UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended APRIL 28, 2012 |
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or | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number: 1-4365
OXFORD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Georgia |
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58-0831862 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
222 Piedmont Avenue, N.E., Atlanta, Georgia 30308
(Address of principal executive offices) (Zip Code)
(404) 659-2424
(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.
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Large accelerated filer £ |
Accelerated filer þ |
Non-accelerated filer £ |
Smaller reporting company £ | ||
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Number of shares outstanding |
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Title of each class |
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as of June 1, 2012 |
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Common Stock, $1 par value |
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16,540,863 |
OXFORD INDUSTRIES, INC.
For the first quarter of fiscal 2012
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
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Fiscal 2013 |
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52 weeks ending February 1, 2014 |
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Fiscal 2012 |
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53 weeks ending February 2, 2013 |
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Fiscal 2011 |
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52 weeks ended January 28, 2012 |
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Fourth quarter fiscal 2012 |
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14 weeks ending February 2, 2013 |
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Third quarter fiscal 2012 |
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13 weeks ending October 27, 2012 |
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Second quarter fiscal 2012 |
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13 weeks ending July 28, 2012 |
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First quarter fiscal 2012 |
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13 weeks ended April 28, 2012 |
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Fourth quarter fiscal 2011 |
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13 weeks ended January 28, 2012 |
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Third quarter fiscal 2011 |
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13 weeks ended October 29, 2011 |
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Second quarter fiscal 2011 |
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13 weeks ended July 30, 2011 |
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First quarter fiscal 2011 |
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13 weeks ended April 30, 2011 |
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par amounts)
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April 28, |
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January 28, |
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April 30, |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ 5,679 |
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$ 13,373 |
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$ 47,033 |
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Receivables, net |
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86,705 |
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59,706 |
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72,263 |
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Inventories, net |
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85,996 |
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103,420 |
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62,843 |
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Prepaid expenses, net |
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16,725 |
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19,041 |
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10,912 |
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Deferred tax assets |
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19,339 |
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19,733 |
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16,266 |
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Assets related to discontinued operations, net |
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— |
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— |
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33,409 |
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Total current assets |
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214,444 |
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215,273 |
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242,726 |
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Property and equipment, net |
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97,270 |
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93,206 |
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82,899 |
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Intangible assets, net |
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165,673 |
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165,193 |
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167,573 |
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Goodwill |
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16,495 |
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16,495 |
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16,185 |
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Other non-current assets, net |
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21,107 |
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19,040 |
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21,716 |
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Total Assets |
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$514,989 |
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$509,207 |
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$531,099 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities: |
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Trade accounts payable and other accrued expenses |
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$ 67,165 |
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$ 89,149 |
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$ 73,746 |
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Accrued compensation |
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16,703 |
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23,334 |
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15,558 |
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Income taxes payable |
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9,212 |
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— |
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6,289 |
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Contingent consideration earned and payable |
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2,500 |
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2,500 |
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— |
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Short-term debt and current maturities of long-term debt |
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6,023 |
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2,571 |
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716 |
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Liabilities related to discontinued operations |
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— |
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— |
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4,949 |
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Total current liabilities |
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101,603 |
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117,554 |
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101,258 |
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Long-term debt, less current maturities |
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106,991 |
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103,405 |
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147,228 |
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Non-current contingent consideration |
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11,245 |
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10,645 |
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11,345 |
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Other non-current liabilities |
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39,446 |
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38,652 |
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43,703 |
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Non-current deferred income taxes |
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33,614 |
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34,882 |
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30,231 |
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Commitments and contingencies |
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Shareholders’ Equity: |
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Common stock, $1.00 par value per common share |
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16,541 |
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16,522 |
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16,511 |
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Additional paid-in capital |
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101,090 |
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99,670 |
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96,679 |
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Retained earnings |
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127,079 |
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111,551 |
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106,700 |
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Accumulated other comprehensive loss |
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(22,620 |
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(23,674 |
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(22,556 |
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Total shareholders’ equity |
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222,090 |
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204,069 |
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197,334 |
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Total Liabilities and Shareholders’ Equity |
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$514,989 |
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$509,207 |
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$531,099 |
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See accompanying notes.
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(in thousands, except per share amounts)
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First |
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First |
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Net sales |
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$230,953 |
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$208,308 |
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Cost of goods sold |
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101,739 |
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90,648 |
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Gross profit |
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129,214 |
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117,660 |
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SG&A |
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100,808 |
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91,138 |
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Change in fair value of contingent consideration |
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600 |
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600 |
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Royalties and other operating income |
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4,982 |
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4,791 |
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Operating income |
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32,788 |
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30,713 |
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Interest expense, net |
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3,603 |
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4,804 |
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Earnings from continuing operations before income taxes |
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29,185 |
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25,909 |
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Income taxes |
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11,183 |
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8,849 |
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Earnings from continuing operations |
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18,002 |
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17,060 |
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Earnings from discontinued operations, net of taxes |
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— |
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1,040 |
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Net earnings |
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$ 18,002 |
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$ 18,100 |
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Earnings from continuing operations per common share: |
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Basic |
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$ 1.09 |
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$ 1.03 |
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Diluted |
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$ 1.09 |
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$ 1.03 |
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Earnings from discontinued operations, net of taxes per common share: |
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Basic |
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$ 0.00 |
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$ 0.06 |
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Diluted |
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$ 0.00 |
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$ 0.06 |
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Net earnings per common share: |
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Basic |
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$ 1.09 |
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$ 1.10 |
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Diluted |
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$ 1.09 |
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$ 1.10 |
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Weighted average common shares outstanding: |
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Basic |
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16,531 |
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16,515 |
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Dilution |
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21 |
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10 |
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Diluted |
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16,552 |
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16,525 |
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Dividends declared per common share |
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$ 0.15 |
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$ 0.13 |
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See accompanying notes.
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
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First Quarter |
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First Quarter |
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Net earnings |
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$ 18,002 |
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$ 18,100 |
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Other comprehensive income (loss), net of taxes |
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Foreign currency translation gain |
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1,269 |
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1,768 |
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Net unrealized loss on forward foreign currency exchange contracts |
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(215 |
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(505 |
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Total other comprehensive income, net of taxes |
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1,054 |
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1,263 |
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Comprehensive income |
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$ 19,056 |
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$ 19,363 |
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See accompanying notes.
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
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First |
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First |
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Cash Flows From Operating Activities: |
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Earnings from continuing operations |
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$ 18,002 |
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$ 17,060 |
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Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities: |
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Depreciation |
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5,772 |
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4,821 |
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Amortization of intangible assets |
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256 |
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298 |
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Change in fair value of contingent consideration |
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600 |
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600 |
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Amortization of deferred financing costs and bond discount |
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376 |
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487 |
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Stock compensation expense |
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761 |
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864 |
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Deferred income taxes |
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(1,050 |
) |
3,819 |
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Changes in working capital: |
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|
|
|
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Receivables |
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(26,638 |
) |
(20,962 |
) |
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Inventories |
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17,889 |
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23,003 |
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Prepaid expenses |
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2,263 |
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1,110 |
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Current liabilities |
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(19,798 |
) |
(13,631 |
) |
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Other non-current assets |
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(2,326 |
) |
756 |
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Other non-current liabilities |
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781 |
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(1,009 |
) |
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Net cash provided by (used in) operating activities |
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(3,112 |
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17,216 |
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Cash Flows From Investing Activities: |
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Purchases of property and equipment |
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(9,633 |
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(3,634 |
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Net cash used in investing activities |
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(9,633 |
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(3,634 |
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Cash Flows From Financing Activities: |
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Repayment of revolving credit arrangements |
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(64,886 |
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(12,283 |
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Proceeds from revolving credit arrangements |
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71,670 |
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12,978 |
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Proceeds from issuance of common stock |
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680 |
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939 |
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Dividends on common stock |
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(2,475 |
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(2,142 |
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Net cash provided by (used in) financing activities |
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4,989 |
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(508 |
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Cash Flows from Discontinued Operations: |
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Net cash used in discontinued operations |
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— |
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(10,413 |
) |
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Net change in cash and cash equivalents |
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(7,756 |
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2,661 |
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Effect of foreign currency translation on cash and cash equivalents |
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62 |
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278 |
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Cash and cash equivalents at the beginning of year |
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13,373 |
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44,094 |
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Cash and cash equivalents at the end of period |
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$ 5,679 |
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$ 47,033 |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest, net, including interest paid for discontinued operations |
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$ 82 |
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$ 306 |
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Cash paid (refunded) for income taxes, including income taxes paid for discontinued operations |
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$ (351 |
) |
$ 27,344 |
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See accompanying notes.
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):
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April 28, |
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January 28, |
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April 30, |
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Finished goods |
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$127,833 |
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$143,482 |
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$101,150 |
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Work in process |
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4,378 |
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6,244 |
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3,639 |
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Fabric, trim and supplies |
|
6,161 |
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6,070 |
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4,008 |
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LIFO reserve |
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(52,376 |
) |
(52,376 |
) |
(45,954 |
) |
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Total |
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$ 85,996 |
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$103,420 |
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$ 62,843 |
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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.
3. Debt: The following table details our debt (in thousands) as of the dates specified:
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April 28, |
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January 28, |
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April 30, |
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$175 million U.S. Secured Revolving Credit Facility (“U.S. Revolving Credit Agreement”), which is limited to a borrowing base consisting of specified percentages of eligible categories of assets, accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to average unused availability, requires interest payments monthly with principal due at maturity (August 2013) and is secured by a first priority security interest in the accounts receivable (other than royalty payments in respect of trademark licenses), inventory, investment property (including the equity interests of certain subsidiaries), general intangibles (other than trademarks, trade names and related rights), deposit accounts, intercompany obligations, equipment, goods, documents, contracts, books and records and other personal property of Oxford Industries, Inc. and substantially all of its domestic subsidiaries and a second priority interest in those assets in which the holders of the 113/8% Senior Secured Notes have a first priority interest |
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$ 3,471 |
|
$ — |
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$ — |
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|
£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 |
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6,023 |
|
2,571 |
|
716 |
|
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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 |
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Unamortized discount |
|
(1,480 |
) |
(1,595 |
) |
(2,772 |
) |
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Total debt |
|
113,014 |
|
105,976 |
|
147,944 |
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|
Short-term debt and current maturities of long-term debt |
|
(6,023 |
) |
(2,571 |
) |
(716 |
) |
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Long-term debt, less current maturities |
|
$106,991 |
|
$103,405 |
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$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 $6.0 million if the notes were to be redeemed on July 16, 2012.
4. Operating Group Information: Our business is primarily operated through our four operating groups: Tommy Bahama, Lilly Pulitzer, Ben Sherman and Lanier Clothes, as disclosed in our Annual Report on Form 10-K for fiscal 2011. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. The table below presents certain information (in thousands) about our operating groups, as well as Corporate and Other, which is a reconciling category for reporting purposes.
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First Quarter Fiscal 2012 |
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First Quarter Fiscal 2011 |
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Net Sales |
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Tommy Bahama |
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$ |
141,134 |
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|
$ |
122,903 |
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Lilly Pulitzer |
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35,633 |
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29,873 |
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Ben Sherman |
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17,352 |
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19,421 |
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Lanier Clothes |
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33,007 |
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32,973 |
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Corporate and Other |
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3,827 |
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|
3,138 |
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Total Net Sales |
|
|
$ |
230,953 |
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|
$ |
208,308 |
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Depreciation and Amortization |
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|
|
|
|
|
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Tommy Bahama |
|
|
$ |
4,321 |
|
|
$ |
3,522 |
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|
Lilly Pulitzer |
|
|
506 |
|
|
468 |
| ||
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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).
OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
April 28, 2012
|
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
|
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 |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
|
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 |
|
OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
April 30, 2011
|
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
|
|
ASSETS | |||||||||||
|
Cash and cash equivalents |
|
$ 40,734 |
|
$ 1,255 |
|
$ 5,044 |
|
$ — |
|
$ 47,033 |
|
|
Receivables, net |
|
11,518 |
|
25,999 |
|
47,767 |
|
(13,021 |
) |
72,263 |
|
|
Inventories, net |
|
(20,728 |
) |
75,609 |
|
8,720 |
|
(758 |
) |
62,843 |
|
|
Prepaid expenses and deferred tax assets |
|
17,227 |
|
11,186 |
|
2,648 |
|
(3,883 |
) |
27,178 |
|
|
Assets related to discontinued operations, net |
|
33,409 |
|
— |
|
— |
|
— |
|
33,409 |
|
|
Total current assets |
|
82,160 |
|
114,049 |
|
64,179 |
|
(17,662 |
) |
242,726 |
|
|
Property and equipment, net |
|
7,017 |
|
71,578 |
|
4,304 |
|
— |
|
82,899 |
|
|
Goodwill and intangible assets, net |
|
— |
|
158,618 |
|
25,140 |
|
— |
|
183,758 |
|
|
Other non-current assets, net |
|
602,112 |
|
143,219 |
|
4,153 |
|
(727,768 |
) |
21,716 |
|
|
Total Assets |
|
$691,289 |
|
$ 487,464 |
|
$97,776 |
|
$(745,430 |
) |
$531,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
|
Current liabilities related to continuing operations |
|
$ 15,882 |
|
$ 59,167 |
|
$ 35,838 |
|
$ (14,578 |
) |
$ 96,309 |
|
|
Current liabilities related to discontinued operations |
|
4,949 |
|
— |
|
— |
|
— |
|
4,949 |
|
|
Long-term debt, less current maturities |
|
147,228 |
|
— |
|
— |
|
— |
|
147,228 |
|
|
Other non-current liabilities, 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 |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
|
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 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
First Quarter Fiscal 2011
|
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
|
Net sales |
|
$ |
35,721 |
|
$ |
159,001 |
|
$ |
21,692 |
|
$ |
(8,106 |
) |
$ |
208,308 |
|
|
Cost of goods sold |
|
24,435 |
|
62,641 |
|
8,269 |
|
(4,697 |
) |
90,648 |
| |||||
|
Gross profit |
|
11,286 |
|
96,360 |
|
13,423 |
|
(3,409 |
) |
117,660 |
| |||||
|
SG&A including 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 |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
|
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 |
|
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
First Quarter Fiscal 2011
|
|
|
Oxford |
|
Subsidiary |
|
Subsidiary |
|
Consolidating |
|
Consolidated |
| |||||
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
6,304 |
|
$ |
15,681 |
|
$ |
(3,269 |
) |
$ |
(1,500 |
) |
$ |
17,216 |
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash used in investing activities |
|
(408 |
) |
(3,203 |
) |
(23 |
) |
— |
|
(3,634 |
) | |||||
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Change in debt |
|
— |
|
— |
|
695 |
|
— |
|
695 |
| |||||
|
Proceeds from issuance of common stock |
|
939 |
|
— |
|
— |
|
— |
|
939 |
| |||||
|
Change in intercompany payable |
|
8,245 |
|
(12,356 |
) |
2,611 |
|
1,500 |
|
— |
| |||||
|
Dividends on common stock |
|
(2,142 |
) |
— |
|
— |
|
— |
|
(2,142 |
) | |||||
|
Net cash provided by (used in) financing activities |
|
7,042 |
|
(12,356 |
) |
3,306 |
|
1,500 |
|
(508 |
) | |||||
|
Cash Flows from Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) discontinued operations |
|
(13,334 |
) |
324 |
|
2,597 |
|
— |
|
(10,413 |
) | |||||
|
Net change in Cash and Cash Equivalents |
|
(396 |
) |
446 |
|
2,611 |
|
— |
|
2,661 |
| |||||
|
Effect of foreign currency translation |
|
— |
|
— |
|
278 |
|
— |
|
278 |
| |||||
|
Cash and Cash Equivalents at the Beginning of Period |
|
41,130 |
|
809 |
|
2,155 |
|
— |
|
44,094 |
| |||||
|
Cash and Cash Equivalents at the End of Period |
|
$ |
40,734 |
|
$ |
1,255 |
|
$ |
5,044 |
|
$ |
— |
|
$ |
47,033 |
|
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.
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 |
|
First Quarter |
|
|
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.
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.
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
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
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 |
|
First |
|
|
|
|
|
|
|
|
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 |
|
First |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
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 |
% |
|
|
|
|
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 |
|
First |
|
|
|
|
| |||
|
|
|
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 |
|
First |
|
|
|
|
|
|
|
|
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 |
|
First |
|
|
|
|
|
|
|
|
Fiscal 2012 |
|
Fiscal 2011 |
|
$ Change |
|
% Change |
|
|
Income taxes |
|
$ 11,183 |