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 APRIL 28, 2012

 

 

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 June 1, 2012

Common Stock, $1 par value

 

16,540,863

 

 

 


Table of Contents

 

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the first quarter of fiscal 2012

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets (Unaudited)

4

Condensed Consolidated Statements of Earnings (Unaudited)

5

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

6

Condensed Consolidated Statements of Cash Flows (Unaudited)

7

Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited)

8

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

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

Item 4. Controls and Procedures

29

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

29

Item 1A. Risk Factors

29

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

30

Item 3. Defaults Upon Senior Securities

30

Item 4. Mine Safety Disclosures

30

Item 5. Other Information

30

Item 6. Exhibits

30

Signatures

30

 

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, access to capital and/or credit markets on satisfactory terms, 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, 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 2011, 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 2011

 

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

 

FASB: Financial Accounting Standards Board

 

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

 

Fiscal 2013

 

52 weeks ending February 1, 2014

Fiscal 2012

 

53 weeks ending February 2, 2013

Fiscal 2011

 

52 weeks ended January 28, 2012

Fourth quarter fiscal 2012

 

14 weeks ending February 2, 2013

Third quarter fiscal 2012

 

13 weeks ending October 27, 2012

Second quarter fiscal 2012

 

13 weeks ending July 28, 2012

First quarter fiscal 2012

 

13 weeks ended April 28, 2012

Fourth quarter fiscal 2011

 

13 weeks ended 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

 

3



Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par amounts)

 

 

 

April 28,
2012

 

January 28,
2012

 

April 30,
2011

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$   5,679

 

$   13,373

 

$   47,033

 

Receivables, net

 

86,705

 

59,706

 

72,263

 

Inventories, net

 

85,996

 

103,420

 

62,843

 

Prepaid expenses, net

 

16,725

 

19,041

 

10,912

 

Deferred tax assets

 

19,339

 

19,733

 

16,266

 

Assets related to discontinued operations, net

 

 

 

33,409

 

Total current assets

 

214,444

 

215,273

 

242,726

 

Property and equipment, net

 

97,270

 

93,206

 

82,899

 

Intangible assets, net

 

165,673

 

165,193

 

167,573

 

Goodwill

 

16,495

 

16,495

 

16,185

 

Other non-current assets, net

 

21,107

 

19,040

 

21,716

 

Total Assets

 

$514,989

 

$509,207

 

$531,099

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Trade accounts payable and other accrued expenses

 

$  67,165

 

$  89,149

 

$  73,746

 

Accrued compensation

 

16,703

 

23,334

 

15,558

 

Income taxes payable

 

9,212

 

 

6,289

 

Contingent consideration earned and payable

 

2,500

 

2,500

 

 

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

 

6,023

 

2,571

 

716

 

Liabilities related to discontinued operations

 

 

 

4,949

 

Total current liabilities

 

101,603

 

117,554

 

101,258

 

Long-term debt, less current maturities

 

106,991

 

103,405

 

147,228

 

Non-current contingent consideration

 

11,245

 

10,645

 

11,345

 

Other non-current liabilities

 

39,446

 

38,652

 

43,703

 

Non-current deferred income taxes

 

33,614

 

34,882

 

30,231

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Common stock, $1.00 par value per common share

 

16,541

 

16,522

 

16,511

 

Additional paid-in capital

 

101,090

 

99,670

 

96,679

 

Retained earnings

 

127,079

 

111,551

 

106,700

 

Accumulated other comprehensive loss

 

(22,620

)

(23,674

)

(22,556

)

Total shareholders’ equity

 

222,090

 

204,069

 

197,334

 

Total Liabilities and Shareholders’ Equity

 

$514,989

 

$509,207

 

$531,099

 

 

See accompanying notes.

 

4



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(in thousands, except per share amounts)

 

 

 

First
Quarter
Fiscal 2012

 

First
Quarter
Fiscal 2011

 

Net sales

 

$230,953

 

$208,308

 

Cost of goods sold

 

101,739

 

90,648

 

Gross profit

 

129,214

 

117,660

 

SG&A

 

100,808

 

91,138

 

Change in fair value of contingent consideration

 

600

 

600

 

Royalties and other operating income

 

4,982

 

4,791

 

Operating income

 

32,788

 

30,713

 

Interest expense, net

 

3,603

 

4,804

 

Earnings from continuing operations before income taxes

 

29,185

 

25,909

 

Income taxes

 

11,183

 

8,849

 

Earnings from continuing operations

 

18,002

 

17,060

 

 

 

 

 

 

 

Earnings from discontinued operations, net of taxes

 

 

1,040

 

Net earnings

 

$  18,002

 

$  18,100

 

 

 

 

 

 

 

Earnings from continuing operations per common share:

 

 

 

 

 

Basic

 

$      1.09

 

$      1.03

 

Diluted

 

$      1.09

 

$      1.03

 

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

 

 

 

 

 

Basic

 

$      0.00

 

$      0.06

 

Diluted

 

$      0.00

 

$      0.06

 

Net earnings per common share:

 

 

 

 

 

Basic

 

$      1.09

 

$      1.10

 

Diluted

 

$      1.09

 

$      1.10

 

Weighted average common shares outstanding:

 

 

 

 

 

Basic

 

16,531

 

16,515

 

Dilution

 

21

 

10

 

Diluted

 

16,552

 

16,525

 

Dividends declared per common share

 

$      0.15

 

$      0.13

 

 

See accompanying notes.

 

5



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)

 

 

 

First Quarter
Fiscal 2012

 

First Quarter
Fiscal 2011

 

Net earnings

 

$ 18,002

 

$ 18,100

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes

 

 

 

 

 

Foreign currency translation gain

 

1,269

 

1,768

 

Net unrealized loss on forward foreign currency exchange contracts

 

(215

)

(505

)

Total other comprehensive income, net of taxes

 

1,054

 

1,263

 

Comprehensive income

 

$ 19,056

 

$ 19,363

 

 

See accompanying notes.

 

6



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

First
Quarter
Fiscal 2012

 

First
Quarter
Fiscal 2011

 

Cash Flows From Operating Activities:

 

 

 

 

 

Earnings from continuing operations

 

$ 18,002

 

$ 17,060

 

Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation

 

5,772

 

4,821

 

Amortization of intangible assets

 

256

 

298

 

Change in fair value of contingent consideration

 

600

 

600

 

Amortization of deferred financing costs and bond discount

 

376

 

487

 

Stock compensation expense

 

761

 

864

 

Deferred income taxes

 

(1,050

)

3,819

 

Changes in working capital:

 

 

 

 

 

Receivables

 

(26,638

)

(20,962

)

Inventories

 

17,889

 

23,003

 

Prepaid expenses

 

2,263

 

1,110

 

Current liabilities

 

(19,798

)

(13,631

)

Other non-current assets

 

(2,326

)

756

 

Other non-current liabilities

 

781

 

(1,009

)

Net cash provided by (used in) operating activities

 

(3,112

)

17,216

 

Cash Flows From Investing Activities:

 

 

 

 

 

Purchases of property and equipment

 

(9,633

)

(3,634

)

Net cash used in investing activities

 

(9,633

)

(3,634

)

Cash Flows From Financing Activities:

 

 

 

 

 

Repayment of revolving credit arrangements

 

(64,886

)

(12,283

)

Proceeds from revolving credit arrangements

 

71,670

 

12,978

 

Proceeds from issuance of common stock

 

680

 

939

 

Dividends on common stock

 

(2,475

)

(2,142

)

Net cash provided by (used in) financing activities

 

4,989

 

(508

)

Cash Flows from Discontinued Operations:

 

 

 

 

 

Net cash used in discontinued operations

 

 

(10,413

)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(7,756

)

2,661

 

Effect of foreign currency translation on cash and cash equivalents

 

62

 

278

 

Cash and cash equivalents at the beginning of year

 

13,373

 

44,094

 

Cash and cash equivalents at the end of period

 

$   5,679

 

$ 47,033

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

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

 

$       82

 

$      306

 

Cash paid (refunded) for income taxes, including income taxes paid for discontinued operations

 

$    (351

)

$ 27,344

 

 

See accompanying notes.

 

7



Table of Contents

 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FIRST QUARTER OF FISCAL 2012

 

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 2011.

 

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 were adopted by us in the first quarter of fiscal 2012, with all amendments applied prospectively with changes in measurements, if any, recognized in earnings in the first quarter of fiscal 2012. The adoption of the amendments to ASC 820 in the first quarter of fiscal 2012 did not have a material impact on our consolidated financial statements.

 

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

 

 

 

April 28,
2012

 

January 28,
2012

 

April 30,
2011

 

Finished goods

 

$127,833

 

$143,482

 

$101,150

 

Work in process

 

4,378

 

6,244

 

3,639

 

Fabric, trim and supplies

 

6,161

 

6,070

 

4,008

 

LIFO reserve

 

(52,376

)

(52,376

)

(45,954

)

Total

 

$  85,996

 

$103,420

 

$  62,843

 

 

LIFO accounting adjustments, which we consider to include changes in the LIFO reserve as well as the impact of changes in inventory reserves related to lower of cost or market adjustments that do not exceed the LIFO reserve, were a charge of $0.2 million in the first quarter of fiscal 2012 and a credit of $0.6 million in the first quarter of fiscal 2011.

 

8



Table of Contents

 

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

 

 

 

April 28,
2012

 

January 28,
2012

 

April 30,
2011

 

$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

 

$    3,471

 

$         —

 

$         —

 

£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

 

6,023

 

2,571

 

716

 

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 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

 

105,000

 

150,000

 

Unamortized discount

 

(1,480

)

(1,595

)

(2,772

)

Total debt

 

113,014

 

105,976

 

147,944

 

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

 

(6,023

)

(2,571

)

(716

)

Long-term debt, less current maturities

 

$106,991

 

$103,405

 

$147,228

 

 


(1)          In the second and third quarters 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 $1.0 million of unamortized deferred financing costs and $0.8 million of unamortized bond discount resulted in a loss on repurchase of senior notes of approximately $9.0 million.

 

The net book value of our 113/8% Senior Secured Notes as of April 28, 2012 was approximately $103.5 million. As of April 28, 2012, we estimated that the fair value of our 113/8% Senior Secured Notes was approximately $112.0 million. On or after July 15, 2012, we may redeem all or a portion of the 113/8% Senior Secured Notes at redemption prices specified in the indenture governing the notes. We anticipate that payment for principal and the 5.688% redemption premium to redeem the notes on or after July 15, 2012 (but before July 15, 2013) would be approximately $111.0 million, plus accrued and unpaid interest of approximately $6.0 million if the notes were to be redeemed on July 16, 2012.

 

9



Table of Contents

 

4.                                      Operating Group Information:  Our business is primarily operated through our four operating groups: Tommy Bahama, Lilly Pulitzer, Ben Sherman and Lanier Clothes, as disclosed in our Annual Report on Form 10-K for fiscal 2011. 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. The table below presents certain information (in thousands) about our operating groups, as well as Corporate and Other, which is a reconciling category for reporting purposes.

 

 

 

First Quarter Fiscal 2012

 

First Quarter Fiscal 2011

 

Net Sales

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

141,134

 

 

$

122,903

 

Lilly Pulitzer

 

 

35,633

 

 

29,873

 

Ben Sherman

 

 

17,352

 

 

19,421

 

Lanier Clothes

 

 

33,007

 

 

32,973

 

Corporate and Other

 

 

3,827

 

 

3,138

 

Total Net Sales

 

 

$

230,953

 

 

$

208,308

 

Depreciation and Amortization

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

4,321

 

 

$

3,522

 

Lilly Pulitzer

 

 

506

 

 

468

 

Ben Sherman

 

 

674

 

 

580

 

Lanier Clothes

 

 

97

 

 

109

 

Corporate and Other

 

 

430

 

 

440

 

Total Depreciation and Amortization

 

 

$

6,028

 

 

$

5,119

 

Operating Income

 

 

 

 

 

 

 

Tommy Bahama

 

 

$

25,564

 

 

$

23,770

 

Lilly Pulitzer

 

 

11,012

 

 

7,015

 

Ben Sherman

 

 

(2,740

)

 

(826

)

Lanier Clothes

 

 

4,046

 

 

4,725

 

Corporate and Other

 

 

(5,094

)

 

(3,971

)

Total Operating Income

 

 

32,788

 

 

30,713

 

Interest expense, net

 

 

3,603

 

 

4,804

 

Earnings from Continuing Operations Before Income Taxes

 

 

$

29,185

 

 

$

25,909

 

 

5.                          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 April 28, 2012, January 28, 2012 and April 30, 2011 (in thousands) as well as our condensed consolidating statements of earnings for the first quarter of fiscal 2012 and fiscal 2011 (in thousands) and our condensed consolidating statements of cash flows for the first quarter of fiscal 2012 and fiscal 2011 (in thousands).

 

10



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

April 28, 2012

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

ASSETS

Cash and cash equivalents

 

$       880

 

$     1,381

 

$    3,418

 

$          —

 

$    5,679

 

Receivables, net

 

23,931

 

45,614

 

36,900

 

(19,740

)

86,705

 

Inventories, net

 

(21,077

)

94,759

 

13,708

 

(1,394

)

85,996

 

Prepaid expenses and deferred tax assets

 

19,080

 

13,818

 

7,049

 

(3,883

)

36,064

 

Total current assets

 

22,814

 

155,572

 

61,075

 

(25,017

)

214,444

 

Property and equipment, net

 

7,972

 

81,274

 

8,024

 

 

97,270

 

Goodwill and intangible assets, net

 

 

157,969

 

24,199

 

 

182,168

 

Other non-current assets, net

 

632,715

 

149,269

 

7,185

 

(768,062

)

21,107

 

Total Assets

 

$663,501

 

$ 544,084

 

$100,483

 

$(793,079

)

$514,989

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

 

$  24,424

 

$   64,474

 

$  28,900

 

$  (16,195

)

$101,603

 

Long-term debt, less current maturities

 

106,991

 

 

 

 

106,991

 

Other non-current liabilities, including non-current contingent consideration

 

313,604

 

(300,638

)

149,922

 

(112,197

)

50,691

 

Non-current deferred income taxes

 

(3,608

)

31,275

 

5,947

 

 

33,614

 

Total shareholders’/invested equity

 

222,090

 

748,973

 

(84,286

)

(664,687

)

222,090

 

Total Liabilities and Shareholders’ Equity

 

$663,501

 

$ 544,084

 

$100,483

 

$(793,079

)

$514,989

 

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

January 28, 2012

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

ASSETS

Cash and cash equivalents

 

$   8,416

 

$    1,818

 

$    3,139

 

$         —

 

$  13,373

 

Receivables, net

 

16,082

 

1,569

 

68,194

 

(26,139

)

59,706

 

Inventories, net

 

(15,653

)

104,239

 

16,247

 

(1,413

)

103,420

 

Prepaid expenses and deferred tax assets

 

19,522

 

14,431

 

5,887

 

(1,066

)

38,774

 

Total current assets

 

28,367

 

122,057

 

93,467

 

(28,618

)

215,273

 

Property and equipment, net

 

8,094

 

78,402

 

6,710

 

 

93,206

 

Goodwill and intangible assets, net

 

 

158,163

 

23,525

 

 

181,688

 

Other non-current assets, net

 

613,720

 

149,268

 

5,237

 

(749,185

)

19,040

 

Total Assets

 

$650,181

 

$507,890

 

$128,939

 

$(777,803

)

$509,207

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

 

$  25,821

 

$   55,100

 

$  56,418

 

$  (19,785

)

$117,554

 

Long-term debt, less current maturities

 

103,405

 

 

 

 

103,405

 

Other non-current liabilities, including non-current contingent consideration

 

319,882

 

(308,380

)

149,991

 

(112,196

)

49,297

 

Non-current deferred income taxes

 

(2,996

)

32,128

 

5,750

 

 

34,882

 

Total shareholders’/invested equity

 

204,069

 

729,042

 

(83,220

)

(645,822

)

204,069

 

Total Liabilities and Shareholders’ Equity

 

$650,181

 

$ 507,890

 

$128,939

 

$(777,803

)

$509,207

 

 

11



Table of Contents

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

April 30, 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

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, including non-current contingent consideration

 

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

 

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS

First Quarter Fiscal 2012

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

Net sales

 

$

36,867

 

$

182,546

 

$

18,385

 

$

(6,845

)

$

230,953

 

Cost of goods sold

 

25,757

 

71,275

 

7,961

 

(3,254

)

101,739

 

Gross profit

 

11,110

 

111,271

 

10,424

 

(3,591

)

129,214

 

SG&A including change in fair value of contingent consideration

 

7,984

 

82,714

 

14,363

 

(3,653

)

101,408

 

Royalties and other operating income

 

 

3,247

 

1,777

 

(42

)

4,982

 

Operating income

 

3,126

 

31,804

 

(2,162

)

20

 

32,788

 

Interest (income) expense, net

 

3,999

 

(1,274

)

878

 

 

3,603

 

Income from equity investment

 

17,771

 

 

 

(17,771

)

 

Earnings from continuing operations before income taxes

 

16,898

 

33,078

 

(3,040

)

(17,751

)

29,185

 

Income taxes (benefit)

 

(1,091

)

13,187

 

(920

)

7

 

11,183

 

Net earnings

 

17,989

 

19,891

 

(2,120

)

(17,758

)

18,002

 

Total other comprehensive income, net of taxes

 

1,054

 

 

1,054

 

(1,054

)

1,054

 

Comprehensive income

 

$

19,043

 

$

19,891

 

$

(1,066

)

$

(18,812

)

$

19,056

 

 

12



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS

First Quarter Fiscal 2011

 

 

 

Oxford
Industries
(Parent)

 

Subsidiary
Guarantors

 

Subsidiary
Non-
Guarantors

 

Consolidating
Adjustments

 

Consolidated
Total

 

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 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

 

Total other comprehensive income, net of taxes

 

1,263

 

 

1,263

 

(1,263

)

1,263

 

Comprehensive income

 

$

19,386

 

$

20,088

 

$

3,077

 

$

(23,188

)

$

19,363

 

 

OXFORD INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Quarter Fiscal 2012

 

 

 

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

 

$

(2,186

)

$

381

 

$

(1,473

)

$

166

 

$

(3,112

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(427

)

(7,640

)

(1,566

)

 

(9,633

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

Change in debt

 

3,472

 

 

3,312

 

 

6,784

 

Proceeds from issuance of common stock

 

680

 

 

 

 

680

 

Change in intercompany payable

 

(6,600

)

6,822

 

(56

)

(166

)

 

Dividends on common stock

 

(2,475

)

 

 

 

(2,475

)

Net cash provided by (used in) financing activities

 

(4,923

)

6,822

 

3,256

 

(166

)

4,989

 

Net change in Cash and Cash Equivalents

 

(7,536

)

(437

)

217

 

 

(7,756

)

Effect of foreign currency translation

 

 

 

62

 

 

62

 

Cash and Cash Equivalents at the Beginning of Period

 

8,416

 

1,818

 

3,139

 

 

13,373

 

Cash and Cash Equivalents at the End of Period

 

$

880

 

$

1,381

 

$

3,418

 

$

 

$

5,679

 

 

13



Table of Contents

 

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

First Quarter 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

 

$

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

 

 

14



Table of Contents

 

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

 

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for fiscal 2011.

 

OVERVIEW

 

We generate revenues and cash flow primarily through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of our owned lifestyle brands as well as certain licensed and private label apparel products. We distribute our products through our direct to consumer channels, including our retail stores, e-commerce websites and restaurants, and our wholesale distribution channel, which includes better department stores, specialty stores, national chains, specialty catalogs and Internet retailers. In fiscal 2011, more than 90% of our consolidated net sales were to customers located in the United States, with the remainder primarily being sales of our Ben Sherman products in the United Kingdom and Europe. We source substantially all of our products through third party manufacturers located outside of the United States and United Kingdom.

 

We operate in highly competitive domestic and international markets in which numerous U.S.-based and foreign apparel firms compete. No single apparel firm or small group of apparel firms, dominate the apparel industry and our direct competitors vary by operating group. We believe that the principal competitive factors in the apparel industry are the reputation, value and image of our brand names; design; consumer preference; price; quality; marketing; and customer service. We believe our ability to compete successfully in styling and marketing is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference, and presenting appealing products for consumers. In some instances, a retailer that is our customer may compete directly with us by offering certain of their own competing products, some of which may be sourced directly by our customer, in their own retail stores. Additionally, the apparel industry is cyclical and dependent upon the overall level of discretionary consumer spending, which changes as regional, domestic and international economic conditions change. Often, negative economic conditions have a longer and more severe impact on the apparel and retail industry than the conditions have on other industries.

 

The global economic environment and resulting economic uncertainty that began in fiscal 2008 continue to impact each of our operating groups, and the apparel industry as a whole. Although declines in consumer spending in the United States have moderated, unemployment levels remain high, the retail environment remains highly promotional and a significant amount of economic uncertainty remains. The economies in the United Kingdom and Europe, which are important to our Ben Sherman operating group operations, continue to show more sluggish economic conditions than the economic conditions in the United States.

 

While we anticipate sales of our products may continue to be negatively impacted as long as there is an elevated level of economic uncertainty, we believe that our operating groups have significant opportunities for long-term growth. We believe that each of our lifestyle brands has opportunities for growth in its direct to consumer businesses through expansion of our retail store operations as well as increases in same store and e-commerce sales. We also believe that our lifestyle brands provide an opportunity for moderate sales increases in our wholesale businesses primarily from our current customers adding to their existing door count and the selective addition of new wholesale customers.

 

Although the challenging economic conditions continue to have an impact on our business and the apparel industry as a whole, and we continue to focus on minimizing inventory markdown risk and promotional pressure, we were more aggressive in our inventory purchases for fiscal 2011 and the first quarter of fiscal 2012 and anticipate continuing to purchase inventory more aggressively for the remainder of fiscal 2012 if the economic conditions continue to show improvement. The second half of fiscal 2011 was impacted by pricing pressures on raw materials, fuel, transportation, labor and other costs necessary for the production and sourcing of apparel products, and these pricing pressures have continued into the first half of fiscal 2012. We anticipate that these increased product costs may moderate in the second half of fiscal 2012, which along with an anticipated increase in the proportion of our consolidated sales represented by the higher gross margin Tommy Bahama and Lilly Pulitzer businesses may provide an opportunity for some consolidated gross margin improvements compared to the second half of fiscal 2011.

 

15



Table of Contents

 

We continue to believe it is important to focus on maintaining a strong balance sheet and ample liquidity, and we believe that our strong balance sheet and liquidity coupled with positive cash flow from operations will provide us sufficient resources to fund future investments in our owned lifestyle brands. In the future, we may add additional lifestyle brands to our portfolio, if we identify appropriate lifestyle brands which meet our investment criteria; however, we believe that we have significant opportunities to appropriately deploy our capital and resources in our existing owned lifestyle brands even absent any future acquisition.

 

Further, although we have not entered into any arrangements as of the date of this report, we currently believe that it is likely that we will redeem all of our outstanding 113/8% Senior Secured Notes in July 2012, when the notes initially become redeemable at 105.688% of the principal amount, together with the payment of accrued and unpaid interest. In order to fund this redemption and ensure adequate liquidity, we intend to amend and restate our existing $175 million U.S. Revolving Credit Agreement to, among other things, increase the size of the facility and extend its August 2013 maturity date. We anticipate that this change in our capital structure, if completed, would result in substantial interest savings but will also increase our exposure in future periods to variable interest rates compared to our current exposure.

 

The following table sets forth our consolidated operating results (in thousands, except per share amounts) for the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011:

 

 

 

First Quarter
Fiscal 2012

 

First Quarter
Fiscal 2011

 

Net sales

 

$230,953

 

$208,308

 

Operating income

 

$  32,788

 

$  30,713

 

Earnings from continuing operations

 

$  18,002

 

$  17,060

 

Earnings from continuing operations per diluted common share

 

$      1.09

 

$      1.03

 

Earnings from discontinued operations, net of taxes

 

$         —

 

$    1,040

 

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

 

$         —

 

$      0.06

 

Net earnings

 

$  18,002

 

$  18,100

 

Net earnings per diluted common share

 

$      1.09

 

$      1.10

 

 

The primary reasons for the improvement in earnings from continuing operations were:

 

·                  An increase in net sales in both the Tommy Bahama and Lilly Pulitzer operating groups; and

 

·                  Lower interest expense in the first quarter of fiscal 2012 due to our reduction of debt as a result of our repurchase of $45.0 million in aggregate principal amount of our 113/8% Senior Secured Notes in fiscal 2011.

 

These items were partially offset by:

 

·                  Lower gross margins at Ben Sherman and Lanier Clothes, primarily due to product costing pressures and competitive factors, and the net impact of LIFO accounting, partially offset by a change in sales mix as well as no purchase accounting charges impacting cost of goods sold in the first quarter of fiscal 2012;

 

·                  An increase in SG&A, which was primarily due to (1) the incremental SG&A associated with the operation of retail stores opened in fiscal 2011 and fiscal 2012 and (2) certain infrastructure and other costs related to the Tommy Bahama international expansion; and

 

·                  A higher effective tax rate due to the first quarter of fiscal 2011 being impacted by certain favorable discrete items.

 

16



Table of Contents

 

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 men’s and women’s 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 Tommy Bahama retail stores and on our Tommy Bahama e-commerce website, www.tommybahama.com, as well as in better department stores and independent specialty stores throughout the United States and licensed Tommy Bahama retail stores outside the United States. We also operate Tommy Bahama restaurants and license the Tommy Bahama name for various product categories. As of April 28, 2012, we operated 96 owned Tommy Bahama retail stores, including 62 full-price stores, 13 restaurant-retail locations and 21 outlet stores. This store count includes both our 95 domestic and one international owned retail store locations.

 

Lilly Pulitzer designs, sources and distributes upscale collections of women’s and girl’s dresses, sportswear and other products. Lilly Pulitzer was originally created in the late 1950’s and is an affluent brand with a heritage and aesthetic based on the Palm Beach resort lifestyle. The brand is somewhat unique among women’s 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, www.lillypulitzer.com, as well as in better department and independent specialty stores. We also license the Lilly Pulitzer name for various product categories. As of April 28, 2012, we operated 17 owned Lilly Pulitzer retail stores.

 

Ben Sherman is a London-based designer, marketer and distributor of men’s branded sportswear and related products. Ben Sherman was established in 1963 as an edgy shirt brand that was adopted by the “Mods” and has throughout its history been inspired by what is new and current in British art, music, culture and style. The brand has evolved into a British modernist 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 better 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. As of April 28, 2012, we operated 16 owned Ben Sherman international and domestic retail stores, including five outlet stores.

 

Lanier Clothes designs, sources and markets branded and private label men’s tailored clothing, including suits, sportcoats, suit separates and dress slacks across a wide range of price points, with the majority of the business at moderate price points. Our Lanier Clothes branded products are sold under certain trademarks licensed to us by third parties including Kenneth Cole®, Dockers®, Geoffrey Beene® and Ike Behar®. Additionally, we design and market products for our owned Billy London®, Arnold Brant® and Oxford Republic® brands. In addition to the branded businesses, Lanier Clothes designs and sources certain private label tailored clothing products. Significant private label brands for which we produce tailored clothing include Lands’ End, Stafford, 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 offices, 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. The operations that are included in Corporate and Other include our Oxford Golf business and our Lyons, Georgia distribution center.

 

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 2011.

 

17



Table of Contents

 

RESULTS OF OPERATIONS

 

FIRST QUARTER OF FISCAL 2012 COMPARED TO FIRST QUARTER OF FISCAL 2011

 

The following table sets forth the specified line items in our unaudited condensed consolidated statements of earnings 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 earnings may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.

 

First Quarter

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$ 230,953

 

100.0%

 

$ 208,308

 

100.0%

 

$ 22,645

 

10.9%

 

Cost of goods sold

 

101,739

 

44.1%

 

90,648

 

43.5%

 

11,091

 

12.2%

 

Gross profit

 

129,214

 

55.9%

 

117,660

 

56.5%

 

11,554

 

9.8%

 

SG&A

 

100,808

 

43.6%

 

91,138

 

43.8%

 

9,670

 

10.6%

 

Change in fair value of contingent consideration

 

600

 

0.3%

 

600

 

0.3%

 

 

 

Royalties and other operating income

 

4,982

 

2.2%

 

4,791

 

2.3%

 

191

 

4.0%

 

Operating income

 

32,788

 

14.2%

 

30,713

 

14.7%

 

2,075

 

6.8%

 

Interest expense, net

 

3,603

 

1.6%

 

4,804

 

2.3%

 

(1,201

)

(25.0)%

 

Earnings from continuing operations before income taxes

 

29,185

 

12.6%

 

25,909

 

12.4%

 

3,276

 

12.6%

 

Income taxes

 

11,183

 

4.8%

 

8,849

 

4.2%

 

2,334

 

26.4%

 

Earnings from continuing operations

 

18,002

 

7.8%

 

17,060

 

8.2%

 

942

 

5.5%

 

Earnings from discontinued operations, net of taxes

 

 

 

1,040

 

NM

 

(1,040

)

NM

 

Net earnings

 

$   18,002

 

NM

 

$   18,100

 

NM

 

$      (98

)

NM

 

 

The discussion and tables below compare certain line items included in our statements of earnings for the first quarter of fiscal 2012 to the first quarter of fiscal 2011. 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

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Tommy Bahama

 

$  141,134

 

$  122,903

 

$  18,231

 

14.8%

 

Lilly Pulitzer

 

35,633

 

29,873

 

5,760

 

19.3%

 

Ben Sherman

 

17,352

 

19,421

 

(2,069

)

(10.7)%

 

Lanier Clothes

 

33,007

 

32,973

 

34

 

0.1%

 

Corporate and Other

 

3,827

 

3,138

 

689

 

22.0%

 

Total net sales

 

$  230,953

 

$  208,308

 

$  22,645

 

10.9%

 

 

Consolidated net sales increased $22.6 million, or 10.9%, in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011 primarily due to the increase in net sales at Tommy Bahama and Lilly Pulitzer partially offset by the decrease in net sales at Ben Sherman, each as discussed below.

 

Tommy Bahama:

 

The 14.8% increase in net sales for Tommy Bahama was primarily driven by increased sales in both the direct to consumer and wholesale distribution channels with the largest percentage increase in the direct to consumer business. The increased sales in the direct to consumer business resulted from a high single digit increase in comparable full-price retail store sales, net sales at retail stores opened during fiscal 2011 and fiscal 2012 and a significant increase in e-commerce sales. Tommy Bahama unit sales increased by 10.6% due to the higher volume in each distribution channel, and the average selling price per unit increased by 5.1%, primarily as a result of the higher proportion of net sales from the direct to consumer channel of distribution and higher product sales prices reflecting price increases that

 

18



Table of Contents

 

were initiated during fiscal 2011. As of April 28, 2012, Tommy Bahama operated 96 retail stores compared to 89 retail stores as of April 30, 2011.

 

Lilly Pulitzer:

 

The 19.3% increase in net sales for Lilly Pulitzer was driven by increased sales in both the direct to consumer and wholesale distribution channels with the largest percentage increase in the direct to consumer portion of the business, as a result of higher comparable store sales, the operation of one additional retail store during the first quarter of fiscal 2012 and a significant increase in e-commerce sales. Unit sales increased by 23.3% due to the higher volume in each distribution channel, while the average selling price per unit decreased by 3.3% despite a greater percentage of Lilly Pulitzer sales being direct to consumer sales. The decreased selling price per unit resulted from a change in product mix as sportswear, which often sells at lower price points than woven dresses, represented a greater proportion of the Lilly Pulitzer business.

 

Ben Sherman:

 

Net sales for Ben Sherman decreased by approximately 10.7% in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011. The decrease in net sales for Ben Sherman was primarily driven by a reduction in unit volume of 18.1% primarily attributable to the difficult economic conditions in the United Kingdom and Europe and our strategy to improve the wholesale distribution of the brand. The reduction in units sold was partially offset by an increase in the average selling price per unit of 9.2%. The increase in average selling price per unit was primarily due to (1) our strategy to improve the wholesale distribution of the brand and (2) a greater proportion of Ben Sherman’s sales being retail sales, which generally have higher selling prices. These two items, which had a positive impact on average selling price per unit, were partially offset by an unfavorable foreign currency translation impact resulting from a 1.5% change in average exchange rates between the two periods.

 

Lanier Clothes:

 

Net sales for Lanier Clothes were relatively flat. The average selling price per unit increased 4.8% as a result of the change in sales mix as our branded tailored clothing products, which typically have a higher average selling price than our private label products, represented a greater percentage of net sales for Lanier Clothes. A decrease in unit sales of 4.5% was primarily driven by the decreased unit sales in the private label businesses, which was partially offset by an increase in unit sales of branded tailored clothing 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 2012.

 

Gross Profit

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Gross profit

 

$ 129,214

 

$ 117,660

 

$ 11,554

 

9.8%

 

Gross margin (gross profit as a % of net sales)

 

55.9

%

56.5

%

 

 

 

 

LIFO charges (credits) included in gross profit

 

$        223

 

$       (602

)

 

 

 

 

Purchase accounting charge related to write-up of acquired inventory included in gross profit

 

$          —

 

$        996

 

 

 

 

 

 

The 9.8% increase in gross profit in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011 was primarily due to the 10.9% increase in net sales, as discussed above. The first quarter of fiscal 2012 experienced a decrease in gross margins primarily resulting from product cost increases and competitive factors impacting gross margins in Ben Sherman and Lanier Clothes subsequent to the first quarter of fiscal 2011, and the net negative impact of LIFO accounting adjustments between the two periods, which were partially offset by changes in sales mix from the prior year and the first quarter of fiscal 2012 not including any purchase accounting charges. During the first quarter of fiscal 2012, the changes in sales mix included an increased proportion of sales being sales of the higher gross margin Tommy Bahama and Lilly Pulitzer brands and an increased proportion of sales being sales of the higher gross margin direct to consumer businesses rather than wholesale sales.

 

We believe that certain of the year-over-year gross margin pressures impacting our operating groups may begin to ease in the second half of fiscal 2012 as certain of the higher product costs experienced during the second half of fiscal 2011 and the first half of fiscal 2012 are expected to moderate. However, we expect that certain competitive factors impacting Lanier Clothes and Ben Sherman may continue into the second half of fiscal 2012. Our

 

19



Table of Contents

 

gross profit may not be directly comparable to those of our competitors, as statement of earnings classification of certain expenses may vary by company.

 

SG&A

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

SG&A

 

$ 100,808

 

$ 91,138

 

$ 9,670

 

10.6%

 

SG&A (as % of net sales)

 

43.6

%

43.8

%

 

 

 

 

 

The increase in SG&A was primarily due to (1) the incremental SG&A in the first quarter of fiscal 2012 associated with operating Tommy Bahama retail stores which opened during fiscal 2011 and the first quarter of fiscal 2012, (2) the rent charge associated with our Tommy Bahama New York location, which in accordance with U.S. GAAP is required to be recognized as an ongoing expense of the store at the time we took possession of the space despite the store not opening and no cash payments for the rent required until later in the year, and (3) certain infrastructure and other costs related to the Tommy Bahama international expansion into Asia. The first quarter of fiscal 2012 included charges of approximately $2.4 million related to the Tommy Bahama New York store and the Tommy Bahama international expansion into Asia. SG&A as a percentage of net sales benefitted from leveraging, as our net sales increased at a greater rate than the increase in SG&A, as certain SG&A costs do not fluctuate with sales levels. SG&A for both the first quarter of fiscal 2012 and the first quarter of fiscal 2011 included charges of $0.3 million related to the amortization of intangible assets.

 

Change in fair value of contingent consideration

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Change in fair value of contingent consideration

 

$ 600

 

$ 600

 

$ —

 

—%

 

 

Change in fair value of contingent consideration reflects the current period impact of the change in fair value of the contingent consideration obligation associated with the Lilly Pulitzer acquisition, as discussed in our Annual Report on Form 10-K for fiscal 2011. We anticipate that the change in contingent consideration for the full year of fiscal 2012 will be approximately $2.4 million; however, that amount could change significantly depending upon whether there are any changes in future periods to our assumptions about the probability of payment of the contingent consideration, appropriate discount rate or other factors.

 

Royalties and other operating income

 

 

 

First
Quarter

 

First
Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Royalties and other operating income

 

$ 4,982

 

$ 4,791

 

$ 191

 

4.0%

 

 

The increase in royalties and other operating income was primarily due to higher royalty income in the Lilly Pulitzer business during the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011.

 

Operating income (loss)

 

 

 

First
Quarter

 

First
Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Tommy Bahama

 

$ 25,564

 

$ 23,770

 

$  1,794

 

7.5%

 

Lilly Pulitzer

 

11,012

 

7,015

 

3,997

 

57.0%

 

Ben Sherman

 

(2,740

)

(826

)

(1,914

)

(231.7)%

 

Lanier Clothes

 

4,046

 

4,725

 

(679

)

(14.4)%

 

Corporate and Other

 

(5,094

)

(3,971

)

(1,123

)

(28.3)%

 

Total operating income

 

$ 32,788

 

$ 30,713

 

$  2,075

 

6.8%

 

LIFO charges (credits) included in operating income

 

$      223

 

$     (602

)

 

 

 

 

Purchase accounting charge related to write-up of acquired inventory included in operating income

 

$        —

 

$      996

 

 

 

 

 

Charge for increase in fair value of contingent consideration included in operating income

 

$      600

 

$      600

 

 

 

 

 

 

20



Table of Contents

 

Operating income, on a consolidated basis, increased to $32.8 million in the first quarter of fiscal 2012 from $30.7 million in the first quarter of fiscal 2011. The $2.1 million increase in operating income was primarily due to (1) higher net sales and improved operating results in Lilly Pulitzer and Tommy Bahama and (2) the first quarter of fiscal 2011 including a $1.0 million charge for the write-up of acquired inventory at Lilly Pulitzer. These positive items were partially offset by lower operating results in Ben Sherman and Lanier Clothes and the net impact of LIFO accounting, which is included in Corporate and Other, between the two periods. Changes in operating income by operating group are discussed below.

 

Tommy Bahama:

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$  141,134

 

$  122,903

 

$  18,231

 

14.8%

 

Operating income

 

$    25,564

 

$    23,770

 

$    1,794

 

7.5%

 

Operating income as % of net sales

 

18.1

%

19.3

%

 

 

 

 

 

The increase in operating income for Tommy Bahama was primarily due to the increased net sales. The increased net sales were partially offset by increased SG&A associated with (1) operating additional retail stores which opened during fiscal 2011 and fiscal 2012, (2) the rent charge associated with our Tommy Bahama New York location, which in accordance with U.S. GAAP is required to be recognized as an ongoing expense of the store at the time we took possession of the space despite the store not opening and no cash payments for the rent required until later in the year and (3) certain infrastructure and other costs associated with Tommy Bahama’s international expansion into Asia. The first quarter of fiscal 2012 included charges of approximately $2.4 million related to the Tommy Bahama New York store and the Tommy Bahama international expansion into Asia.

 

Lilly Pulitzer:

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$ 35,633

 

$ 29,873

 

$  5,760

 

19.3%

 

Operating income

 

$ 11,012

 

$   7,015

 

$  3,997

 

57.0%

 

Operating income as % of net sales

 

30.9

%

23.5

%

 

 

 

 

Purchase accounting charge related to write-up of acquired inventory included in operating income

 

$       —

 

$      996

 

 

 

 

 

Charge for increase in fair value of contingent consideration included in operating income

 

$     600

 

$      600

 

 

 

 

 

 

The increase in operating income for Lilly Pulitzer was primarily due to increased net sales and increased gross margins. The increased net sales were partially offset by increased SG&A associated with the cost of operating one additional retail store during the first quarter of fiscal 2012. The first quarter of fiscal 2011 gross margin was negatively impacted by approximately $1.0 million of purchase accounting charges to cost of goods sold resulting from the write-up of acquired inventory to fair value pursuant to the purchase method of accounting. Both periods were impacted by a charge of $0.6 million for the change in the fair value of contingent consideration.

 

Ben Sherman:

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$    17,352

 

$  19,421

 

$ (2,069

)

(10.7)%

 

Operating loss

 

$    (2,740

)

$      (826

)

$ (1,914

)

(231.7)%

 

Operating loss as % of net sales

 

(15.8

)%

(4.3

)%

 

 

 

 

 

The decline in operating results for Ben Sherman in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011 was primarily due to (1) lower net sales, as discussed above, and (2) lower gross margins resulting from higher product costs and a more promotional environment in the United Kingdom and Europe due to the difficult economic conditions.

 

Lanier Clothes:

 

 

 

First Quarter

 

First Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$  33,007

 

$  32,973

 

$     34

 

0.1%

 

Operating income

 

$    4,046

 

$    4,725

 

$  (679

)

(14.4)%

 

Operating income as % of net sales

 

12.3

%

14.3

%

 

 

 

 

 

21



Table of Contents

 

The decrease in operating income for Lanier Clothes was primarily the result of gross margin pressures resulting from both cost pressures and competitive factors, which continue to impact the operating results of Lanier Clothes.

 

Corporate and Other:

 

 

 

First
Quarter

 

First
Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Net sales

 

$

3,827

 

$

3,138

 

$

689

 

22.0

%

Operating loss

 

$

 (5,094

)

$

(3,971

)

$

(1,123

)

(28.3

)%

LIFO charges (credits) included in operating loss

 

$

   223

 

$

(602

)

 

 

 

 

 

 

The Corporate and Other operating results declined by $1.1 million from a loss of $4.0 million in the first quarter of fiscal 2011 to a loss of $5.1 million in the first quarter of fiscal 2012. The decline in operating results for fiscal 2012 was primarily due to the net impact of LIFO accounting, with charges of $0.2 million in the first quarter of fiscal 2012 and credits of $0.6 million in the first quarter of fiscal 2011, with the remaining difference in operating results between the two periods primarily being related to gross margin pressures in the Oxford Golf business.

 

Interest expense, net

 

 

 

First
Quarter

 

First
Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Interest expense, net

 

$  3,603

 

$  4,804

 

$ (1,201

)

(25.0)%

 

 

Interest expense for the first quarter of fiscal 2012 decreased due to a reduction in debt levels as a result of our repurchase of $45.0 million in aggregate principal amount of our 113/8% Senior Secured Notes during fiscal 2011. We anticipate that interest expense for the first quarter of fiscal 2012 would be indicative of anticipated interest expense for the second quarter of fiscal 2012 and future quarters if we were not to redeem our 113/8% Senior Secured Notes; however, we expect to redeem our 113/8% Senior Secured Notes in July 2012 and replace this financing with a lower interest rate alternative which would significantly lower the interest expense beginning in the third quarter of fiscal 2012.

 

Income taxes

 

 

 

First
Quarter

 

First
Quarter

 

 

 

 

 

 

 

Fiscal 2012

 

Fiscal 2011

 

$ Change

 

% Change

 

Income taxes

 

$  11,183