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 OCTOBER 29, 2011

 

 

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 þ 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 December 2, 2011

Common Stock, $1 par value

 

16,499,281

 

 

 


Table of Contents

 

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the third quarter of fiscal 2011

 

 

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 (Unaudited)

7

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

17

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

Item 4. Controls and Procedures

37

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

37

Item 1A. Risk Factors

37

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

37

Item 3. Defaults Upon Senior Securities

38

Item 4. Reserved

38

Item 5. Other Information

38

Item 6. Exhibits

38

Signatures

38

 

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, particularly in light of general economic uncertainty that continues to prevail, 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: 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, Management’s 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 2012

 

53 weeks ending February 2, 2013

Fiscal 2011

 

52 weeks ending January 28, 2012

First nine months fiscal 2011

 

39 weeks ended October 29, 2011

Fourth quarter fiscal 2011

 

13 weeks ending January 28, 2012

Third quarter fiscal 2011

 

13 weeks ended October 29, 2011

Second quarter fiscal 2011

 

13 weeks ended July 30, 2011

First quarter fiscal 2011

 

13 weeks ended April 30, 2011

Fiscal 2010

 

52 weeks ended January 29, 2011

First nine months fiscal 2010

 

39 weeks ended October 30, 2010

Fourth quarter fiscal 2010

 

13 weeks ended January 29, 2011

Third quarter fiscal 2010

 

13 weeks ended October 30, 2010

Second quarter fiscal 2010

 

13 weeks ended July 31, 2010

First quarter fiscal 2010

 

13 weeks ended May 1, 2010

 

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)

 

 

 

Third
Quarter
Fiscal 2011

 

 

Third
Quarter
Fiscal 2010

 

 

First
Nine Months
Fiscal 2011

 

 

First
Nine Months
Fiscal 2010

 

 

Net sales

 

$170,280

 

 

$139,627

 

 

$559,234

 

 

$446,233

 

 

Cost of goods sold

 

81,540

 

 

65,942

 

 

249,897

 

 

203,823

 

 

Gross profit

 

88,740

 

 

73,685

 

 

309,337

 

 

242,410

 

 

SG&A

 

84,862

 

 

70,995

 

 

264,050

 

 

220,328

 

 

Amortization of intangible assets

 

299

 

 

241

 

 

897

 

 

719

 

 

Change in fair value of contingent consideration

 

600

 

 

 

 

1,800

 

 

 

 

 

 

85,761

 

 

71,236

 

 

266,747

 

 

221,047

 

 

Royalties and other operating income

 

3,837

 

 

3,982

 

 

12,650

 

 

11,218

 

 

Operating income

 

6,816

 

 

6,431

 

 

55,240

 

 

32,581

 

 

Interest expense, net

 

3,705

 

 

5,095

 

 

12,777

 

 

15,115

 

 

Loss on repurchase of senior secured notes

 

769

 

 

 

 

9,017

 

 

 

 

Earnings from continuing operations before income taxes

 

2,342

 

 

1,336

 

 

33,446

 

 

17,466

 

 

Income taxes

 

731

 

 

17

 

 

11,255

 

 

2,944

 

 

Earnings from continuing operations

 

1,611

 

 

1,319

 

 

22,191

 

 

14,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from discontinued operations, net of taxes

 

13

 

 

4,231

 

 

137

 

 

10,744

 

 

Net earnings

 

$    1,624

 

 

$    5,550

 

 

$  22,328

 

 

$  25,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations, per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$      0.10

 

 

$      0.08

 

 

$      1.34

 

 

$      0.88

 

 

Diluted

 

$      0.10

 

 

$      0.08

 

 

$      1.34

 

 

$      0.88

 

 

Earnings from discontinued operations, net of taxes per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$      0.00

 

 

$      0.26

 

 

$      0.01

 

 

$      0.65

 

 

Diluted

 

$      0.00

 

 

$      0.26

 

 

$      0.01

 

 

$      0.65

 

 

Net earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$      0.10

 

 

$      0.34

 

 

$      1.35

 

 

$      1.53

 

 

Diluted

 

$      0.10

 

 

$      0.33

 

 

$      1.35

 

 

$      1.53

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

16,502

 

 

16,564

 

 

16,510

 

 

16,532

 

 

Dilution

 

15

 

 

12

 

 

17

 

 

13

 

 

Diluted

 

16,517

 

 

16,576

 

 

16,527

 

 

16,545

 

 

Dividends declared per common share

 

$      0.13

 

 

$      0.11

 

 

$      0.39

 

 

$      0.33

 

 

 

See accompanying notes.

 

4



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par amounts)

 

 

 

October 29,
2011

 

 

January 29,
2011

 

 

October 30,
2010

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$    4,962

 

 

$  44,094

 

 

$   4,376

 

 

Receivables, net

 

66,372

 

 

50,177

 

 

58,900

 

 

Inventories, net

 

91,003

 

 

85,338

 

 

63,484

 

 

Prepaid expenses, net

 

17,425

 

 

12,554

 

 

14,663

 

 

Deferred tax assets

 

17,596

 

 

19,005

 

 

15,624

 

 

Assets related to discontinued operations, net

 

 

 

57,745

 

 

84,936

 

 

Total current assets

 

197,358

 

 

268,913

 

 

241,983

 

 

Property and equipment, net

 

91,121

 

 

83,895

 

 

74,721

 

 

Intangible assets, net

 

166,082

 

 

166,680

 

 

136,584

 

 

Goodwill

 

16,555

 

 

16,866

 

 

 

 

Other non-current assets, net

 

18,385

 

 

22,117

 

 

21,181

 

 

Total Assets

 

$489,501

 

 

$558,471

 

 

$474,469

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

Trade accounts payable and other accrued expenses

 

$  78,209

 

 

$  83,211

 

 

$  63,308

 

 

Accrued compensation

 

21,748

 

 

23,095

 

 

19,000

 

 

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

 

3,279

 

 

 

 

20,924

 

 

Liabilities related to discontinued operations

 

 

 

40,785

 

 

21,542

 

 

Total current liabilities

 

103,236

 

 

147,091

 

 

124,774

 

 

Long-term debt, less current maturities

 

103,290

 

 

147,065

 

 

146,900

 

 

Other non-current liabilities

 

53,873

 

 

55,441

 

 

47,351

 

 

Non-current deferred income taxes

 

30,738

 

 

28,846

 

 

27,753

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

 

 

Common stock, $1.00 par value per common share

 

16,499

 

 

16,511

 

 

16,570

 

 

Additional paid-in capital

 

98,434

 

 

96,597

 

 

95,660

 

 

Retained earnings

 

106,645

 

 

90,739

 

 

39,165

 

 

Accumulated other comprehensive loss

 

(23,214

)

 

(23,819

)

 

(23,704

)

 

Total shareholders’ equity

 

198,364

 

 

180,028

 

 

127,691

 

 

Total Liabilities and Shareholders’ Equity

 

$489,501

 

 

$558,471

 

 

$474,469

 

 

 

See accompanying notes.

 

5



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

First
Nine Months
Fiscal 2011

 

 

First
Nine Months
Fiscal 2010

 

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

Earnings from continuing operations

 

$ 22,191

 

 

$ 14,522

 

 

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation

 

15,264

 

 

13,005

 

 

Amortization of intangible assets

 

897

 

 

719

 

 

Change in fair value of contingent consideration

 

1,800

 

 

 

 

Amortization of deferred financing costs and bond discount

 

1,286

 

 

1,464

 

 

Loss on repurchase of senior secured notes

 

9,017

 

 

 

 

Stock compensation expense

 

1,635

 

 

3,563

 

 

Loss on sale of property and equipment

 

24

 

 

10

 

 

Deferred income taxes

 

3,223

 

 

(2,337

)

 

Changes in working capital:

 

 

 

 

 

 

 

Receivables

 

(16,080

)

 

(14,258

)

 

Inventories

 

(5,511

)

 

(5,549

)

 

Prepaid expenses

 

(4,717

)

 

(4,154

)

 

Current liabilities

 

(8,690

)

 

4,535

 

 

Other non-current assets

 

2,536

 

 

(644

)

 

Other non-current liabilities

 

(3,441

)

 

(2,119

)

 

Net cash provided by operating activities

 

19,434

 

 

8,757

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(22,448

)

 

(9,435

)

 

Other

 

(398

)

 

78

 

 

Net cash used in investing activities

 

(22,846

)

 

(9,357

)

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

Repayment of revolving credit arrangements

 

(60,579

)

 

(64,514

)

 

Proceeds from revolving credit arrangements

 

63,865

 

 

85,415

 

 

Repurchase of senior secured notes

 

(52,175

)

 

 

 

Repayment of company-owned life insurance policy loans

 

 

 

(4,125

)

 

Proceeds from issuance of common stock

 

2,017

 

 

362

 

 

Dividends on common stock

 

(6,425

)

 

(5,460

)

 

Net cash (used in) provided by financing activities

 

(53,297

)

 

11,678

 

 

Cash Flows from Discontinued Operations:

 

 

 

 

 

 

 

Net operating cash flows provided by (used in) discontinued operations

 

13,735

 

 

(14,939

)

 

Net investing cash flows provided by (used in) discontinued operations

 

3,744

 

 

(33

)

 

Net cash provided by (used in) discontinued operations

 

17,479

 

 

(14,972

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(39,230

)

 

(3,894

)

 

Effect of foreign currency translation on cash and cash equivalents

 

98

 

 

(18

)

 

Cash and cash equivalents at the beginning of year

 

44,094

 

 

8,288

 

 

Cash and cash equivalents at the end of period

 

$   4,962

 

 

$   4,376

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest, net, including interest paid for discontinued operations

 

$   8,890

 

 

$   9,658

 

 

Cash paid for income taxes, including income taxes paid for discontinued operations

 

$ 40,065

 

 

$ 19,071

 

 

 

See accompanying notes.

 

6



Table of Contents

 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THIRD 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 7 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 issued an update to their authoritative guidance regarding fair value measurements and related disclosures. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for the use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. This guidance will be effective in our first quarter of fiscal 2012 and will be applied on a prospective basis with any changes in measurements recognized in earnings in the period of adoption. We are currently assessing the impact of adopting the amendments to authoritative guidance regarding fair value measurements and related disclosures, but we do not anticipate a material impact on our financial statements upon adoption.

 

In June 2011, the FASB issued an update to their accounting guidance regarding other comprehensive income which requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements of income and comprehensive income. The guidance provided by this update becomes effective in our first quarter of fiscal 2012, with early adoption permitted. The adoption of the new guidance will not affect our financial position, results of operations or cash flows, but does change certain disclosure requirements.

 

In September 2011, the FASB issued an update to their accounting guidance regarding goodwill impairment testing. The amendment is intended to reduce the complexity of testing by allowing companies to assess qualitative factors to determine the likelihood of goodwill impairment and whether it is necessary to perform the two-step impairment test, as currently required. The guidance provided by this update becomes effective in our first quarter of fiscal 2012, with early adoption permitted. We are currently assessing the impact of adopting the amendments to goodwill impairment testing, but we do not anticipate a material impact on our financial statements upon adoption.

 

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

 

 

 

October 29,
2011

 

January 29,
2011

 

October 30,
2010

 

Finished goods

 

$126,570

 

$122,159

 

$100,901

 

Work in process

 

4,096

 

5,744

 

4,010

 

Fabric, trim and supplies

 

6,291

 

3,389

 

3,011

 

LIFO reserve

 

(45,954

)

(45,954

)

(44,438

)

Total

 

$  91,003

 

$  85,338

 

$  63,484

 

 

7



Table of Contents

 

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):

 

 

 

 

Third
Quarter
Fiscal 2011

 

Third
Quarter
Fiscal 2010

 

First
Nine Months
Fiscal 2011

 

First
Nine Months
Fiscal 2010

 

Net earnings

 

 

$1,624

 

$5,550

 

$22,328

 

$25,266

 

Gain (loss) on foreign currency translation

 

 

(642

)

994

 

483

 

(247

)

Net unrealized gain (loss) on forward foreign exchange contracts

 

 

151

 

(25

)

122

 

(217

)

Comprehensive income

 

 

$1,133

 

$6,519

 

$22,933

 

$24,802

 

 

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).

 

 

 

Third
Quarter
Fiscal 2011

 

Third
Quarter
Fiscal 2010

 

First Nine
Months
Fiscal 2011

 

First Nine
Months
Fiscal 2010

 

Net Sales

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

92,500

 

 

$

81,131

 

 

$

324,546

 

 

$

289,585

 

Lilly Pulitzer

 

 

16,668

 

 

 

 

71,364

 

 

 

Ben Sherman

 

 

25,191

 

 

25,528

 

 

65,505

 

 

66,028

 

Lanier Clothes

 

 

33,080

 

 

30,820

 

 

88,995

 

 

83,984

 

Corporate and Other

 

 

2,841

 

 

2,148

 

 

8,824

 

 

6,636

 

Total Net Sales

 

 

$

170,280

 

 

$

139,627

 

 

$

559,234

 

 

$

446,233

 

Depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

3,881

 

 

$

3,285

 

 

$

10,866

 

 

$

9,848

 

Lilly Pulitzer

 

 

438

 

 

 

 

1,137

 

 

 

Ben Sherman

 

 

528

 

 

566

 

 

1,571

 

 

1,626

 

Lanier Clothes

 

 

106

 

 

113

 

 

322

 

 

350

 

Corporate and Other

 

 

473

 

 

408

 

 

1,368

 

 

1,181

 

Total Depreciation

 

 

$

5,426

 

 

$

4,372

 

 

$

15,264

 

 

$

13,005

 

Amortization of Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

129

 

 

$

174

 

 

$

387

 

 

$

520

 

Lilly Pulitzer

 

 

115

 

 

 

 

345

 

 

 

Ben Sherman

 

 

55

 

 

67

 

 

165

 

 

199

 

Lanier Clothes

 

 

 

 

 

 

 

 

 

Corporate and Other

 

 

 

 

 

 

 

 

 

Total Amortization of Intangible Assets

 

 

$

299

 

 

$

241

 

 

$

897

 

 

$

719

 

Operating Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

4,624

 

 

$

3,440

 

 

$

45,381

 

 

$

35,473

 

Lilly Pulitzer

 

 

(363

)

 

 

 

12,264

 

 

 

Ben Sherman

 

 

301

 

 

1,684

 

 

(2,281

)

 

1,608

 

Lanier Clothes

 

 

4,331

 

 

5,345

 

 

11,319

 

 

12,513

 

Corporate and Other

 

 

(2,077

)

 

(4,038

)

 

(11,443

)

 

(17,013

)

Total Operating Income

 

 

6,816

 

 

6,431

 

 

55,240

 

 

32,581

 

Interest expense, net

 

 

3,705

 

 

5,095

 

 

12,777

 

 

15,115

 

Loss on repurchase of senior secured notes

 

 

769

 

 

 

 

9,017

 

 

 

Earnings from Continuing Operations Before Income Taxes

 

 

$

2,342

 

 

$

1,336

 

 

$

33,446

 

 

$

17,466

 

 

8



Table of Contents

 

5.                                      Debt: The following table details our debt (in thousands) as of the dates specified:

 

 

 

October 29,
2011

 

January 29,
2011

 

October 30,
2010

 

$175 million U.S. Secured Revolving Credit Facility (“U.S. Revolving Credit Agreement”), which is limited to a borrowing base consisting of specified percentages of eligible categories of assets, accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to average unused availability, requires interest payments monthly with principal due at maturity (August 2013) and is secured by a first priority security interest in the accounts receivable (other than royalty payments in respect of trademark licenses), inventory, investment property (including the equity interests of certain subsidiaries), general intangibles (other than trademarks, trade names and related rights), deposit accounts, intercompany obligations, equipment, goods, documents, contracts, books and records and other personal property of Oxford Industries, Inc. and substantially all of its domestic subsidiaries and a second priority interest in those assets in which the holders of the 113/8% Senior Secured Notes have a first priority interest

 

$    1,621

 

$         —

 

$  20,273

 

£7 million Senior Secured Revolving Credit Facility (“U.K. Revolving Credit Agreement”), which accrues interest at the bank’s base rate plus as much as 3.5%, requires interest payments monthly with principal payable on demand and is collateralized by substantially all of the United Kingdom assets of Ben Sherman

 

1,658

 

 

651

 

11.375% Senior Secured Notes (“113/8% Senior Secured Notes”), which accrue interest at an annual rate of 11.375% (effective interest rate of 12%) and require interest payments semi-annually in January and July of each year, require payment of principal at maturity (July 2015), are subject to certain prepayment penalties, are secured by a first priority interest in all U.S. registered trademarks and certain related rights and certain future acquired real property owned in fee simple of Oxford Industries, Inc. and substantially all of its consolidated domestic subsidiaries and a second priority interest in those assets in which the lenders under the U.S. Revolving Credit Agreement have a first priority interest (1)

 

105,000

 

150,000

 

150,000

 

Unamortized discount

 

(1,710

)

(2,935

)

(3,100

)

Total debt

 

106,569

 

147,065

 

167,824

 

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

 

(3,279

)

 

(20,924

)

Long-term debt, less current maturities

 

$103,290

 

$147,065

 

$146,900

 

 


(1)          In the first nine months of fiscal 2011, we repurchased, in privately negotiated transactions, $45.0 million in aggregate principal amount of our 113/8% Senior Secured Notes for $52.2 million, plus accrued interest. The repurchase of the 113/8% Senior Secured Notes and related write-off of approximately $1.8 million of unamortized deferred financing costs and discount resulted in a loss of approximately $9.0 million, which was reflected in our consolidated financial statements during the first nine months of fiscal 2011. After completion of the transactions, $105.0 million aggregate principal amount of our 113/8% Senior Secured Notes remained outstanding as of October 29, 2011.

 

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Table of Contents

 

6.                                      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 October 29, 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 as of the acquisition date, including the contingent consideration. During the first nine months 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 October 29, 2011, the estimated fair value of the contingent consideration was approximately $12.5 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.

 

7.                                      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.

 

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):

 

 

 

Third
Quarter
Fiscal 2011

 

Third
Quarter
Fiscal 2010

 

First
Nine Months
Fiscal 2011

 

First
Nine Months
Fiscal 2010

 

Net sales

 

$17

 

$64,889

 

$2,414

 

$162,564

 

Earnings from discontinued operations before income taxes (1)

 

$20

 

$  6,825

 

$     97

 

$  17,330

 

Earnings from discontinued operations, net of income taxes (1)

 

$13

 

$  4,231

 

$   137

 

$  10,744

 

 


(1)          During the second quarter of fiscal 2011, we finalized the working capital adjustment associated with the sold operations, which resulted in a change in estimate to the gain on sale recognized. The impact of this change in estimate was a reduction to the gain on sale of approximately $1.0 million, net of income taxes, which was recognized in the second quarter of fiscal 2011. This change in estimate resulted in a revised after-tax gain on the sale of the Oxford Apparel operations of approximately $48.5 million compared to $49.5 million as previously recognized in the fourth quarter of fiscal 2010.

 

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 of accounting 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 October 29, 2011, January 29, 2011 and October 30, 2010 (in thousands) as well as our condensed consolidating statements of operations for the third quarter and first nine months of each of fiscal 2011 and fiscal 2010 (in thousands) and our condensed consolidating statements of cash flows for the first nine months of fiscal 2011 and fiscal 2010 (in thousands).

 

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Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

October 29, 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

ASSETS

Cash and cash equivalents

 

$   1,332

 

$       730

 

$    2,900

 

$         —

 

$    4,962

 

Receivables, net

 

23,287

 

12,683

 

54,077

 

(23,675

)

66,372

 

Inventories, net

 

(18,152

)

98,434

 

12,058

 

(1,337

)

91,003

 

Prepaid expenses and deferred tax assets

 

17,996

 

13,064

 

3,978

 

(17

)

35,021

 

Total current assets

 

24,463

 

124,911

 

73,013

 

(25,029

)

197,358

 

Property and equipment, net

 

6,291

 

79,318

 

5,512

 

 

91,121

 

Goodwill and intangible assets, net

 

 

158,500

 

24,137

 

 

182,637

 

Other non-current assets, net

 

611,917

 

143,229

 

4,646

 

(741,407

)

18,385

 

Total Assets

 

$642,671

 

$ 505,958

 

$107,308

 

$(766,436

)

$489,501

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities related to continuing operations

 

$    1,667

 

$   79,766

 

$  37,953

 

$  (16,150

)

$103,236

 

Long-term debt, less current maturities

 

103,290

 

 

 

 

103,290

 

Other non-current liabilities

 

342,978

 

(329,875

)

153,002

 

(112,232

)

53,873

 

Non-current deferred income taxes

 

(3,628

)

28,472

 

5,894

 

 

30,738

 

Total shareholders’/invested equity

 

198,364

 

727,595

 

(89,541

)

(638,054

)

198,364

 

Total Liabilities and Shareholders’ Equity

 

$642,671

 

$ 505,958

 

$107,308

 

$(766,436

)

$489,501

 

 

January 29, 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

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

 

 

11



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

October 30, 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

ASSETS

Cash and cash equivalents

 

$   1,273

 

$       563

 

$  2,540

 

$        —

 

$    4,376

 

Receivables, net

 

18,396

 

9,399

 

39,823

 

(8,718

)

58,900

 

Inventories, net

 

(15,529

)

71,186

 

8,463

 

(636

)

63,484

 

Prepaid expenses and deferred tax assets, net

 

17,589

 

10,291

 

3,559

 

(1,152

)

30,287

 

Assets related to discontinued operations, net

 

69,200

 

6,859

 

8,877

 

 

84,936

 

Total current assets

 

90,929

 

98,298

 

63,262

 

(10,506

)

241,983

 

Property and equipment, net

 

7,531

 

62,147

 

5,043

 

 

74,721

 

Goodwill and intangible assets, net

 

 

112,653

 

23,931

 

 

136,584

 

Other non-current assets, net

 

517,873

 

142,457

 

3,882

 

(643,031

)

21,181

 

Total Assets

 

$616,333

 

$ 415,555

 

$ 96,118

 

$(653,537

)

$474,469

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities related to continuing operations

 

$  32,905

 

$   50,229

 

$ 25,815

 

$    (5,717

)

$103,232

 

Current liabilities related to discontinued operations

 

11,570

 

 

9,972

 

 

21,542

 

Long-term debt, less current maturities

 

146,900

 

 

 

 

146,900

 

Other non-current liabilities

 

301,217

 

(289,059

)

143,790

 

(108,597

)

47,351

 

Non-current deferred income taxes

 

(3,950

)

25,233

 

6,455

 

15

 

27,753

 

Total shareholders’/invested equity

 

127,691

 

629,152

 

(89,914

)

(539,238

)

127,691

 

Total Liabilities and Shareholders’ Equity

 

$616,333

 

$ 415,555

 

$ 96,118

 

$(653,537

)

$474,469

 

 

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Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Third Quarter Fiscal 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

35,378

 

$

117,704

 

$

26,509

 

$

(9,311

)

$

170,280

 

Cost of goods sold

 

24,300

 

51,482

 

11,890

 

(6,132

)

81,540

 

Gross profit

 

11,078

 

66,222

 

14,619

 

(3,179

)

88,740

 

SG&A including amortization of intangible assets and change in fair value of contingent consideration

 

5,148

 

70,247

 

13,394

 

(3,028

)

85,761

 

Royalties and other operating income

 

41

 

2,021

 

1,845

 

(70

)

3,837

 

Operating income

 

5,971

 

(2,004

)

3,070

 

(221

)

6,816

 

Interest expense (income), net

 

4,120

 

(1,227

)

813

 

(1

)

3,705

 

Loss on repurchase of senior secured notes

 

769

 

 

 

 

769

 

Income from equity investment

 

1,037

 

 

 

(1,037

)

 

Earnings (loss) from continuing operations before income taxes

 

2,119

 

(777

)

2,257

 

(1,257

)

2,342

 

Income taxes (benefit)

 

379

 

(154

)

597

 

(91

)

731

 

Earnings (loss) from continuing operations

 

1,740

 

(623

)

1,660

 

(1,166

)

1,611

 

Earnings (loss) from discontinued operations, net of taxes

 

13

 

 

 

 

13

 

Net earnings (loss)

 

$

1,753

 

$

(623

)

$

1,660

 

$

(1,166

)

$

1,624

 

 

Third Quarter Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

32,966

 

$

90,608

 

$

24,155

 

$

(8,102

)

$

139,627

 

Cost of goods sold

 

21,980

 

38,236

 

10,156

 

(4,430

)

65,942

 

Gross profit

 

10,986

 

52,372

 

13,999

 

(3,672

)

73,685

 

SG&A including amortization of intangible assets and change in fair value of contingent consideration

 

7,633

 

54,030

 

12,483

 

(2,910

)

71,236

 

Royalties and other operating income

 

(7

)

1,886

 

2,244

 

(141

)

3,982

 

Operating income

 

3,346

 

228

 

3,760

 

(903

)

6,431

 

Interest expense (income), net

 

6,390

 

(1,115

)

774

 

(954

)

5,095

 

Income from equity investment

 

5,149

 

 

 

(5,149

)

 

Earnings from continuing operations before income taxes

 

2,105

 

1,343

 

2,986

 

(5,098

)

1,336

 

Income taxes (benefit)

 

(1,287

)

517

 

770

 

17

 

17

 

Earnings from continuing operations

 

3,392

 

826

 

2,216

 

(5,115

)

1,319

 

Earnings from discontinued operations, net of taxes

 

3,034

 

333

 

864

 

 

4,231

 

Net earnings

 

$

6,426

 

$

1,159

 

$

3,080

 

$

(5,115

)

$

5,550

 

 

13



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

First Nine Months Fiscal 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

96,520

 

$

416,588

 

$

70,527

 

$

(24,401

)

$

559,234

 

Cost of goods sold

 

65,932

 

167,548

 

31,464

 

(15,047

)

249,897

 

Gross profit

 

30,588

 

249,040

 

39,063

 

(9,354

)

309,337

 

SG&A including amortization of intangible assets and change in fair value of contingent consideration

 

21,390

 

215,419

 

38,873

 

(8,935

)

266,747

 

Royalties and other operating income

 

139

 

7,165

 

5,513

 

(167

)

12,650

 

Operating income

 

9,337

 

40,786

 

5,703

 

(586

)

55,240

 

Interest expense (income), net

 

14,024

 

(3,590

)

2,343

 

 

12,777

 

Loss on repurchase of senior secured notes

 

9,017

 

 

 

 

9,017

 

Income from equity investment

 

35,808

 

 

 

(35,808

)

 

Earnings from continuing operations before income taxes

 

22,104

 

44,376

 

3,360

 

(36,394

)

33,446

 

Income taxes (benefit)

 

(595

)

11,688

 

382

 

(220

)

11,255

 

Earnings from continuing operations

 

22,699

 

32,688

 

2,978

 

(36,174

)

22,191

 

Earnings (loss) from discontinued operations, net of taxes

 

(6

)

143

 

 

 

137

 

Net earnings

 

$

22,693

 

$

32,831

 

$

2,978

 

$

(36,174

)

$

22,328

 

 

First Nine Months Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

90,765

 

$

313,831

 

$

63,512

 

$

(21,875

)

$

446,233

 

Cost of goods sold

 

61,945

 

126,688

 

27,063

 

(11,873

)

203,823

 

Gross profit

 

28,820

 

187,143

 

36,449

 

(10,002

)

242,410

 

SG&A including amortization of intangible assets and change in fair value of contingent consideration

 

28,340

 

168,336

 

35,019

 

(10,648

)

221,047

 

Royalties and other operating income

 

21

 

6,048

 

5,612

 

(463

)

11,218

 

Operating income

 

501

 

24,855

 

7,042

 

183

 

32,581

 

Interest expense (income), net

 

16,319

 

(3,233

)

2,173

 

(144

)

15,115

 

Income from equity investment

 

23,407

 

 

 

(23,407

)

 

Earnings from continuing operations before income taxes

 

7,589

 

28,088

 

4,869

 

(23,080

)

17,466

 

Income taxes (benefit)

 

(8,828

)

10,399

 

1,259

 

114

 

2,944

 

Earnings from continuing operations

 

16,417

 

17,689

 

3,610

 

(23,194

)

14,522

 

Earnings from discontinued operations, net of taxes

 

8,638

 

1,113

 

993

 

 

10,744

 

Net earnings

 

$

25,055

 

$

18,802

 

$

4,603

 

$

(23,194

)

$

25,266

 

 

14



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Nine Months Fiscal 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

(21,924

)

$

48,542

 

$

(7,582

)

$

398

 

$

19,434

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(790

)

(19,703

)

(1,955

)

 

(22,448

)

Other

 

(398

)

 

 

 

(398

)

Net cash used in investing activities

 

(1,188

)

(19,703

)

(1,955

)

 

(22,846

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

Change in debt

 

(50,554

)

 

1,665

 

 

(48,889

)

Proceeds from issuance of common stock

 

2,017

 

 

 

 

2,017

 

Change in intercompany payable

 

23,718

 

(29,242

)

5,922

 

(398

)

 

Dividends on common stock

 

(6,425

)

 

 

 

(6,425

)

Net cash provided by (used in) financing activities

 

(31,244

)

(29,242

)

7,587

 

(398

)

(53,297

)

Cash Flows from Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by discontinued operations

 

14,558

 

324

 

2,597

 

 

17,479

 

Net change in Cash and Cash Equivalents

 

(39,798

)

(79

)

647

 

 

(39,230

)

Effect of foreign currency translation

 

 

 

98

 

 

98

 

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

 

$

1,332

 

$

730

 

$

2,900

 

$

 

$

4,962

 

 

15



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Nine Months Fiscal 2010

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

(20,907

)

$

27,753

 

$

1,781

 

$

130

 

$

8,757

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(607

)

(8,224

)

(526

)

 

(9,357

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

Change in debt

 

20,273

 

 

628

 

 

20,901

 

Repayments of company-owned life insurance policy loans

 

(4,125

)

 

 

 

(4,125

)

Proceeds from issuance of common stock

 

362

 

 

 

 

362

 

Change in intercompany payable

 

21,933

 

(20,502

)

(1,301

)

(130

)

 

Dividends on common stock

 

(5,460

)

 

 

 

(5,460

)

Net cash provided by (used in) financing activities

 

32,983

 

(20,502

)

(673

)

(130

)

11,678

 

Cash Flows from Discontinued Operations: