related to certain exited businesses representing a lower proportion of consolidated net sales during the first half of fiscal 2010. The first half of fiscal 2009 included $26.4 million of net sales associated with businesses that we have exited.

 

·                  Improved gross margins, which benefitted from the first half of fiscal 2010 including a LIFO charge of $1.6 million compared to the first half of fiscal 2009 including a LIFO charge of $5.5 million.

 

14



Table of Contents

 

·                  Increased royalty income in both Tommy Bahama and Ben Sherman resulting from increased sales during the first half of fiscal 2010 by existing licensees, as well as the addition of new licensees.

 

·                  The first half of fiscal 2009 included $1.4 million of restructuring charges related to Ben Sherman’s exit from and subsequent licensing of its footwear and kids operations and other streamlining initiatives.

 

·                  The first half of fiscal 2009 included a $1.8 million write-off of unamortized deferred financing costs related to the satisfaction and discharge of the remaining 8 7/8% Senior Unsecured Notes, which was included in interest expense.

 

These items were partially offset by increased SG&A primarily due to increased incentive compensation amounts resulting from the resumption of our incentive compensation program, which was suspended in fiscal 2009 and is tied to our financial performance.

 

OPERATING GROUPS

 

Our business is operated through our four operating groups: Tommy Bahama, Ben Sherman, Lanier Clothes and Oxford Apparel. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance.

 

Tommy Bahama designs, sources and markets collections of men’s and women’s sportswear and related products. The target consumers of Tommy Bahama are affluent men and women age 35 and older who embrace a relaxed and casual approach to daily living. Tommy Bahama® products can be found in our owned and licensed Tommy Bahama retail stores and on our e-commerce website, as well as in certain department stores and independent specialty stores throughout the United States. We also license the Tommy Bahama name for various product categories and operate Tommy Bahama restaurants.

 

Ben Sherman is a London-based designer, marketer and distributor of branded sportswear and related products. Ben Sherman® was established in 1963 as an edgy, young men’s, “Mod”-inspired shirt brand and has evolved into a British lifestyle brand of apparel targeted at youthful-thinking men age 19 to 35 throughout the world. We offer a Ben Sherman men’s sportswear collection, as well as tailored clothing and accessories. Our Ben Sherman products can be found in certain department stores, a variety of independent specialty stores and our owned and licensed Ben Sherman retail stores, as well as on our e-commerce websites. We also license the Ben Sherman name for various product categories.

 

Lanier Clothes designs and markets branded and private label men’s suits, sportcoats, suit separates and dress slacks across a wide range of price points. Certain Lanier Clothes products are sold using trademarks licensed to us by third parties, including Kenneth Cole®, Dockers®, and Geoffrey Beene®. We also offer branded tailored clothing products under our Billy London® and Arnold Brant® trademarks. In addition to our branded businesses, we design and source certain private label tailored clothing products. Significant private label brands include Stafford®, Lands’ End® and Alfani®. Our Lanier Clothes products are sold to national chains, department stores, mass merchants, specialty stores, specialty catalog retailers and discount retailers throughout the United States.

 

Oxford Apparel produces branded and private label dress shirts, suit separates, sport shirts, casual slacks, outerwear, sweaters, jeans, swimwear, westernwear and golf apparel. We design and source certain private label programs for several customers, including programs for Costco, Sears, Target and Macy’s. Significant owned brands of Oxford Apparel include Oxford Golf®, Ely®, Cattleman® and Cumberland Outfitters®. Oxford Apparel also owns a two-thirds interest in the entity that owns the Hathaway® trademark in the United States and several other countries. Additionally, Oxford Apparel licenses from third parties the right to use certain trademarks, including Dockers and United States Polo Association®, for certain apparel products. Our Oxford Apparel products are sold to a variety of department stores, mass merchants, specialty catalog retailers, discount retailers, specialty stores, “green grass” golf merchants and Internet retailers throughout the United States.

 

Corporate and Other is a reconciling category for reporting purposes and includes our corporate office, substantially all financing activities, elimination of inter-segment sales, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis which does not correspond to our operating group definitions; therefore, LIFO inventory accounting adjustments are not allocated to operating groups.

 

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For further information regarding our operating groups, see Note 4 to our unaudited condensed consolidated financial statements included in this report and Part I, Item 1, Business in our Annual Report on Form 10-K for fiscal 2009.

 

RESULTS OF OPERATIONS

 

SECOND QUARTER OF FISCAL 2010 COMPARED TO SECOND QUARTER OF FISCAL 2009

 

The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. The table also sets forth the dollar change and the percentage change of the data as compared to the same period of the prior year. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding. Individual line items of our consolidated statements of operations may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.

 

 

 

Second Quarter

 

 

 

 

 

 

 

Fiscal 2010

 

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