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 |
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For the quarterly period ended APRIL 30, 2011 |
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or | |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number: 1-4365
OXFORD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Georgia |
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58-0831862 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
222 Piedmont Avenue, N.E., Atlanta, Georgia 30308
(Address of principal executive offices) (Zip Code)
(404) 659-2424
(Registrants 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 £ | ||
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(Do not check if a smaller reporting company) |
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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 issuers classes of common stock, as of the latest practicable date.
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Number of shares outstanding |
Title of each class |
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as of June 3, 2011 |
Common Stock, $1 par value |
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16,507,870 |
OXFORD INDUSTRIES, INC.
For the first quarter of fiscal 2011
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 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, costs of labor, access to capital and/or credit markets, acquisition and disposition activities, 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 2010, 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
Discontinued operations: References to discontinued operations represent the assets and operations of our former Oxford Apparel operating group which we sold in the fourth quarter of fiscal 2010, as discussed in our Annual Report on Form 10-K for fiscal 2010.
113/8% Senior Secured Notes: Our 11.375% senior secured notes due 2015, as described in Part I, Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations in this report.
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
Fiscal 2011 |
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52 weeks ending January 28, 2012 |
Fourth quarter fiscal 2011 |
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13 weeks ending January 28, 2012 |
Third quarter fiscal 2011 |
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13 weeks ending October 29, 2011 |
Second quarter fiscal 2011 |
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13 weeks ending July 30, 2011 |
First quarter fiscal 2011 |
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13 weeks ended April 30, 2011 |
Fiscal 2010 |
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52 weeks ended January 29, 2011 |
Fourth quarter fiscal 2010 |
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13 weeks ended January 29, 2011 |
Third quarter fiscal 2010 |
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13 weeks ended October 30, 2010 |
Second quarter fiscal 2010 |
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13 weeks ended July 31, 2010 |
First quarter fiscal 2010 |
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13 weeks ended May 1, 2010 |
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
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First Quarter |
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First Quarter |
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Net sales |
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$208,308 |
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$163,625 |
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Cost of goods sold |
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90,648 |
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73,918 |
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Gross profit |
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117,660 |
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89,707 |
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SG&A |
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90,840 |
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78,009 |
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Amortization of intangible assets |
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298 |
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240 |
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Change in fair value of contingent consideration |
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600 |
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91,738 |
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78,249 |
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Royalties and other operating income |
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4,791 |
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3,513 |
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Operating income |
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30,713 |
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14,971 |
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Interest expense, net |
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4,804 |
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4,967 |
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Earnings from continuing operations before income taxes |
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25,909 |
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10,004 |
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Income taxes |
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8,849 |
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1,480 |
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Earnings from continuing operations |
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17,060 |
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8,524 |
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Earnings from discontinued operations, net of taxes |
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1,040 |
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3,973 |
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Net earnings |
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$ 18,100 |
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$ 12,497 |
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Earnings from continuing operations, net of taxes per common share: |
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Basic |
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$ 1.03 |
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$ 0.52 |
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Diluted |
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$ 1.03 |
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$ 0.52 |
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Earnings from discontinued operations, net of taxes per common share: |
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Basic |
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$ 0.06 |
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$ 0.24 |
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Diluted |
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$ 0.06 |
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$ 0.24 |
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Net earnings per common share: |
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Basic |
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$ 1.10 |
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$ 0.76 |
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Diluted |
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$ 1.10 |
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$ 0.76 |
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Weighted average common shares outstanding: |
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Basic |
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16,515 |
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16,491 |
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Dilution |
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10 |
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12 |
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Diluted |
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16,525 |
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16,503 |
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Dividends declared per common share |
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$ 0.13 |
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$ 0.11 |
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See accompanying notes.
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par amounts)
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April 30, |
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January 29, |
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May 1, |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ 47,033 |
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$ 44,094 |
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$ 18,823 |
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Receivables, net |
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72,263 |
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50,177 |
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61,423 |
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Inventories, net |
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62,843 |
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85,338 |
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45,790 |
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Prepaid expenses, net |
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10,912 |
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12,554 |
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12,041 |
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Deferred tax assets |
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16,266 |
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19,005 |
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15,397 |
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Assets related to discontinued operations, net |
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33,409 |
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57,745 |
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51,372 |
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Total current assets |
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242,726 |
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268,913 |
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204,846 |
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Property and equipment, net |
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82,899 |
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83,895 |
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75,404 |
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Intangible assets, net |
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167,573 |
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166,680 |
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136,015 |
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Goodwill |
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16,185 |
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16,866 |
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Other non-current assets, net |
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21,716 |
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22,117 |
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17,369 |
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Total Assets |
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$531,099 |
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$558,471 |
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$433,634 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities: |
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Trade accounts payable and other accrued expenses |
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$ 73,746 |
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$ 83,211 |
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$ 61,288 |
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Accrued compensation |
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15,558 |
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23,095 |
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15,213 |
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Income taxes payable |
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6,289 |
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5,808 |
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Short-term debt and current maturities of long-term debt |
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716 |
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2,856 |
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Liabilities related to discontinued operations |
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4,949 |
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40,785 |
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11,354 |
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Total current liabilities |
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101,258 |
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147,091 |
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96,519 |
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Long-term debt, less current maturities |
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147,228 |
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147,065 |
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146,572 |
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Other non-current liabilities |
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55,048 |
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55,441 |
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47,825 |
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Non-current deferred income taxes |
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30,231 |
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28,846 |
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28,192 |
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Commitments and contingencies |
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Shareholders Equity: |
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Common stock, $1.00 par value per common share |
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16,511 |
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16,511 |
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16,526 |
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Additional paid-in capital |
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96,679 |
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96,597 |
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93,131 |
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Retained earnings |
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106,700 |
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90,739 |
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30,036 |
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Accumulated other comprehensive loss |
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(22,556 |
) |
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(23,819 |
) |
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(25,167 |
) |
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Total shareholders equity |
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197,334 |
|
|
180,028 |
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114,526 |
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Total Liabilities and Shareholders Equity |
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$531,099 |
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$558,471 |
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$433,634 |
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See accompanying notes.
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
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First Quarter |
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First Quarter |
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Cash Flows From Operating Activities: |
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|
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|
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Earnings from continuing operations |
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$ 17,060 |
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$ 8,524 |
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Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: |
|
|
|
|
|
|
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Depreciation |
|
4,809 |
|
|
4,310 |
|
|
Amortization of intangible assets |
|
298 |
|
|
240 |
|
|
Change in fair value of contingent consideration |
|
600 |
|
|
|
|
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Amortization/write-off of deferred financing costs and bond discount |
|
487 |
|
|
488 |
|
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Stock compensation expense |
|
864 |
|
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1,578 |
|
|
Loss on sale of property and equipment |
|
12 |
|
|
2 |
|
|
Deferred income taxes |
|
3,819 |
|
|
(1,433 |
) |
|
Changes in working capital: |
|
|
|
|
|
|
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Receivables |
|
(20,962 |
) |
|
(17,340 |
) |
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Inventories |
|
23,003 |
|
|
11,824 |
|
|
Prepaid expenses |
|
1,110 |
|
|
(1,679 |
) |
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Current liabilities |
|
(13,631 |
) |
|
5,052 |
|
|
Other non-current assets |
|
756 |
|
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(309 |
) |
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Other non-current liabilities |
|
(1,009 |
) |
|
(1,618 |
) |
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Net cash provided by operating activities |
|
17,216 |
|
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9,639 |
|
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Cash Flows From Investing Activities: |
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|
|
|
|
|
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Purchases of property and equipment |
|
(3,634 |
) |
|
(1,540 |
) |
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Net cash used in investing activities |
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(3,634 |
) |
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(1,540 |
) |
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Cash Flows From Financing Activities: |
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|
|
|
|
|
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Repayment of revolving credit arrangements |
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(12,283 |
) |
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(22,350 |
) |
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Proceeds from revolving credit arrangements |
|
12,978 |
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|
25,233 |
|
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Proceeds from issuance of common stock |
|
939 |
|
|
115 |
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Dividends on common stock |
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(2,142 |
) |
|
(1,821 |
) |
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Net cash (used in) provided by financing activities |
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(508 |
) |
|
1,177 |
|
|
Cash Flows from Discontinued Operations: |
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|
|
|
|
|
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Net operating cash flows (used in) provided by discontinued operations |
|
(10,413 |
) |
|
1,478 |
|
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Net investing cash flows used in discontinued operations |
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|
|
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(21 |
) |
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Net cash (used in) provided by discontinued operations |
|
(10,413 |
) |
|
1,457 |
|
|
|
|
|
|
|
|
|
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Net change in cash and cash equivalents |
|
2,661 |
|
|
10,733 |
|
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Effect of foreign currency translation on cash and cash equivalents |
|
278 |
|
|
(198 |
) |
|
Cash and cash equivalents at the beginning of year |
|
44,094 |
|
|
8,288 |
|
|
Cash and cash equivalents at the end of period |
|
$ 47,033 |
|
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$ 18,823 |
|
|
|
|
|
|
|
|
|
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Supplemental disclosure of cash flow information: |
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|
|
|
|
|
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Cash paid for interest, net, including interest paid for discontinued operations |
|
$ 306 |
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$ 286 |
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Cash paid for income taxes, including income taxes paid for discontinued operations |
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$ 27,344 |
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$ 3,404 |
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|
See accompanying notes.
OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIRST QUARTER OF FISCAL 2011
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 2010.
Unless indicated otherwise, all references to assets, liabilities, revenues and expenses in this report reflect continuing operations and exclude any amounts related to the discontinued operations of our former Oxford Apparel operating group, as discussed in Note 6 to our unaudited condensed consolidated financial statements included in this report and Note 15 of our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2010,
In May 2011, the FASB amended ASC 820 Fair Value Measurements and Disclosures in order to clarify existing guidance in U.S. GAAP, better align ASC 820 with International Accounting Standards and require additional fair value disclosures. The amendments to ASC 820 become effective in fiscal 2012, with all amendments applied prospectively with any changes in measurements recognized in earnings in the period of adoption. We are currently assessing the impact of adopting the amendments to ASC 820.
2. Inventories: The components of inventories related to continuing operations as of the dates specified are summarized as follows (in thousands):
|
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April 30, |
|
January 29, |
|
May 1, |
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Finished goods |
|
$ |
101,150 |
|
|
$ |
122,159 |
|
|
$ |
81,790 |
|
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Work in process |
|
3,639 |
|
|
5,744 |
|
|
5,001 |
|
| |||
Fabric, trim and supplies |
|
4,008 |
|
|
3,389 |
|
|
3,437 |
|
| |||
LIFO reserve |
|
(45,954 |
) |
|
(45,954 |
) |
|
(44,438 |
) |
| |||
Total |
|
$ |
62,843 |
|
|
$ |
85,338 |
|
|
$ |
45,790 |
|
|
3. Comprehensive Income: Other comprehensive income includes all changes in equity from non-owner sources, such as foreign currency translation adjustments and the net unrealized gain (loss) associated with forward foreign currency exchange contracts which qualify for hedge accounting. Comprehensive income, net of income taxes, is calculated as follows for the periods presented (in thousands):
|
|
First Quarter |
|
First Quarter |
|
Net earnings |
|
$ 18,100 |
|
$ 12,497 |
|
Gain (loss) on foreign currency translation |
|
1,768 |
|
(1,927 |
) |
Net unrealized loss on forward foreign exchange contracts |
|
(505 |
) |
|
|
Comprehensive income |
|
$ 19,363 |
|
$ 10,570 |
|
4. Operating Group Information: Our business is primarily operated through our four operating groups: Tommy Bahama, Lilly Pulitzer, Ben Sherman and Lanier Clothes. 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. All amounts included in this report reflect our changes in operating groups during fiscal 2010, as disclosed in our Annual Report on Form 10-K for fiscal 2010. The table below presents certain information about the continuing operations of our operating groups (in thousands).
|
|
First Quarter |
|
First Quarter |
| ||
Net Sales |
|
|
|
|
| ||
Tommy Bahama |
|
$ |
122,903 |
|
$ |
109,105 |
|
Lilly Pulitzer |
|
29,873 |
|
|
| ||
Ben Sherman |
|
19,421 |
|
22,154 |
| ||
Lanier Clothes |
|
32,973 |
|
30,428 |
| ||
Corporate and Other |
|
3,138 |
|
1,938 |
| ||
Total |
|
$ |
208,308 |
|
$ |
163,625 |
|
Depreciation |
|
|
|
|
| ||
Tommy Bahama |
|
$ |
3,381 |
|
$ |
3,274 |
|
Lilly Pulitzer |
|
354 |
|
|
| ||
Ben Sherman |
|
525 |
|
536 |
| ||
Lanier Clothes |
|
109 |
|
119 |
| ||
Corporate and Other |
|
440 |
|
381 |
| ||
Total |
|
$ |
4,809 |
|
$ |
4,310 |
|
Amortization of Intangible Assets |
|
|
|
|
| ||
Tommy Bahama |
|
$ |
129 |
|
$ |
173 |
|
Lilly Pulitzer |
|
114 |
|
|
| ||
Ben Sherman |
|
55 |
|
67 |
| ||
Lanier Clothes |
|
|
|
|
| ||
Corporate and Other |
|
|
|
|
| ||
Total |
|
$ |
298 |
|
$ |
240 |
|
Operating Income (Loss) |
|
|
|
|
| ||
Tommy Bahama |
|
$ |
23,770 |
|
$ |
17,861 |
|
Lilly Pulitzer |
|
7,015 |
|
|
| ||
Ben Sherman |
|
(826 |
) |
522 |
| ||
Lanier Clothes |
|
4,725 |
|
4,359 |
| ||
Corporate and Other |
|
(3,971 |
) |
(7,771 |
) | ||
Total Operating Income |
|
30,713 |
|
14,971 |
| ||
Interest expense, net |
|
4,804 |
|
4,967 |
| ||
Earnings From Continuing Operations Before Income Taxes |
|
$ |
25,909 |
|
$ |
10,004 |
|
|
|
April 30, |
|
January 29, |
|
May 1, |
| |||
Total Assets |
|
|
|
|
|
|
| |||
Tommy Bahama |
|
$ |
274,252 |
|
$ |
274,140 |
|
$ |
265,148 |
|
Lilly Pulitzer |
|
81,960 |
|
79,476 |
|
|
| |||
Ben Sherman |
|
67,680 |
|
67,478 |
|
65,313 |
| |||
Lanier Clothes |
|
32,283 |
|
35,530 |
|
40,712 |
| |||
Corporate and Other |
|
41,515 |
|
44,102 |
|
11,089 |
| |||
Discontinued Operations |
|
33,409 |
|
57,745 |
|
51,372 |
| |||
Total |
|
$ |
531,099 |
|
$ |
558,471 |
|
$ |
433,634 |
|
5. Business Combinations: On December 21, 2010, we acquired the Lilly Pulitzer brand and operations, as described in Note 14 of our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2010. As of April 30, 2011, we have not finalized our allocation of purchase price to the fair values of the acquired assets and liabilities, and we will revise our allocation through the one year period following the closing of the transaction, as appropriate, as we obtain new information about the fair values of these assets and liabilities, including the contingent consideration. During the first quarter of fiscal 2011, we did not record any significant adjustments to the initial purchase price allocation included in Note 14 of our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2010. As of April 30, 2011, the estimated fair value of the contingent consideration was approximately $11.3 million compared to $10.5 million as of the date of acquisition, with the change in fair value representing the passage of time from the date of acquisition as we approach the dates of the anticipated payments in the future.
6. Discontinued Operations: On January 3, 2011, we sold substantially all of the assets and operations of our former Oxford Apparel operating group, as discussed in Note 15 of our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2010. The results of operations and assets which were sold are reflected in discontinued operations in our consolidated financial statements. The following represents the major classes of assets and liabilities related to the discontinued operations included in our consolidated balance sheets as of the following dates (in thousands):
|
|
April 30, |
|
January 29, |
|
May 1, |
|
Receivables, net |
|
$26,763 |
|
$48,564 |
|
$33,058 |
|
Inventories, net |
|
6,627 |
|
9,162 |
|
10,529 |
|
Other current assets, net |
|
19 |
|
19 |
|
245 |
|
Property and equipment, net |
|
|
|
|
|
1,070 |
|
Other assets, net |
|
|
|
|
|
6,470 |
|
Total assets |
|
33,409 |
|
57,745 |
|
51,372 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
4,949 |
|
40,785 |
|
11,354 |
|
Net assets |
|
$28,460 |
|
$16,960 |
|
$40,018 |
|
Net sales, earnings from discontinued operations before income taxes and earnings from discontinued operations, net of income taxes are shown in the table below (in thousands):
|
|
First |
|
First |
|
Net sales |
|
$2,189 |
|
$54,125 |
|
Earnings from discontinued operations before income taxes |
|
$1,577 |
|
$ 6,408 |
|
Earnings from discontinued operations, net of income taxes |
|
$1,040 |
|
$ 3,973 |
|
7. Subsequent Event: In May 2011, we repurchased, in a privately negotiated transaction, $40.0 million in aggregate principal amount of our 113/8% Senior Secured Notes for approximately $46.6 million, plus accrued interest, using cash on hand. The repurchase of the 113/8% Senior Secured Notes and related write-off of approximately $1.6 million of unamortized deferred financing costs and discount resulted in a loss of approximately $8.2 million, which will be reflected in our consolidated financial statements for the second quarter of fiscal 2011. After completion of the transaction, $110.0 million aggregate principal amount of our 113/8% Senior Secured Notes remain outstanding.
8. Consolidating Financial Data of Subsidiary Guarantors: Our 113/8% Senior Secured Notes 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 April 30, 2011, January 29, 2011 and May 1, 2010 (in thousands) as well as our condensed consolidating statements of operations for the first quarter of fiscal 2011 and fiscal 2010 (in thousands) and our condensed consolidating statements of cash flows for the first quarter of fiscal 2011 and fiscal 2010 (in thousands).
OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
April 30, 2011
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
ASSETS | |||||||||||
Cash and cash equivalents |
|
$ 40,734 |
|
$ 1,255 |
|
$ 5,044 |
|
$ |
|
$ 47,033 |
|
Receivables, net |
|
11,518 |
|
25,999 |
|
47,767 |
|
(13,021 |
) |
72,263 |
|
Inventories, net |
|
(20,728) |
|
75,609 |
|
8,720 |
|
(758 |
) |
62,843 |
|
Prepaid expenses and deferred tax assets |
|
17,227 |
|
11,186 |
|
2,648 |
|
(3,883 |
) |
27,178 |
|
Assets related to discontinued operations, net |
|
33,409 |
|
|
|
|
|
|
|
33,409 |
|
Total current assets |
|
82,160 |
|
114,049 |
|
64,179 |
|
(17,662 |
) |
242,726 |
|
Property and equipment, net |
|
7,017 |
|
71,578 |
|
4,304 |
|
|
|
82,899 |
|
Goodwill and intangible assets, net |
|
|
|
158,618 |
|
25,140 |
|
|
|
183,758 |
|
Other non-current assets, net |
|
602,112 |
|
143,219 |
|
4,153 |
|
(727,768 |
) |
21,716 |
|
Total Assets |
|
$691,289 |
|
$487,464 |
|
$97,776 |
|
$(745,430 |
) |
$531,099 |
|
| |||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||||
Current liabilities related to continuing operations |
|
$ 15,882 |
|
$ 59,167 |
|
$35,838 |
|
$ (14,578 |
) |
$96,309 |
|
Current liabilities related to discontinued operations |
|
4,949 |
|
|
|
|
|
|
|
4,949 |
|
Long-term debt, less current maturities |
|
147,228 |
|
|
|
|
|
|
|
147,228 |
|
Other non-current liabilities |
|
330,114 |
|
(314,051 |
) |
145,780 |
|
(106,795 |
) |
55,048 |
|
Non-current deferred income taxes |
|
(4,218 |
) |
27,883 |
|
6,566 |
|
|
|
30,231 |
|
Total shareholders/invested equity |
|
197,334 |
|
714,465 |
|
(90,408 |
) |
(624,057 |
) |
197,334 |
|
Total Liabilities and Shareholders Equity |
|
$691,289 |
|
$487,464 |
|
$97,776 |
|
$(745,430 |
) |
$531,099 |
|
January 29, 2011
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
ASSETS | |||||||||||
Cash and cash equivalents |
|
$ 41,130 |
|
$ 809 |
|
$ 2,155 |
|
$ |
|
$ 44,094 |
|
Receivables, net |
|
10,969 |
|
3,431 |
|
44,897 |
|
(9,120 |
) |
50,177 |
|
Inventories, net |
|
(13,234 |
) |
86,747 |
|
11,889 |
|
(64 |
) |
85,338 |
|
Prepaid expenses and deferred tax assets |
|
19,756 |
|
12,671 |
|
3,018 |
|
(3,886 |
) |
31,559 |
|
Assets related to discontinued operations, net |
|
46,418 |
|
324 |
|
11,003 |
|
|
|
57,745 |
|
Total current assets |
|
105,039 |
|
103,982 |
|
72,962 |
|
(13,070 |
) |
268,913 |
|
Property and equipment, net |
|
7,182 |
|
72,323 |
|
4,390 |
|
|
|
83,895 |
|
Goodwill and intangible assets, net |
|
|
|
159,543 |
|
24,003 |
|
|
|
183,546 |
|
Other non-current assets, net |
|
579,130 |
|
143,459 |
|
4,101 |
|
(704,573 |
) |
22,117 |
|
Total Assets |
|
$691,351 |
|
$479,307 |
|
$105,456 |
|
$(717,643 |
) |
$558,471 |
|
| |||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||||
Current liabilities related to continuing operations |
|
$ 13,978 |
|
$ 59,255 |
|
$ 41,170 |
|
$ (8,097 |
) |
$106,306 |
|
Current liabilities related to discontinued operations |
|
32,379 |
|
|
|
8,406 |
|
|
|
40,785 |
|
Long-term debt, less current maturities |
|
147,065 |
|
|
|
|
|
|
|
147,065 |
|
Other non-current liabilities |
|
322,237 |
|
(301,271 |
) |
143,113 |
|
(108,638 |
) |
55,441 |
|
Non-current deferred income taxes |
|
(4,336 |
) |
26,944 |
|
6,332 |
|
(94 |
) |
28,846 |
|
Total shareholders/invested equity |
|
180,028 |
|
694,379 |
|
(93,565 |
) |
(600,814 |
) |
180,028 |
|
Total Liabilities and Shareholders Equity |
|
$691,351 |
|
$479,307 |
|
$105,456 |
|
$(717,643 |
) |
$558,471 |
|
OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
May 1, 2010
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
ASSETS | |||||||||||
Cash and cash equivalents |
|
$ 13,558 |
|
$ 577 |
|
$ 4,688 |
|
$ |
|
$ 18,823 |
|
Receivables, net |
|
14,756 |
|
17,815 |
|
36,542 |
|
(7,690 |
) |
61,423 |
|
Inventories, net |
|
(16,456 |
) |
56,400 |
|
6,512 |
|
(666 |
) |
45,790 |
|
Prepaid expenses and deferred tax assets, net |
|
18,118 |
|
8,578 |
|
4,625 |
|
(3,883 |
) |
27,438 |
|
Assets related to discontinued operations, net |
|
39,560 |
|
6,649 |
|
5,163 |
|
|
|
51,372 |
|
Total current assets |
|
69,536 |
|
90,019 |
|
57,530 |
|
(12,239 |
) |
204,846 |
|
Property and equipment, net |
|
8,143 |
|
62,007 |
|
5,254 |
|
|
|
75,404 |
|
Goodwill and intangible assets, net |
|
|
|
112,708 |
|
23,307 |
|
|
|
136,015 |
|
Other non-current assets, net |
|
500,030 |
|
142,826 |
|
4,048 |
|
(629,535 |
) |
17,369 |
|
Total Assets |
|
$577,709 |
|
$407,560 |
|
$90,139 |
|
$(641,774 |
) |
$433,634 |
|
| |||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||||
Current liabilities related to continuing operations |
|
$ 25,263 |
|
$ 39,008 |
|
$28,567 |
|
$ (7,673 |
) |
$ 85,165 |
|
Current liabilities related to discontinued operations |
|
5,972 |
|
|
|
5,382 |
|
|
|
11,354 |
|
Long-term debt, less current maturities |
|
146,572 |
|
|
|
|
|
|
|
146,572 |
|
Other non-current liabilities |
|
289,627 |
|
(277,231 |
) |
143,959 |
|
(108,530 |
) |
47,825 |
|
Non-current deferred income taxes |
|
(4,251 |
) |
25,863 |
|
6,580 |
|
|
|
28,192 |
|
Total shareholders/invested equity |
|
114,526 |
|
619,920 |
|
(94,349 |
) |
(525,571 |
) |
114,526 |
|
Total Liabilities and Shareholders Equity |
|
$577,709 |
|
$407,560 |
|
$90,139 |
|
$(641,774 |
) |
$433,634 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
First Quarter Fiscal 2011
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
Net sales |
|
$ |
35,721 |
|
$ |
159,001 |
|
$ |
21,692 |
|
$ |
(8,106 |
) |
$ |
208,308 |
|
Cost of goods sold |
|
24,435 |
|
62,641 |
|
8,269 |
|
(4,697 |
) |
90,648 |
| |||||
Gross profit |
|
11,286 |
|
96,360 |
|
13,423 |
|
(3,409 |
) |
117,660 |
| |||||
SG&A including amortization of intangible assets and change in fair value of contingent consideration |
|
10,314 |
|
73,189 |
|
12,478 |
|
(4,243 |
) |
91,738 |
| |||||
Royalties and other operating income |
|
53 |
|
2,913 |
|
1,882 |
|
(57 |
) |
4,791 |
| |||||
Operating income |
|
1,025 |
|
26,084 |
|
2,827 |
|
777 |
|
30,713 |
| |||||
Interest (income) expense, net |
|
4,427 |
|
(1,197 |
) |
759 |
|
815 |
|
4,804 |
| |||||
Income from equity investment |
|
21,901 |
|
|
|
|
|
(21,901 |
) |
|
| |||||
Earnings from continuing operations before income taxes |
|
18,499 |
|
27,281 |
|
2,068 |
|
(21,939 |
) |
25,909 |
| |||||
Income taxes (benefit) |
|
1,273 |
|
7,336 |
|
254 |
|
(14 |
) |
8,849 |
| |||||
Earnings from continuing operations |
|
17,226 |
|
19,945 |
|
1,814 |
|
(21,925 |
) |
17,060 |
| |||||
Earnings from discontinued operations, net of taxes |
|
897 |
|
143 |
|
|
|
|
|
1,040 |
| |||||
Net earnings |
|
$ |
18,123 |
|
$ |
20,088 |
|
$ |
1,814 |
|
$ |
(21,925 |
) |
$ |
18,100 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
First Quarter Fiscal 2010
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
Net sales |
|
$ |
32,579 |
|
$ |
116,929 |
|
$ |
20,821 |
|
$ |
(6,704 |
) |
$ |
163,625 |
|
Cost of goods sold |
|
22,299 |
|
46,884 |
|
8,483 |
|
(3,748 |
) |
73,918 |
| |||||
Gross profit |
|
10,280 |
|
70,045 |
|
12,338 |
|
(2,956 |
) |
89,707 |
| |||||
SG&A including amortization of intangible assets and change in fair value of contingent consideration |
|
13,056 |
|
58,013 |
|
11,312 |
|
(4,132 |
) |
78,249 |
| |||||
Royalties and other operating income |
|
23 |
|
2,100 |
|
1,574 |
|
(184 |
) |
3,513 |
| |||||
Operating income |
|
(2,753 |
) |
14,132 |
|
2,600 |
|
992 |
|
14,971 |
| |||||
Interest (income) expense, net |
|
4,923 |
|
(1,041 |
) |
682 |
|
403 |
|
4,967 |
| |||||
Income from equity investment |
|
11,260 |
|
|
|
|
|
(11,260 |
) |
|
| |||||
Earnings from continuing operations before income taxes |
|
3,584 |
|
15,173 |
|
1,918 |
|
(10,671 |
) |
10,004 |
| |||||
Income taxes (benefit) |
|
(5,310 |
) |
6,066 |
|
518 |
|
206 |
|
1,480 |
| |||||
Earnings from continuing operations |
|
8,894 |
|
9,107 |
|
1,400 |
|
(10,877 |
) |
8,524 |
| |||||
Earnings from discontinued operations, net of taxes |
|
3,222 |
|
817 |
|
(66 |
) |
|
|
3,973 |
| |||||
Net earnings |
|
$ |
12,116 |
|
$ |
9,924 |
|
$ |
1,334 |
|
$ |
(10,877 |
) |
$ |
12,497 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
First Quarter Fiscal 2011
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash provided by (used in) operating activities |
|
$ |
6,304 |
|
$ |
15,681 |
|
$ |
(3,269 |
) |
$ |
(1,500 |
) |
$ |
17,216 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash used in investing activities |
|
(408 |
) |
(3,203 |
) |
(23 |
) |
|
|
(3,634 |
) | |||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Change in debt |
|
|
|
|
|
695 |
|
|
|
695 |
| |||||
Proceeds from issuance of common stock |
|
939 |
|
|
|
|
|
|
|
939 |
| |||||
Change in intercompany payable |
|
8,245 |
|
(12,356 |
) |
2,611 |
|
1,500 |
|
|
| |||||
Dividends on common stock |
|
(2,142 |
) |
|
|
|
|
|
|
(2,142 |
) | |||||
Net cash provided by (used in) financing activities |
|
7,042 |
|
(12,356 |
) |
3,306 |
|
1,500 |
|
(508 |
) | |||||
Cash Flows from Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash provided by (used in) discontinued operations |
|
(13,334 |
) |
324 |
|
2,597 |
|
|
|
(10,413 |
) | |||||
Net change in Cash and Cash Equivalents |
|
(396 |
) |
446 |
|
2,611 |
|
|
|
2,661 |
| |||||
Effect of foreign currency translation |
|
|
|
|
|
278 |
|
|
|
278 |
| |||||
Cash and Cash Equivalents at the Beginning of Period |
|
41,130 |
|
809 |
|
2,155 |
|
|
|
44,094 |
| |||||
Cash and Cash Equivalents at the End of Period |
|
$ |
40,734 |
|
$ |
1,255 |
|
$ |
5,044 |
|
$ |
|
|
$ |
47,033 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
First Quarter Fiscal 2010
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash provided by (used in) operating activities |
|
$ |
(2,788 |
) |
$ |
10,081 |
|
$ |
2,346 |
|
|
|
$ |
9,639 |
| |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash used in investing activities |
|
(242 |
) |
(1,028 |
) |
(270 |
) |
|
|
(1,540 |
) | |||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Change in debt |
|
|
|
|
|
2,883 |
|
|
|
2,883 |
| |||||
Proceeds from issuance of common stock |
|
115 |
|
|
|
|
|
|
|
115 |
| |||||
Change in intercompany payable |
|
10,463 |
|
(8,997 |
) |
(1,466 |
) |
|
|
|
| |||||
Dividends on common stock |
|
(1,821 |
) |
|
|
|
|
|
|
(1,821 |
) | |||||
Net cash provided by (used in) financing activities |
|
8,757 |
|
(8,997 |
) |
1,417 |
|
|
|
1,177 |
| |||||
Cash Flows from Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash provided by (used in) discontinued operations |
|
1,898 |
|
18 |
|
(459 |
) |
|
|
1,457 |
| |||||
Net change in Cash and Cash Equivalents |
|
7,625 |
|
74 |
|
3,034 |
|
|
|
10,733 |
| |||||
Effect of foreign currency translation |
|
|
|
|
|
(198 |
) |
|
|
(198 |
) | |||||
Cash and Cash Equivalents at the Beginning of Period |
|
5,933 |
|
503 |
|
1,852 |
|
|
|
8,288 |
| |||||
Cash and Cash Equivalents at the End of Period |
|
$ |
13,558 |
|
$ |
577 |
|
$ |
4,688 |
|
$ |
|
|
$ |
18,823 |
|
ITEM 2. MANAGEMENTS 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 Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for fiscal 2010.
OVERVIEW
We generate revenues and cash flow primarily through the design, production, sale and distribution of branded consumer apparel for men, women and children 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 our products through our direct to consumer channels, including our retail stores, e-commerce websites and restaurants, as well as through our wholesale distribution channels, which include department stores, specialty stores, national chains, specialty catalogs, mass merchants and Internet retailers.
We believe the weak global economic conditions, which began in fiscal 2008, continue to impact our business and the apparel industry as a whole, although not as severely as in fiscal 2010. While we continue to focus on minimizing inventory markdown risk and promotional pressure, we have been more aggressive in our inventory purchases for fiscal 2011 than we were in the prior year. We anticipate continuing to purchase inventory more aggressively if the economic conditions continue to show improvement. Also, we believe that fiscal 2011 will be impacted by pricing pressures on raw materials, fuel, transportation and other costs necessary for the production and sourcing of apparel products, particularly in our Lanier Clothes and Ben Sherman businesses.
We continue to believe it is important to focus on maintaining a strong balance sheet and ample liquidity. We believe that the measures we have taken in recent years have significantly enhanced our balance sheet and liquidity, while allowing us to acquire the Lilly Pulitzer brand and operations and continue to operate our businesses appropriately. We believe our strong balance sheet and liquidity will allow us to aggressively develop our lifestyle brands and maintain the financial flexibility to opportunistically enhance our capital structure and pursue desirable acquisitions, if any meet our investment criteria.
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 quarter of fiscal 2011 compared to the first quarter of fiscal 2010:
|
|
First Quarter |
|
First Quarter |
|
$ Change |
|
% Change |
Net sales |
|
$208,308 |
|
$163,625 |
|
$ 44,683 |
|
27.3% |
Operating income |
|
$ 30,713 |
|
$ 14,971 |
|
$ 15,742 |
|
105.1% |
Earnings from continuing operations |
|
$ 17,060 |
|
$ 8,524 |
|
$ 8,536 |
|
100.1% |
Earnings from continuing operations per diluted common share |
|
$ 1.03 |
|
$ 0.52 |
|
$ 0.51 |
|
98.1% |
Earnings from discontinued operations, net of taxes |
|
$ 1,040 |
|
$ 3,973 |
|
$ (2,933 |
) |
(73.8)% |
Earnings from discontinued operations per diluted common share |
|
$ 0.06 |
|
$ 0.24 |
|
$ (0.18 |
) |
(75.0)% |
Net earnings |
|
$ 18,100 |
|
$ 12,497 |
|
$ 5,603 |
|
NM |
Net earnings per diluted common share |
|
$ 1.10 |
|
$ 0.76 |
|
$ 0.34 |
|
NM |
Weighted average common shares outstandingdiluted |
|
16,525 |
|
16,503 |
|
22 |
|
0.1% |
The primary reasons for the improvement in earnings from continuing operations were:
· An increase in net sales driven by the $29.9 million of net sales related to Lilly Pulitzer, which we acquired on December 21, 2010, and an increase in the direct to consumer channel of distribution at Tommy Bahama.
· Improved gross margins, which benefitted from the inclusion of Lilly Pulitzer and our other operating groups either increasing or maintaining gross margins. Gross margins were impacted in the first quarter of fiscal 2011 by LIFO accounting credits of $0.6 million compared to LIFO accounting charges of $0.7 million in the first quarter of fiscal 2010. Additionally, gross margins were negatively impacted by approximately $1.0 million of charges to cost of goods sold in Lilly Pulitzer resulting from the write-up of acquired inventory to fair value pursuant to the purchase method of accounting in connection with the sale of acquired inventory during the first quarter of fiscal 2011. We do not anticipate that there will be any such charges to cost of goods sold in future periods.
· Increased royalty income in Tommy Bahama and Ben Sherman resulting from increased sales during the first quarter of fiscal 2011 by existing licensees as well as the inclusion of royalty income associated with the Lilly Pulitzer business in the first quarter of fiscal 2011.
These items were partially offset by:
· The increase in SG&A which was primarily due to (1) the inclusion of $10.0 million of SG&A associated with the Lilly Pulitzer operations during the first quarter of fiscal 2011 and (2) the increased retail store operating costs as a result of the opening of additional Tommy Bahama retail stores subsequent to the first day of fiscal 2010.
· A $0.6 million charge related to the change in fair value of contingent consideration associated with the acquisition of the Lilly Pulitzer brand and operations.
Earnings from discontinued operations reflect substantially all of the operations related to our former Oxford Apparel operating group, which we sold in the fourth quarter of fiscal 2010. The operating results of the discontinued operations reflect substantially all of the normal operating activities of our former Oxford Apparel operating group in the first quarter of fiscal 2010, but only reflect certain wind-down and transition activities in the first quarter of fiscal 2011. We do not anticipate significant earnings or losses from our discontinued operations after the first half of fiscal 2011. Operations of our former Oxford Apparel operating group which were not sold are included in Corporate and Other.
SUBSEQUENT EVENT REPURCHASE OF 11 3/8% SENIOR SECURED NOTES
In May 2011, we repurchased, in a privately negotiated transaction, $40.0 million in aggregate principal amount of our 113/8% Senior Secured Notes for approximately $46.6 million, plus accrued interest, using cash on hand. The repurchase of the 113/8% Senior Secured Notes and related write-off of approximately $1.6 million of unamortized deferred financing costs and discount resulted in a loss of approximately $8.2 million, which will be reflected in our consolidated financial statements for the second quarter of fiscal 2011. After completion of the transaction, $110.0 million aggregate principal amount of our 113/8% Senior Secured Notes remain outstanding.
OPERATING GROUPS
Our business is primarily operated through our four operating groups: Tommy Bahama, Lilly Pulitzer, Ben Sherman and Lanier Clothes. 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 mens and womens sportswear and related products. The target consumers of Tommy Bahama are primarily 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 Tommy Bahama 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.
Lilly Pulitzer designs, sources and distributes upscale collections of womens and girls dresses, sportswear and other products. Lilly Pulitzer® was originally created in the late 1950s and is an affluent brand with heritage and aesthetic based on the Palm Beach resort lifestyle. The brand is somewhat unique among womens brands in that it has demonstrated multi-generational appeal, including: young women in college or recently graduated from college; young mothers with their daughters; and women who are not tied to the academic calendar. Lilly Pulitzer products can be found in our owned Lilly Pulitzer stores, in Lilly Pulitzer Signature Stores and on our Lilly Pulitzer website, as well as in certain department stores and a variety of independent specialty stores. We also license the Lilly Pulitzer name for various product categories.
Ben Sherman is a London-based designer, marketer and distributor of mens branded sportswear and related products. Ben Sherman® was established in 1963 as an edgy, Mod-inspired shirt brand and has evolved into a British lifestyle brand of apparel targeted at style conscious men ages 25 to 40 in multiple markets throughout the world. 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 Ben Sherman e-commerce websites. We also license the Ben Sherman name for various product categories.
Lanier Clothes designs and markets branded and private label mens tailored clothing including 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®. Lanier Clothes also offers branded products under our Billy London® and Arnold Brant® trademarks. In addition to the branded businesses, Lanier Clothes designs and sources private label products for certain customers. Significant private label brands include Stafford, Lands End, Alfani, Structure and Kenneth Roberts. Our Lanier Clothes products are sold to national chains, department stores, specialty stores, specialty catalog retailers and discount 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, other costs that are not allocated to the operating groups and operations of our other businesses which are not included in our four 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. The operations of businesses that are included in Corporate and Other include our Oxford Golf business and our Lyons, Georgia distribution center operations that were previously allocated to our former Oxford Apparel operating group.
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 2010.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2011 COMPARED TO FIRST QUARTER OF FISCAL 2010
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. For purposes of the tables below, NM means not meaningful. 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. In accordance with U.S. GAAP, net sales, cost of goods sold, gross profit, SG&A, amortization of intangible assets, change in fair value of contingent consideration, royalties and other operating income, operating income, interest expense, net, earnings from continuing operations before income taxes, income taxes and earnings from continuing operations reflect continuing operations only, and all discontinued operations are reflected in earnings from discontinued operations, net.
|
|
First Quarter |
|
|
|
|
| ||||||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
| ||||
Net sales |
|
$208,308 |
|
100.0% |
|
$163,625 |
|
100.0% |
|
$44,683 |
|
27.3% |
|
Cost of goods sold |
|
90,648 |
|
43.5% |
|
73,918 |
|
45.2% |
|
16,730 |
|
22.6% |
|
Gross profit |
|
117,660 |
|
56.5% |
|
89,707 |
|
54.8% |
|
27,953 |
|
31.2% |
|
SG&A |
|
90,840 |
|
43.6% |
|
78,009 |
|
47.7% |
|
12,831 |
|
16.4% |
|
Amortization of intangible assets |
|
298 |
|
0.1% |
|
240 |
|
0.1% |
|
58 |
|
24.2% |
|
Change in fair value of contingent consideration |
|
600 |
|
0.3% |
|
|
|
|
|
600 |
|
NM |
|
Royalties and other operating income |
|
4,791 |
|
2.3% |
|
3,513 |
|
2.1% |
|
1,278 |
|
36.4% |
|
Operating income |
|
30,713 |
|
14.7% |
|
14,971 |
|
9.1% |
|
15,742 |
|
105.1% |
|
Interest expense, net |
|
4,804 |
|
2.3% |
|
4,967 |
|
3.0% |
|
(163) |
|
(3.3)% |
|
Earnings from continuing operations before income taxes |
|
25,909 |
|
12.4% |
|
10,004 |
|
6.1% |
|
15,905 |
|
159.0% |
|
Income taxes |
|
8,849 |
|
4.2% |
|
1,480 |
|
0.9% |
|
7,369 |
|
497.9% |
|
Earnings from continuing operations |
|
17,060 |
|
8.2% |
|
8,524 |
|
5.2% |
|
8,536 |
|
100.1% |
|
Earnings from discontinued operations, net of taxes |
|
1,040 |
|
NM |
|
3,973 |
|
NM |
|
(2,933) |
|
NM |
|
Net earnings |
|
$ 18,100 |
|
NM |
|
$ 12,497 |
|
NM |
|
$ 5,603 |
|
NM |
|
The discussion and tables below compare certain line items included in our statements of operations for the first quarter of fiscal 2011 to the first quarter of fiscal 2010. Each dollar and percentage change provided reflects the change between these periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts.
Net Sales
|
|
First Quarter |
|
|
|
|
| ||||||
|
|
Fiscal 2011 |
|
|
Fiscal 2010 |
|
|
$ Change |
|
|
% Change |
| |
Tommy Bahama |
|
$122,903 |
|
|
$109,105 |
|
|
$13,798 |
|
|
12.6 |
% |
|
Lilly Pulitzer |
|
29,873 |
|
|
|
|
|
29,873 |
|
|
NM |
|
|
Ben Sherman |
|
19,421 |
|
|
22,154 |
|
|
(2,733 |
) |
|
(12.3 |
)% |
|
Lanier Clothes |
|
32,973 |
|
|
30,428 |
|
|
2,545 |
|
|
8.4 |
% |
|
Corporate and Other |
|
3,138 |
|
|
1,938 |
|
|
1,200 |
|
|
61.9 |
% |
|
Total net sales |
|
$208,308 |
|
|
$163,625 |
|
|
$44,683 |
|
|
27.3 |
% |
|
Consolidated net sales increased $44.7 million, or 27.3%, in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 primarily due to the net sales related to the Lilly Pulitzer business and the increase in net sales at Tommy Bahama, each as discussed below.
Tommy Bahama:
The increase in net sales for Tommy Bahama was primarily due to improved comparable retail store sales, higher e-commerce sales and sales at retail stores opened subsequent to the first day of fiscal 2010. Tommy Bahama unit sales increased 5.7% and the apparel average selling price per unit increased by 6.9%, primarily as a result of the higher sales volume in the direct to consumer channel of distribution. As of April 30, 2011, we operated 89 Tommy Bahama retail stores compared to 84 stores as of May 1, 2010.
Lilly Pulitzer:
We acquired the Lilly Pulitzer brand and operations on December 21, 2010. Therefore, our consolidated operating results for the first quarter of fiscal 2010 did not include any operating activities for Lilly Pulitzer. Net sales for Lilly Pulitzer for the first quarter of fiscal 2011 were $29.9 million. By way of comparison, the Lilly Pulitzer brand and operations generated $24.1 million of net sales during the first quarter of fiscal 2010. The $29.9 million of net sales in the first quarter of fiscal 2011 reflects increases in each of the wholesale, retail and e-commerce channels of distribution.
Ben Sherman:
The decrease in net sales for Ben Sherman was primarily due to a 33.0% reduction in unit sales resulting from the reduced sales at certain moderate department stores as we continue to implement our strategy to improve the wholesale distribution of the brand to higher tier department stores in the United Kingdom and the first quarter of fiscal 2010 including sales of our previously exited womens and footwear businesses. The first quarter of fiscal 2010 included sales, the majority of which was off-price sales, of $1.6 million associated with the previously exited womens and footwear businesses with no such sales in the first quarter of fiscal 2011. These decreases were partially offset by a 5.2% increase in the average exchange rate of the British pound sterling versus the United States dollar during the first quarter of fiscal 2011 compared to the average exchange rate for the first quarter of fiscal 2010. The average selling price per unit increased by 30.8% in the first quarter of fiscal 2011 as the average selling price per unit in the first quarter of fiscal 2010 was negatively impacted by the off-price sales associated with the exited womens and footwear businesses and as the first quarter of fiscal 2011 had a greater proportion of retail sales.
Lanier Clothes:
The increase in net sales for Lanier Clothes was primarily due to increased net sales in branded tailored clothing products. The increase in unit sales of 6.2% was driven by increased sales in the branded businesses partially offset by lower sales in the private label businesses. The average selling price per unit increased 2.2% as a result of the change in sales mix as our branded tailored clothing products typically have a higher average selling price than private label products.
Corporate and Other:
Corporate and Other net sales primarily consisted of the net sales of our Oxford Golf business and our Lyons, Georgia distribution center. The increase in the net sales for Corporate and Other was primarily driven by the higher net sales in our Oxford Golf business during the first quarter of fiscal 2011.
Gross Profit
|
|
First Quarter |
|
|
|
|
| ||||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
| ||
Gross profit |
|
$ |
117,660 |
|
$ |
89,707 |
|
$ 27,953 |
|
31.2% |
|
Gross margin (gross profit as a % of net sales) |
|
56.5 |
% |
54.8 |
% |
|
|
|
| ||
LIFO (credits) charges included in gross profit |
|
$ |
(602 |
) |
$ |
651 |
|
|
|
|
|
Write-up of acquired inventory included in gross profit |
|
$ |
996 |
|
$ |
|
|
|
|
|
|
The increase in gross profit was primarily due to higher net sales, as discussed above, and increased gross margins. The increase in gross margins was primarily due to changes in the sales mix for the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010. The changes in sales mix included (1) the inclusion of Lilly Pulitzer operating results, (2) direct to consumer sales, which generally have higher gross margins than wholesale sales, making up a larger proportion of Tommy Bahama sales and (3) the impact of LIFO accounting which included $0.6 million of credits in the first quarter of fiscal 2011 and $0.7 million of charges in the first quarter of fiscal 2010. These positive items were partially offset by the negative impact on our gross profit of approximately $1.0 million of charges to cost of goods sold in Lilly Pulitzer resulting from the write-up of acquired inventory to fair value pursuant to the purchase method of accounting in connection with the sale of acquired inventory in the first quarter of fiscal 2011. This write-up was recognized as an increase to cost of goods sold as the inventory was sold in the ordinary course of business. We do not anticipate that there will be any such charges to cost of goods sold in future periods. Our gross profit may not be directly comparable to those of our competitors, as statement of operations classification of certain expenses may vary by company.
SG&A
|
|
First Quarter |
|
|
|
|
| ||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
|
SG&A |
|
$ 90,840 |
|
$ 78,009 |
|
$ 12,831 |
|
16.4% |
|
SG&A (as % of net sales) |
|
43.6 |
% |
47.7 |
% |
|
|
|
|
The increase in SG&A was primarily due to the first quarter of fiscal 2011 including (1) $10.0 million of SG&A associated with Lilly Pulitzer in the first quarter of fiscal 2011, (2) the incremental SG&A associated with the costs of operating Tommy Bahama retail stores which opened subsequent to the first day of fiscal 2010 and (3) other increases in SG&A, during the first quarter of fiscal 2011. The decrease in SG&A as a percentage of net sales results from an increase in our direct to consumer sales not requiring a proportionate increase in SG&A as certain SG&A costs do not fluctuate with sales levels.
Amortization of Intangible Assets
|
|
First Quarter |
|
|
|
|
| ||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
|
Amortization of intangible assets |
|
$ 298 |
|
$ 240 |
|
$ 58 |
|
24.2% |
|
Amortization of intangible assets reflects the amortization of acquired intangible assets for Tommy Bahama, Lilly Pulitzer and Ben Sherman. We anticipate that amortization of intangible assets for the full year fiscal 2011 will be approximately $1.2 million.
Change in fair value of contingent consideration
|
|
First Quarter |
|
|
|
|
| |||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
| |
Change in fair value of contingent consideration |
|
$ 600 |
|
$ |
|
|
$ 600 |
|
NM |
|
The increase in the change in fair value of contingent consideration is due to the contingent consideration associated with our acquisition of the Lilly Pulitzer brand and operations, as discussed in our Annual Report on Form 10-K for fiscal 2010. Prior to the acquisition of the Lilly Pulitzer brand and operations, we did not have any contingent consideration arrangements requiring adjustment to fair value. We anticipate that the change in fair value of contingent consideration due only to the passage of time will be approximately $2.4 million for the full year of fiscal 2011; however, this estimated full year charge will change if we alter any assumptions related to estimated fair value of the contingent consideration computed as of the acquisition date. The change in assumptions, if any, could result in a material change to our consolidated financial statements.
Royalties and other operating income
|
|
First Quarter |
|
|
|
|
| ||
|
|
Fiscal 2011 |
|
Fiscal 2010 |
|
$ Change |
|
% Change |
|
Royalties and other operating income |
|
$ 4,791 |
|
$ 3,513 |
|
$ 1,278 |
|
36.4% |
|
The increase in royalties and other operating income was primarily due to increased royalty income in Tommy Bahama and Ben Sherman as well as royalty income associated with the recently acquired Lilly Pulitzer business.
Operating income (loss)
|
|
First Quarter |
|
|
|