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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 13, 2003
----------------
OXFORD INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 001-04365 58-0831862
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF INCORPORATION) IDENTIFICATION NUMBER)
222 PIEDMONT AVENUE NE, ATLANTA GEORGIA 30308
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(404) 659-2424
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
--------------------------------------------------------------------------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 13, 2003, Oxford Industries, Inc. ("Oxford") completed the
previously announced acquisition of all of the outstanding capital stock of
Viewpoint International, Inc. ("Viewpoint"), pursuant to a stock purchase
agreement, dated as of April 26, 2003.
Oxford purchased Viewpoint for $240 million in cash and $10 million of
Oxford common stock. In addition, Oxford entered into an earnout agreement with
the selling stockholders of Viewpoint, pursuant to which the selling
stockholders will be entitled to earn up to an additional $75 million, in the
aggregate, over the four years following the closing date of the acquisition
based on Viewpoint's achievement of certain performance targets. Oxford financed
the cash portion of the purchase price with the net proceeds of its previously
announced and closed offering of $200 million aggregate principal amount of
senior notes due 2011, borrowings under its new senior secured revolving credit
facility (described below) and cash on hand.
Simultaneously with the closing of the acquisition, Oxford entered into
a new $275 million senior secured credit facility with SunTrust Robinson
Humphrey Capital Markets, a division of SunTrust Capital Markets, Inc., and
Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services,
Inc., as joint lead arrangers, SunTrust Bank as sole administrative agent,
Merrill Lynch Capital as sole syndication agent, SunTrust Bank and Merrill Lynch
Capital as lenders, and other lenders named in the new senior secured revolving
credit facility. The new senior secured revolving credit facility has a five
year term and bears interest, at Oxford's option, at rates determined from time
to time based upon (1) the higher of the federal funds rate or the applicable
prime rate plus a spread or (2) LIBOR plus a spread. Borrowings under the new
senior secured revolving credit facility are subject to a borrowing base
calculation based on Oxford's inventories, real property and accounts
receivable.
Oxford also entered into a registration rights agreement, dated as of
June 13, 2003, with the selling stockholders of Viewpoint, pursuant to which
Oxford has agreed to register for resale, on one or more shelf registration
statements, the shares of Oxford common stock issued to the selling stockholders
pursuant to the stock purchase agreement and the shares of Oxford common stock
that may be issued to the selling stockholders from time to time pursuant to the
earnout agreement.
At the time of the acquisition there were no material relationships
between Oxford, or any of its affiliates, any directors or officers, or any
associate of such director or officer, on the one hand, and Viewpoint or the
selling stockholders of Viewpoint, on the other hand.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of business acquired
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
Viewpoint International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Viewpoint
International, Inc. and Subsidiaries as of March 31, 2002 and 2001, and the
related consolidated statements of income, shareholders' equity (deficiency) and
cash flows for each of the three years in the period ended March 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Viewpoint
International, Inc. and Subsidiaries as of March 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Mahoney Cohen & Company, CPA, P.C.
New York, New York
June 6, 2002
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 AND 2001
2002 2001
---------- ----------
($ IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
ASSETS (NOTES 7 AND 9)
Current assets:
Cash and cash equivalents................................. $ 2,620 $ 6,093
Cash equivalent -- restricted (Note 9).................... 8,197 15,114
Due from factor (Note 4).................................. 40,605 38,527
Accounts receivable, net of allowance for doubtful
accounts of approximately $45 in 2002 and $59 in 2001... 3,053 6,973
Royalties receivable -- Paradise Shoe Company LLC (Note
6)...................................................... 722 373
Inventories............................................... 24,671 22,378
Prepaid income taxes...................................... 1,835 --
Deferred income taxes (Note 12)........................... 353 1,986
Prepaid expenses and other current assets................. 5,512 6,235
-------- --------
Total current assets............................... 87,568 97,679
Property and equipment, net (Note 5)........................ 18,388 16,095
Other assets:
Goodwill, net............................................. 5,537 5,537
Deferred financing costs, net............................. 857 1,071
Royalties receivable -- Paradise Shoe Company LLC (Note
6)...................................................... 187 211
Investment in Paradise Shoe Company LLC (Note 6).......... 496 536
Deferred income taxes (Note 12)........................... 1,855 986
Marketable securities (Note 11)........................... 617 --
Security deposits and other assets........................ 595 339
-------- --------
Total other assets................................. 10,144 8,680
-------- --------
$116,100 $122,454
======== ========
LIABILITIES AND DEFICIENCY
Current liabilities:
Accounts payable (Notes 3 and 13)......................... $ 19,355 $ 16,742
Notes and bankers acceptances payable (Note 7)............ 23,262 29,926
Long-term debt -- current portion (Note 8)................ 7,500 7,580
Income taxes payable...................................... 38 11,193
Loans payable -- shareholders (Notes 9 and 10)............ 10,103 16,579
Accrued expenses and other current liabilities (Note 9)... 10,098 10,357
-------- --------
Total current liabilities.......................... 70,356 92,377
Long-term debt (Note 8)..................................... 21,875 29,375
Deferred rent (Note 13)..................................... 1,086 629
Deferred compensation (Note 11)............................. 617 --
Subordinated notes payable -- shareholders (Note 9)......... 25,448 24,572
Minority interests in subsidiaries.......................... 137 224
Commitments and contingencies (Notes 9, 11 and 13)
Deficiency:
Class A Voting Common Stock -- $.0001 par value:
Authorized -- 40,000,000 shares
Issued -- 29,325,000 shares............................. 3 3
Class B Non-Voting Common Stock -- $.0001 par value:
Authorized -- 675,000 shares
Issued -- 675,000 shares................................ -- --
Class C Voting Common Stock -- $.0001 par value:
Authorized -- 6,200,000 shares
Issued and outstanding -- 5,948,067 shares.............. 1 1
Additional paid-in capital................................ 29,714 29,714
Retained earnings and members' interests.................. 67,064 43,146
-------- --------
96,782 72,864
Less: Treasury stock, at cost (Note 10)................... 100,201 97,587
-------- --------
Total deficiency................................... (3,419) (24,723)
-------- --------
$116,100 $122,454
======== ========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
2002 2001 2000
------------ ------------ ------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales:
Wholesale (Note 3)................................... $ 189,879 $ 189,657 $ 106,755
Retail and restaurant................................ 95,074 64,809 40,844
----------- ----------- -----------
Total net sales.............................. 284,953 254,466 147,599
Cost of goods sold (Note 3)............................ 138,503 134,789 79,354
----------- ----------- -----------
Gross profit........................................... 146,450 119,677 68,245
Licensing income (Note 6).............................. 2,434 1,234 536
----------- ----------- -----------
148,884 120,911 68,781
Operating expenses:
Retail and restaurant................................ 43,037 30,536 17,620
Selling and shipping................................. 25,989 22,121 16,979
General and administrative........................... 34,883 26,440 12,843
----------- ----------- -----------
Total operating expenses..................... 103,909 79,097 47,442
----------- ----------- -----------
Operating income....................................... 44,975 41,814 21,339
Other expense (income):
Interest expense, net of interest income of
approximately $563 in 2002, $524 in 2001 and $123
in 2000 (Note 9).................................. 7,517 2,725 1,535
Equity in loss (income) of Paradise Shoe Company LLC
(Note 6).......................................... 291 (80) (111)
Other income (Note 11)............................... (14) (32) (5)
----------- ----------- -----------
Net other expense............................ 7,794 2,613 1,419
----------- ----------- -----------
Income before provision for income taxes and minority
interests in net loss (income) of subsidiaries....... 37,181 39,201 19,920
Provision for income taxes (Note 12)................... 13,350 14,665 6,553
----------- ----------- -----------
Income before minority interests in net loss (income)
of subsidiaries...................................... 23,831 24,536 13,367
Minority interests in net loss (income) of
subsidiaries......................................... 87 (512) (893)
----------- ----------- -----------
Net income............................................. $ 23,918 $ 24,024 $ 12,474
=========== =========== ===========
Net income per common share -- basic................... $ 1.41 $ .85 $ .42
=========== =========== ===========
Net income per common share -- diluted................. $ 1.40 $ .85 $ .42
=========== =========== ===========
Weighted-average common shares outstanding -- basic.... 16,994,476 28,218,421 30,000,000
=========== =========== ===========
Weighted-average common shares outstanding --diluted... 17,096,505 28,232,398 30,000,000
=========== =========== ===========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
COMMON STOCK
-----------------------------------------------------------
CLASS A CLASS B CLASS C ADDITIONAL
------------------- ---------------- ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------ ------- ------ --------- ------ ----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, April 1, 1999................ 29,325,000 $ 3 675,000 $ -- -- $ -- $ 1,885
Net income............................ -- -- -- -- -- -- --
---------- ---- ------- ---- --------- ---- -------
Balance, March 31, 2000............... 29,325,000 3 675,000 -- -- -- 1,885
Issuance of 5,948,067 shares of Class
C Common Stock on February 9, 2001
for cash (at $5.15 per share), net
of related fees and expenses of
approximately $3,320................ -- -- -- -- 5,948,067 1 27,304
Repurchase of 18,278,591 shares of
Class A Common Stock on February 9,
2001 for cash of $79,112 and
issuance of subordinated notes of
$15,000 (total at $5.15 per
share).............................. -- -- -- -- -- -- --
Repurchase of 675,000 shares of Class
B Common Stock on February 9, 2001
for cash (at $5.15 per share)....... -- -- -- -- -- -- --
To allocate proceeds of subordinated
notes payable to detachable warrants
to purchase 102,222 shares of Class
C Common Stock...................... -- -- -- -- -- -- 525
Net income............................ -- -- -- -- -- -- --
---------- ---- ------- ---- --------- ---- -------
Balance, March 31, 2001............... 29,325,000 3 675,000 -- 5,948,067 1 29,714
Adjustment to treasury stock purchase
price (Note 10)..................... -- -- -- -- -- -- --
Net income............................ -- -- -- -- -- -- --
---------- ---- ------- ---- --------- ---- -------
Balance, March 31, 2002............... 29,325,000 $ 3 675,000 $ -- 5,948,067 $ 1 $29,714
========== ==== ======= ==== ========= ==== =======
RETAINED
EARNINGS
AND TREASURY STOCK
MEMBERS' ---------------------------------
INTERESTS SHARES AMOUNT TOTAL
--------- ---------- --------- --------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, April 1, 1999................ $ 6,648 -- $ -- $ 8,536
Net income............................ 12,474 -- -- 12,474
------- ---------- --------- --------
Balance, March 31, 2000............... 19,122 -- -- 21,010
Issuance of 5,948,067 shares of Class
C Common Stock on February 9, 2001
for cash (at $5.15 per share), net
of related fees and expenses of
approximately $3,320................ -- -- -- 27,305
Repurchase of 18,278,591 shares of
Class A Common Stock on February 9,
2001 for cash of $79,112 and
issuance of subordinated notes of
$15,000 (total at $5.15 per
share).............................. -- 18,278,591 (94,112) (94,112)
Repurchase of 675,000 shares of Class
B Common Stock on February 9, 2001
for cash (at $5.15 per share)....... -- 675,000 (3,475) (3,475)
To allocate proceeds of subordinated
notes payable to detachable warrants
to purchase 102,222 shares of Class
C Common Stock...................... -- -- 525
Net income............................ 24,024 -- -- 24,024
------- ---------- --------- --------
Balance, March 31, 2001............... 43,146 18,953,591 (97,587) (24,723)
Adjustment to treasury stock purchase
price (Note 10)..................... -- -- (2,614) (2,614)
Net income............................ 23,918 -- -- 23,918
------- ---------- --------- --------
Balance, March 31, 2002............... $67,064 18,953,591 $(100,201) $ (3,419)
======= ========== ========= ========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
2002 2001 2000
-------- -------- --------
($ IN THOUSANDS)
Cash flows from operating activities:
Net income................................................ $ 23,918 $ 24,024 $ 12,474
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for doubtful accounts........................ (14) 59 --
Depreciation and amortization.......................... 3,841 2,739 1,716
Interest amortization of discount on notes payable and
deferred financing costs............................. 329 36 --
Accrued interest on subordinated notes
payable -- shareholders.............................. 761 97 --
Deferred income taxes.................................. 764 (2,557) (415)
Deferred rent.......................................... 456 378 251
Equity in loss (income) of Paradise Shoe Company LLC... 291 (80) (111)
Gains on marketable securities......................... (14) -- --
Minority interests in net income (loss) of
subsidiaries......................................... (87) 512 893
Change in assets and liabilities:
Due from factor...................................... (2,078) (5,089) (17,490)
Accounts receivable.................................. 3,934 (6,963) (18)
Royalties receivable -- Paradise Shoe Company LLC.... (325) (210) (373)
Inventories.......................................... (2,293) (5,157) (8,293)
Due from vendor...................................... -- 8,338 --
Prepaid income taxes................................. (1,835) -- --
Prepaid expenses and other current assets............ 722 (5,186) 729
Security deposits and other assets................... (272) (45) 49
Accounts payable..................................... 3,175 4,277 4,731
Income taxes payable................................. (11,154) 3,459 2,707
Accrued expenses and other current liabilities....... (261) 4,510 3,869
Deferred compensation................................ 617 -- --
-------- -------- --------
Net cash provided by operating activities......... 20,475 23,142 719
-------- -------- --------
Cash flows from investing activities:
Purchase of minority interest............................. -- (7,449) --
Purchases of property and equipment....................... (6,118) (9,517) (2,714)
Investment in Paradise Shoe Company LLC................... (250) -- (250)
Purchase of marketable securities......................... (608) -- --
Sales of marketable securities............................ 5 -- --
-------- -------- --------
Net cash used in investing activities............. (6,971) (16,966) (2,964)
-------- -------- --------
Totals carried forward...................................... $ 13,504 $ 6,176 $ (2,245)
-------- -------- --------
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
2002 2001 2000
-------- -------- -------
($ IN THOUSANDS)
Totals brought forward...................................... $ 13,504 $ 6,176 $(2,245)
Cash flows from financing activities:
Purchase of restricted cash equivalent.................... -- (15,000) --
Proceeds from restricted cash equivalent.................. 6,917 -- --
Payment of deferred financing costs....................... -- (1,107) --
Increase (decrease) in cash overdraft..................... (560) (2,079) 1,710
Proceeds from (repayments of) notes and acceptances
payable, net........................................... (6,664) 8,120 7,834
Proceeds from long-term debt.............................. -- 37,500 273
Repayments of long-term debt.............................. (7,580) (1,894) (733)
Repayment of loan payable -- member....................... -- (175) --
Proceeds from (repayments of) loans
payable -- shareholders, net........................... (9,090) 12,648 185
Proceeds from subordinated notes
payable -- shareholders................................ -- 10,000 --
Issuance of common stock.................................. -- 27,305 --
Purchase of treasury stock................................ -- (82,587) --
-------- -------- -------
Net cash provided by (used in) financing
activities...................................... (16,977) (7,269) 9,269
-------- -------- -------
Net increase (decrease) in cash and cash equivalents........ (3,473) (1,093) 7,024
Cash and cash equivalents, beginning of year................ 6,093 7,186 162
-------- -------- -------
Cash and cash equivalents, end of year...................... $ 2,620 $ 6,093 $ 7,186
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest.................................................. $ 6,282 $ 2,434 $ 1,393
Income taxes.............................................. $ 25,557 $ 13,983 $ 4,308
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In connection with an adjustment to the purchase price of treasury stock
during the year ended March 31, 2002, the Company issued loans payable to
shareholders totalling $2,615.
In connection with the purchase of treasury stock during the year ended
March 31, 2001, the Company issued subordinated notes payable to several
shareholders totalling $15,000.
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- NATURE OF BUSINESS
Viewpoint International, Inc. (the "Company") is an importer of men's and
women's sportswear sold primarily to retail stores in the United States. Its
wholly-owned subsidiaries, Tommy Bahama R&R Holdings, Inc. and Tommy Bahama R&R
Holdings II, Inc. (collectively "Tommy Bahama Retail"), operate, through their
wholly-owned subsidiaries, retail restaurants and clothing stores that sell
products by and promote the "Tommy Bahama" brand name in the United States. The
Company's majority-owned subsidiary, Paradise Neckwear Co. LLC is a manufacturer
of men's neckwear sold primarily to retail stores in the United States.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company, Tommy Bahama R&R Holdings, Inc. and its twenty-three
wholly-owned subsidiaries, Tommy Bahama R&R Holdings II, Inc. and its four
wholly-owned subsidiaries and Paradise Neckwear Co. LLC (hereinafter referred to
collectively as the "Companies"). All significant intercompany transactions and
balances have been eliminated in consolidation. Effective March 31, 2002, Tommy
Bahama R&R Holdings II, Inc. was merged with and into Tommy Bahama R&R Holdings,
Inc.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Companies consider cash on hand, deposits in banks and short-term
investments, with maturities of three months or less when purchased, as cash and
cash equivalents.
INVENTORIES
Substantially all inventories are finished goods and are stated at the
lower of cost (first-in, first-out method) or market. At March 31, 2002 and
2001, inventory in-transit was approximately $3,207 and $3,805, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed by
both the straight-line and accelerated methods over the assets' estimated lives
ranging from three to seven years. Leasehold improvements are amortized over the
lesser of the lease terms or the assets' useful lives. Upon sale or retirement
of equipment, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in operations.
GOODWILL
Goodwill represents the aggregate excess of the acquired cost of the
minority interest in two retail stores over the fair value of their net assets
on the date of acquisition. Commencing April 1, 2001, with the Company's
adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
goodwill is no longer amortized and the Company is required to complete a test
for impairment of goodwill annually, as well as a transitional goodwill
impairment test within six months from the date of adoption. The Company has
concluded its testing, on an individual store basis, as required by SFAS 142.
The results of these tests did not indicate any impairment of the Company's
recorded goodwill. SFAS 142 also requires disclosure of what net income would
have been in all periods presented had SFAS 142 been in
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
effect. The following table is provided to disclose what net income would have
been had SFAS 142 been adopted in prior periods.
FOR THE YEAR ENDED MARCH 31,
------------------------------
2002 2001 2000
-------- -------- --------
Reported net income............................... $23,918 $24,024 $12,474
Add back: Goodwill amortization................... -- 205 --
------- ------- -------
Adjusted net income............................... $23,918 $24,229 $12,474
======= ======= =======
Net income per common share -- basic, as
reported........................................ $ 1.41 $ .85 $ .42
======= ======= =======
Net income per common share -- diluted, as
reported........................................ $ 1.40 $ .85 $ .42
======= ======= =======
Adjusted net income per common share -- basic..... $ 1.41 $ .86 $ .42
======= ======= =======
Adjusted net income per common share -- diluted... $ 1.40 $ .86 $ .42
======= ======= =======
DEFERRED FINANCING COSTS
Costs incurred in the issuance of the subordinated notes
payable -- shareholders, principally professional fees, are amortized by the
straight-line method over the term of the notes (see Note 9).
SFAS No. 141, "Business Combinations" ("SFAS 141"), specifies certain
criteria for identifying, valuing and recording intangible assets separate from
goodwill. SFAS 142 also prescribes the disclosure requirements for intangible
assets that meet these criteria. The following schedule details the Company's
deferred financing costs, which are included in the accompanying balance sheets
at March 31:
2002 2001
------ ------
Deferred financing costs.................................... $1,107 $1,107
Less: Accumulated amortization.............................. 250 36
------ ------
Net carrying amount......................................... $ 857 $1,071
====== ======
Amortization expense for the years ended March 31, 2002 and 2001 was
approximately $214 and $36, respectively.
The future amortization expense for each of the four succeeding years
relating to the deferred financing costs currently recorded on the balance sheet
is estimated to be the following:
YEAR ENDING
MARCH 31,
-----------
2003...................................................... $214
2004...................................................... $214
2005...................................................... $214
2006...................................................... $214
REVENUE RECOGNITION
Net sales from wholesale products are recognized upon transfer of title
and risk of ownership to customers. Net sales from retail and restaurant sales
are recognized when payment is tendered at the point
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
of sale. Revenue is recorded net of discounts, as well as provisions for
estimated returns, allowances and doubtful accounts. Licensing revenue is
recognized as earned.
INCOME TAXES
The Company and Tommy Bahama Retail file consolidated income tax returns.
The wholly-owned subsidiaries of Tommy Bahama Retail are all either
limited liability companies or limited partnerships (collectively referred to as
the "LLCs"). Limited liability companies and limited partnerships are not tax
paying entities at the corporate level. Each member/partner is individually
responsible for their share of the Companies' income or loss for income tax
reporting purposes. Tommy Bahama Retail includes its respective share of the
income and losses of the LLCs in its income tax returns.
SHIPPING AND HANDLING COSTS
The Company includes shipping and handling costs in selling and shipping
expense. Shipping and handling costs for the years ended March 31, 2002, 2001
and 2000 amounted to approximately $3,619, $3,237 and $2,326, respectively.
ADVERTISING EXPENSES
Advertising expenses are charged to operations in the period in which
they are incurred. Advertising expenses for the years ended March 31, 2002, 2001
and 2000 were approximately $2,084, $2,023 and $731, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the carrying value of its financial instruments
approximates the fair value at the balance sheet date except for its $25,000 of
subordinated notes payable -- shareholders (see Note 9). The estimated fair
value of these notes are approximately $28,000 at March 31, 2002 based upon
management's best estimate of interest rates that would be available to the
Company for similar debt obligations.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
NET INCOME PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share," basic and diluted
income per common share has been computed using the weighted-average number of
shares of common stock outstanding during the period. Potentially dilutive
securities outstanding at March 31, 2002 and 2001 which convert to common share
equivalents consist of common stock warrants to purchase 102,222 shares of the
Company's Class C Common Stock.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 requires entities to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period and
the capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, the entity either settles the obligation for
the amount recorded or incurs a gain or loss. SFAS 143 is effective for fiscal
years beginning after June 15, 2002. Management believes that the adoption of
this statement will not have a material effect on the Company's future results
of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," ("SFAS 121") and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business." The FASB issued SFAS 144 to establish a single accounting model,
based on the framework established in SFAS 121, for long-lived assets to be
disposed of by sale. SFAS 144 broadens the presentation of discontinued
operations in the income statement to include a component of an entity (rather
than a segment of a business). A component of an entity comprises operations and
cash flows that can be clearly distinguished, operationally and for financial
reporting purposes, from the rest of the entity. SFAS 144 also requires that
discontinued operations be measured at the lower of the carrying amount or fair
value less cost to sell. SFAS 144 is effective for fiscal years beginning after
December 15, 2001 and should be applied prospectively. Management is evaluating
the effect of this statement on the Company's results of operations and
financial position.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections" ("SFAS 145"), which clarifies the criteria under which
extinguishment of debt can be considered as extraordinary and rescinds the
related SFAS Nos. 4 and 64 in addition to SFAS 44 and also makes technical
corrections to other Statements of Financial Accounting Standards. The Company
adopted SFAS 145 effective with the year ending March 31, 2002. The adoption of
this statement had no immediate impact on the Company.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), which is effective
for exit or disposal activities that are initiated after December 31, 2002, with
earlier application encouraged. This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of SFAS 146 are to be applied prospectively from the date of adoption. The
Company has not yet assessed any potential impact the issuance of this standard
may have on its financial position or future results of operations.
NOTE 3 -- CONCENTRATIONS OF RISK
CASH AND CASH EQUIVALENTS
The Companies are subject to a concentration of credit risk with respect
to their cash and cash equivalents in excess of federally insured amounts.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ACCOUNTS RECEIVABLE
The concentration of credit risk in the Company's accounts receivable is
mitigated by the sale of a substantial portion of its accounts receivable to a
commercial factor. The remaining accounts receivable are subject to the
Company's credit evaluation process, reasonably short collection terms and the
geographical dispersion of revenue. Credit losses have been within management's
expectations.
MAJOR CUSTOMERS
During the year ended March 31, 2002, two customers accounted for
approximately 13% and 10%, respectively, of the Company's sales. During the year
ended March 31, 2001, one customer accounted for approximately 13% of the
Company's sales.
MAJOR SUPPLIERS
During the years ended March 31, 2002, 2001 and 2000, 42%, 48% and 53%,
respectively, of purchases were from two suppliers. At March 31, 2002 and 2001,
the amounts due to these suppliers were approximately $4,932 and $6,152,
respectively, and are included in accounts payable. Management believes that
other suppliers could provide the materials on comparable terms.
NOTE 4 -- DUE FROM FACTOR
The Company sells a substantial portion of its trade receivables to a
commercial factor, without recourse, up to maximum credit limits established by
the factor for each individual account. Receivables sold in excess of these
limitations are subject to recourse in the event of non-payment by the customer.
At March 31, 2002 and 2001, receivables subject to recourse were approximately
$8,081 and $5,277, respectively. Under a tri-party agreement with the bank (see
Note 7) all factor proceeds are assigned to the bank.
NOTE 5 -- PROPERTY AND EQUIPMENT
At March 31, property and equipment consists of:
2002 2001
------- -------
Office machinery and equipment............................. $ 771 $ 643
Furniture and fixtures..................................... 6,743 5,401
Computer equipment......................................... 2,767 1,782
Leasehold improvements..................................... 16,470 12,537
Kitchen equipment.......................................... 1,547 1,489
Construction in progress................................... 67 395
------- -------
28,365 22,247
Less: Accumulated depreciation and amortization............ 9,977 6,152
------- -------
$18,388 $16,095
======= =======
NOTE 6 -- INVESTMENT IN PARADISE SHOE COMPANY LLC
The Company has a 50% interest in Paradise Shoe Company LLC ("Paradise")
which is accounted for under the equity method. Under this method, the Company's
investment is adjusted for its
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
proportionate share of Paradise's undistributed earnings or losses. The Company
also has a royalty agreement with Paradise based on a percentage of net sales.
Royalties are payable 50% at the end of each quarter with the balance due
eighteen months later. During the years ended March 31, 2002, 2001 and 2000, the
Company charged Paradise royalties of approximately $519, $549 and $373,
respectively.
NOTE 7 -- NOTES AND BANKERS ACCEPTANCES PAYABLE
The Company has a financing agreement providing for a term loan (see Note
8) and a revolving line of credit. The agreement is renewable on an annual basis
through March 31, 2006 provided that on each renewal date the Company is in
compliance with the terms of the agreement. The revolving line of credit is
subject to the following sublimits:
JUNE- NOVEMBER-
OCTOBER MAY
------- ----------
Maximum amount available under the revolving line of
credit.................................................. $40,000 $52,500
Maximum amount of bankers acceptances..................... $35,000 $45,000
Maximum amount of cash advances........................... $15,000 $20,000
Borrowings are based on eligible factored accounts receivable and
inventory, as defined, and bear interest at the 4-month LIBOR rate plus 2.75%,
which on a weighted-average annual basis, amounted to 4.88% and 6.4% as of and
for the year ended March 31, 2002, respectively. The agreement includes various
covenants, as defined. The Company was in compliance with these covenants as of
March 31, 2002. The Company has pledged substantially all of its assets as
collateral and the debt is guaranteed by Tommy Bahama Retail and its
wholly-owned subsidiaries.
NOTE 8 -- LONG-TERM DEBT
At March 31, long-term debt consists of:
2002 2001
------- -------
Term loan payable (see Note 7) in monthly installments of
$625 through February 2006; plus interest at the 3-month
LIBOR rate plus 3% (4.89% at March 31, 2002)............. $29,375 $36,875
Loans payable in monthly installments of $8, including
interest at 5.6%......................................... -- 80
------- -------
29,375 36,955
Less: Current portion...................................... 7,500 7,580
------- -------
$21,875 $29,375
======= =======
At March 31, 2002, maturities of long-term debt are as follows:
YEAR ENDING MARCH 31,
---------------------
2003........................................................ $ 7,500
2004........................................................ 7,500
2005........................................................ 7,500
2006........................................................ 6,875
-------
$29,375
=======
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9 -- RELATED PARTY TRANSACTIONS
LOANS PAYABLE -- SHAREHOLDERS
During the year ended March 31, 2001, the Company borrowed $15,000 from
four shareholders to purchase a certificate of deposit, which is pledged as
collateral on the Company's credit facility. The deposit, which is in an
automatically renewed 7-day certificate of deposit, earns interest at 2.39% at
March 31, 2002. The shareholders are entitled to interest earned and,
accordingly, interest expense charged to operations for the years ended March
31, 2002 and 2001 was approximately $378 and $114, respectively. In June 2001,
the Company repaid three of the shareholders $7,170 plus accrued interest of
approximately $126. At March 31, 2002 and 2001, loans payable -- shareholders
includes approximately $367 and $114, respectively, of accrued interest.
Additionally, included in loans payable -- shareholders at March 31, 2002
and 2001 is approximately $515 and $1,465, respectively, of a loan payable to a
shareholder, which bears interest at the rate of 6% per annum and is due on
demand. Included in the total is approximately $515 and $465 of accrued interest
at March 31, 2002 and 2001, respectively. Interest expense charged to operations
for the years ended March 31, 2002, 2001 and 2000 was approximately $50, $148
and $210, respectively.
SUBORDINATED NOTES PAYABLE -- SHAREHOLDERS
At March 31, 2002 and 2001, the Company has notes payable to several
shareholders, which bear interest at 16% (effective rate of 17.05%), are due on
March 31, 2006 and are subordinated to the Company's credit facility. Interest
is payable quarterly at the rate of 13% and the remaining 3% accrues and is paid
upon maturity. Interest expense charged to operations for the years ended March
31, 2002 and 2001 in connection with these notes was approximately $4,176 and
$515, respectively. Included in accrued expenses and other current liabilities
at March 31, 2002 and 2001 is approximately $824 and $418, respectively, of
accrued interest. The notes include various covenants and restrictions, as
defined. The Company has pledged substantially all of its assets as collateral
and the debt is guaranteed by Tommy Bahama Retail and its wholly-owned
subsidiaries.
At March 31, subordinated notes payable -- shareholders is comprised of
the following:
2002 2001
------- -------
Face value................................................. $25,000 $25,000
Unamortized discount....................................... (410) (525)
Accrued interest........................................... 858 97
------- -------
$25,448 $24,572
======= =======
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with three shareholders
and a key employee expiring in 2006 that provide for minimum annual salaries and
incentives based on the Company's attainment of specified levels of sales and
earnings. The future minimum salaries are as follows:
YEAR ENDING MARCH 31,
---------------------
2003........................................................ $2,400
2004........................................................ 2,400
2005........................................................ 2,400
2006........................................................ 2,000
------
$9,200
======
Salaries and incentives to shareholders charged to operations for the
years ended March 31, 2002 and 2001 amounted to approximately $3,178 and $3,811,
respectively.
CONSULTING CONTRACT
The Company has entered into a consulting contract with a director
expiring in 2006. Future minimum payments are as follows:
YEAR ENDING MARCH 31,
---------------------
2003........................................................ $ 850
2004........................................................ 850
2005........................................................ 850
2006........................................................ 708
------
$3,258
======
Consulting fees to the related party charged to operations for the year
ended March 31, 2002 were approximately $1,349.
MANAGEMENT CONTRACT
The Company has entered into a management contract with a shareholder
calling for an advisory fee in annual payments of $300. The fee will be reduced
to $200 per annum at such time as the shareholder and all of its affiliates
collectively own less than 50% of the shares of the Company's Class C Common
Stock.
Advisory fees to the shareholder charged to operations for the years
ended March 31, 2002 and 2001 amounted to approximately $300 and $50,
respectively.
NOTE 10 -- SHAREHOLDERS' EQUITY
COMMON STOCK
On February 7, 2001, the Company amended and restated its Articles of
Incorporation creating an additional class of Common Stock (Class C) and
authorizing additional shares of Class A and B. Each existing share was
converted into 20,000 shares of the same class. Accordingly, the accompanying
consolidated financial statements give effect to the conversion for all periods
presented.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONVERSION RIGHTS
Each Class B share is convertible into one share of Class A at the option
of the holder immediately prior to a public offering. If the offering does not
occur, the conversion option is voided.
Each Class C share is convertible into one share of Class A at the option
of the holder at anytime. The convertible number of shares will be adjusted for
any stock dividends, distributions, splits or mergers, as defined.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, holders of Class C Common Stock are entitled to the greater of
(a) the amount they would receive after conversion of all shares to Class A
Common Stock or (b) an amount equal to a compounded annual rate of return of
14.5% of the original purchase price of each share from the date of issuance
($5.15 per share) as adjusted for stock splits, dividends, combinations and the
like, reduced by the aggregate amounts of dividends or other distributions paid
to them from the original issue date through liquidation date.
TREASURY STOCK
At March 31, treasury stock consisted of the following:
SHARES 2002 2001
---------- -------- -------
Class A voting common stock................... 18,278,591 $ 96,726 $94,112
Class B non-voting common stock............... 675,000 3,475 3,475
---------- -------- -------
18,953,591 $100,201 $97,587
========== ======== =======
In November 2001, the Company adjusted the purchase price of various
shares purchased on February 9, 2001 by approximately $2,614. At March 31, 2002,
approximately $1,392 of this amount was unpaid and is included in loans
payable -- shareholders on the accompanying consolidated balance sheet.
WARRANTS
At March 31, 2002, there are outstanding warrants to purchase 102,222
shares of Class C Common Stock at $.01 per share. The warrants are exercisable
anytime after August 9, 2002 and expire on February 9, 2008.
NOTE 11 -- EMPLOYEE BENEFIT PLANS
401(K) PLAN
The Company has a 401(k) plan for all eligible employees. Matching
contributions to the plan are at the discretion of the Company. For the years
ended March 31, 2002, 2001 and 2000, employer contributions to the plan were
approximately $321, $258 and $208, respectively.
DEFERRED COMPENSATION PLAN
During the year ended March 31, 2002, the Company began a non-qualified,
deferred compensation plan (the "Plan") for all eligible highly compensated
employees, as defined. Participants may contribute up to 100% of their annual
compensation, as defined. Participants are immediately vested in their
contributions plus actual earnings thereon. Employer contributions are based on
a discretionary
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
matching contribution. Participants become 100% vested in employer contributions
after five years of service. There were no employer contributions during the
year ended March 31, 2002.
The assets of the Plan have been invested, as directed by employees, in
marketable securities consisting primarily of mutual funds, and have been
classified as trading securities, which are recorded at fair value on the
consolidated balance sheet with the change in fair value during the period
included in earnings. Included in other income on the accompanying consolidated
statement of income for the year ended March 31, 2002 is approximately $13 of
unrealized gains on these securities.
NOTE 12 -- INCOME TAXES
The provision for income taxes for the years ended March 31, 2002, 2001
and 2000 consists of:
2002 2001 2000
------- ------- ------
Federal:
Current.......................................... $11,743 $16,355 $6,292
Deferred......................................... 704 (1,872) (382)
------- ------- ------
12,447 14,483 5,910
------- ------- ------
State and local:
Current.......................................... 843 867 676
Deferred......................................... 60 (685) (33)
------- ------- ------
903 182 643
------- ------- ------
$13,350 $14,665 $6,553
======= ======= ======
Reconciliations of the United States federal statutory income tax rates
and the Company's effective tax rates are summarized as follows:
FOR THE YEAR ENDED
MARCH 31,
------------------
2002 2001 2000
---- ---- ----
Statutory rate............................................. 35.0% 35.0% 35.0%
State and local income taxes -- net of federal income tax
benefit.................................................. 1.6 .3 2.1
Other, net................................................. (.7) 2.1 (4.2)
---- ---- ----
Effective rate............................................. 35.9% 37.4% 32.9%
==== ==== ====
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Significant components of the deferred income tax assets as of March 31,
2002 and 2001 are as follows:
2002 2001
------ ------
Current portion:
Inventory uniform capitalization.......................... $ 164 $ 153
Inventory reserves........................................ -- 760
Accrued compensation...................................... 194 1,051
Other..................................................... (5) 22
------ ------
353 1,986
------ ------
Long-term portion:
Depreciation and amortization............................. 1,197 747
Deferred rent obligation.................................. 413 239
Deferred compensation..................................... 245 --
------ ------
1,855 986
------ ------
$2,208 $2,972
====== ======
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Companies lease office, showroom, store space and equipment under
operating leases expiring in various years through 2019. The rental payments
under store facility leases are based upon a minimum rental plus a percentage of
the stores' sales in excess of stipulated amounts. Only the minimum rental
portions are included in future commitments.
At March 31, 2002, the aggregate approximate minimum annual rental
commitments under non-cancelable leases are as follows:
YEAR ENDING MARCH 31,
---------------------
2003........................................................ $ 7,949
2004........................................................ 8,482
2005........................................................ 7,865
2006........................................................ 7,463
2007........................................................ 6,957
Thereafter.................................................. 30,745
-------
$69,461
=======
Rent expense for the years ended March 31, 2002, 2001 and 2000 amounted
to approximately $9,720, $6,262 and $3,222, respectively. Rent expense for the
years ended March 31, 2002, 2001 and 2000 also includes straight-line
adjustments in accordance with Statement of Financial Accounting Standards No.
13 of approximately $456, $378 and $251, respectively. As of March 31, 2002 and
2001, obligations of approximately $1,086 and $629, respectively, representing
future payments are reflected in the accompanying consolidated balance sheets.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LETTERS OF CREDIT
At March 31, 2002, the Company had approximately $7,641 of outstanding
letters of credit under its credit facility. In addition, the Company has
recorded approximately $2,516 of outstanding letters of credit as in-transit
inventory, which is included in accounts payable on the accompanying
consolidated balance sheet.
In addition, the Company has issued three standby letters of credit
totalling approximately $824 as security deposits for two of its leased premises
and as collateral on a surety bond used for its insurance plan.
SELF-INSURANCE PROGRAM
The Company provides its employees basic and major medical insurance
coverage through a limited self-insurance program. Claims processed and paid are
reimbursed to a maximum per participant per contract year. Benefits in excess of
this limit are covered by stop-loss insurance coverage.
LITIGATION
The Company is a defendant in various lawsuits which arose in the
ordinary course of business. Management is vigorously defending the lawsuits and
believes the outcomes will not have a material effect on the Company's financial
condition.
NOTE 14 -- SEGMENTS
The Company's business segments are wholesale and retail and restaurant
operations. The wholesale operations consist of the importing of men's and
women's sportswear sold primarily to retail stores throughout the United States.
The retail and restaurant operations consist of retail clothing and restaurants
that sell products by and promote the "Tommy Bahama" brand name in the United
States.
The accounting policies of the segments are consistent with those
described in Note 2. All intercompany revenue and profits or losses are
eliminated in consolidation. We evaluate each segment based upon earnings before
interest and income taxes.
RETAIL AND
WHOLESALE RESTAURANT ELIMINATIONS TOTAL
--------- ---------- ------------ --------
March 31, 2002:
Net sales........................ $221,760 $95,074 $(31,881) $284,953
Depreciation and amortization.... $ 1,084 $ 2,757 $ -- $ 3,841
Earnings before interest and
income taxes.................. $ 40,422 $ 4,837 $ (688) $ 44,571
Total assets..................... $106,183 $38,739 $(28,822) $116,100
Purchases of property and
equipment..................... $ 1,793 $ 4,325 $ -- $ 6,118
March 31, 2001:
Net sales........................ $212,808 $64,809 $(23,151) $254,466
Depreciation and amortization.... $ 637 $ 2,102 $ -- $ 2,739
Earnings before interest and
income taxes.................. $ 41,104 $ 2,697 $ (2,423) $ 41,378
Total assets..................... $113,858 $38,836 $(30,240) $122,454
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RETAIL AND
WHOLESALE RESTAURANT ELIMINATIONS TOTAL
--------- ---------- ------------ --------
Purchases of property and
equipment..................... $ 1,215 $ 8,302 $ -- $ 9,517
March 31, 2000:
Net sales........................ $121,240 $40,844 $(14,485) $147,599
Depreciation and amortization.... $ 251 $ 1,465 $ -- $ 1,716
Earnings before interest and
income taxes.................. $ 16,627 $ 4,791 $ (856) $ 20,562
Total assets..................... $ 70,985 $18,928 $(11,960) $ 77,953
Purchases of property and
equipment..................... $ 593 $ 2,121 $ -- $ 2,714
NOTE 15 -- SUMMARIZED QUARTERLY DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the
periods ended March 31, 2002 and 2001:
MARCH 31, DEC. 31, SEPT. 30, JUNE 30,
2002 2001 2001 2001 TOTAL
--------- -------- --------- -------- --------
Net sales.................... $92,850 $62,253 $52,364 $77,486 $284,953
Gross profit................. $46,871 $34,135 $25,463 $39,981 $146,450
Net earnings (loss).......... $10,467 $ 5,945 $ (240) $ 7,746 $ 23,918
Basic earnings (loss) per
common share............... $ .62 $ .35 $ (.01) $ .45 $ 1.41
Diluted earnings (loss) per
common share............... $ .61 $ .35 $ (.01) $ .45 $ 1.40
MARCH 31, DEC. 31, SEPT. 30, JUNE 30,
2001 2000 2000 2000 TOTAL
--------- -------- --------- -------- --------
Net sales.................... $98,446 $65,448 $32,726 $57,846 $254,466
Gross profit................. $44,482 $33,366 $15,904 $25,925 $119,677
Net earnings................. $ 9,060 $ 8,141 $ 445 $ 6,378 $ 24,024
Basic earnings per common
share...................... $ .40 $ .27 $ .01 $ .21 $ .85
Diluted earnings per common
share...................... $ .40 $ .27 $ .01 $ .21 $ .85
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
VIEWPOINT INTERNATIONAL, INC.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
DECEMBER 31, 2002 AND 2001
2002 2001
--------- ---------
($ IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,247 $ 3,331
Cash equivalent -- restricted............................. -- 8,147
Due from factor........................................... 23,463 19,730
Accounts receivable, net of allowance for doubtful
accounts of approximately $59 in 2002 and $98 in 2001... 3,654 688
Royalties receivable -- Paradise Shoe Company LLC......... 515 856
Inventories............................................... 40,230 24,603
Prepaid income taxes...................................... -- 5,619
Deferred income taxes..................................... 582 1,474
Prepaid expenses and other current assets................. 6,640 5,046
-------- --------
Total current assets............................... 82,331 69,494
Property and equipment, net................................. 25,327 18,608
Other assets:
Goodwill, net............................................. 5,537 5,537
Deferred financing costs, net............................. 696 910
Royalties receivable -- Paradise Shoe Company LLC......... 251 174
Investment in Paradise Shoe Company LLC................... 654 506
Deferred income taxes..................................... 2,343 1,545
Marketable securities..................................... 799 307
Security deposits and other assets........................ 575 532
-------- --------
Total other assets................................. 10,855 9,511
-------- --------
$118,513 $ 97,613
======== ========
LIABILITIES AND EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 31,905 $ 20,699
Notes and bankers acceptances payable..................... 5,744 11,271
Long-term debt -- current portion......................... 7,589 7,508
Income taxes payable...................................... 3,244 --
Loans payable -- shareholders............................. 59 12,271
Accrued expenses and other current liabilities............ 10,216 9,363
-------- --------
Total current liabilities.......................... 58,757 61,112
Long-term debt.............................................. 16,427 23,750
Deferred rent............................................... 1,452 928
Deferred compensation....................................... 799 307
Subordinated notes payable -- shareholders.................. 26,114 25,233
Minority interests in subsidiaries.......................... 17 169
Commitments and contingencies
Equity (deficiency):
Class A Voting Common Stock -- $.0001 par value:
Authorized -- 40,000,000 shares
Issued -- 29,325,000 shares............................. 3 3
Class B Non-Voting Common Stock -- $.0001 par value:
Authorized -- 675,000 shares
Issued -- 675,000 shares................................ -- --
Class C Voting Common Stock -- $.0001 par value:
Authorized -- 6,200,000 shares
Issued and outstanding -- 5,948,067 shares.............. 1 1
Additional paid-in capital................................ 29,714 29,714
Retained earnings and members' interests.................. 85,430 56,597
-------- --------
115,148 86,315
Less: Treasury stock, at cost............................. 100,201 100,201
-------- --------
Total equity (deficiency).......................... 14,947 (13,886)
-------- --------
$118,513 $ 97,613
======== ========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
($ IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Net sales:
Wholesale................................................. $ 140,900 $ 123,399
Retail.................................................... 84,554 68,704
----------- -----------
Total net sales................................... 225,454 192,103
Cost of goods sold.......................................... 110,893 92,524
----------- -----------
Gross profit................................................ 114,561 99,579
Licensing income............................................ 2,732 1,682
----------- -----------
117,293 101,261
Operating expenses:
Retail and restaurant..................................... 31,930 32,140
Selling and shipping...................................... 20,027 17,192
General and administrative................................ 33,607 25,283
----------- -----------
Total operating expenses.......................... 85,564 74,615
----------- -----------
Operating income............................................ 31,729 26,646
Other expense (income):
Interest expense, net of interest income of approximately
$46 in 2002 and $504 in 2001........................... 4,613 5,816
Equity in loss (income) of Paradise Shoe Company LLC...... (158) 280
Other income.............................................. (227) (88)
----------- -----------
Net other expense................................. 4,228 6,008
----------- -----------
Income before provision for income taxes and minority
interests in net loss of subsidiaries..................... 27,501 20,638
Provision for income taxes.................................. 9,187 7,242
----------- -----------
Income before minority interests in net loss of
subsidiaries.............................................. 18,314 13,396
Minority interests in net loss of subsidiaries.............. 52 55
----------- -----------
Net income.................................................. $ 18,366 $ 13,451
=========== ===========
Net income per common share -- basic........................ $ 1.08 $ .79
=========== ===========
Net income per common share -- diluted...................... $ 1.07 $ .79
=========== ===========
Weighted-average common shares outstanding -- basic......... 16,994,476 16,994,476
=========== ===========
Weighted-average common shares outstanding -- diluted....... 17,096,505 17,096,505
=========== ===========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
COMMON STOCK
-----------------------------------------------------------
CLASS A CLASS B CLASS C ADDITIONAL
------------------- ---------------- ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------ ------- ------ --------- ------ ----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, April 1, 2002...... 29,325,000 $3 675,000 $-- 5,948,067 $1 $29,714
Net income.................. -- -- -- -- -- -- --
---------- -- ------- -- --------- -- -------
Balance, December 31,
2002...................... 29,325,000 $3 675,000 $-- 5,948,067 $1 $29,714
========== == ======= == ========= == =======
Balance, April 1, 2001...... 29,325,000 $3 675,000 $-- 5,948,067 $1 $29,714
Adjustment to treasury stock
purchase price............ -- -- -- -- -- -- --
Net income.................. -- -- -- -- -- -- --
---------- -- ------- -- --------- -- -------
Balance, December 31,
2001...................... 29,325,000 $3 675,000 $-- 5,948,067 $1 $29,714
========== == ======= == ========= == =======
RETAINED
EARNINGS
AND TREASURY STOCK
MEMBERS' ---------------------------------
INTERESTS SHARES AMOUNT TOTAL
--------- ---------- --------- --------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, April 1, 2002...... $67,064 18,953,591 $(100,201) $ (3,419)
Net income.................. 18,366 -- -- 18,366
------- ---------- --------- --------
Balance, December 31,
2002...................... $85,430 18,953,591 $(100,201) $ 14,947
======= ========== ========= ========
Balance, April 1, 2001...... $43,146 18,953,591 $ (97,587) $(24,723)
Adjustment to treasury stock
purchase price............ -- -- (2,614) (2,614)
Net income.................. 13,451 -- -- 13,451
------- ---------- --------- --------
Balance, December 31,
2001...................... $56,597 18,953,591 $(100,201) $(13,886)
======= ========== ========= ========
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
-------- --------
($ IN THOUSANDS)
Cash flows from operating activities:
Net income................................................ $ 18,366 $ 13,451
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for doubtful accounts........................ 14 39
Depreciation and amortization.......................... 3,105 2,830
Interest amortization of discount on notes payable and
deferred financing costs.............................. 238 238
Accrued interest on subordinated notes
payable -- shareholders............................... 589 584
Deferred income taxes.................................. (717) (47)
Deferred rent.......................................... 366 299
Equity in loss (income) of Paradise Shoe Company LLC... (158) 280
Losses (gains) on marketable securities................ 156 (14)
Minority interests in net loss of subsidiaries......... (52) (55)
Gain on purchase of minority interest.................. (37) --
Change in assets and liabilities:
Due from factor...................................... 17,142 18,797
Accounts receivable.................................. (615) 6,246
Royalties receivable -- Paradise Shoe Company LLC.... 143 (446)
Inventories.......................................... (15,559) (2,225)
Prepaid income taxes................................. 1,835 (5,619)
Prepaid expenses and other current assets............ (1,128) 1,188
Security deposits and other assets................... 19 (193)
Accounts payable..................................... 12,550 3,957
Income taxes payable................................. 3,206 (11,193)
Accrued expenses and other current liabilities....... 121 (995)
Deferred compensation................................ 181 307
-------- --------
Net cash provided by operating activities......... 39,765 27,429
-------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (9,734) (5,342)
Purchase of marketable securities......................... (337) (298)
Purchase of minority interest............................. (31) --
Sales of marketable securities............................ -- 5
Investment in Paradise Shoe Company LLC................... -- (250)
-------- --------
Net cash used in investing activities............. (10,102) (5,885)
-------- --------
Totals carried forward...................................... $ 29,663 $ 21,544
-------- --------
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
-------- --------
($ IN THOUSANDS)
Totals brought forward...................................... $ 29,663 $ 21,544
Cash flows from financing activities:
Proceeds from restricted cash equivalent.................. 8,197 6,967
Repayments of notes and acceptances payable, net.......... (17,518) (18,655)
Repayments of long-term debt.............................. (5,670) (5,696)
Repayments of loans payable -- shareholders, net.......... (10,045) (6,922)
-------- --------
Net cash used in financing activities............. (25,036) (24,306)
-------- --------
Net increase (decrease) in cash and cash equivalents........ 4,627 (2,762)
Cash and cash equivalents, beginning of year................ 2,620 6,093
-------- --------
Cash and cash equivalents, end of period.................... $ 7,247 $ 3,331
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 3,207 $ 3,949
Income taxes.............................................. $ 4,931 $ 24,443
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In 2002, the Company incurred long-term debt of $310 in connection with
the acquisition of capitalized equipment.
In 2001, in connection with an adjustment to the purchase price of
treasury stock, the Company issued loans payable to several shareholders
totalling $2,615.
See accompanying notes.
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements were
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and note disclosures
normally included in audited financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been omitted. In the opinion of management, all adjustments consisting of
normal, recurring adjustments necessary for a fair presentation of (a) the
results of operations for the nine months ended December 31, 2002 and 2001, (b)
the financial position at December 31, 2002 and 2001 and (c) cash flows for the
nine months ended December 31, 2002 and 2001, have been made. The results of
operations for the nine months ended December 31, 2002 and 2001 are not
necessarily indicative of those to be expected for the entire year.
The accompanying consolidated financial statements and notes should be
read in conjunction with the audited consolidated financial statements and notes
of the Company for the fiscal year ended March 31, 2002. Any material facts that
have changed from those footnotes are discussed herein, or are a normal result
of transactions during the interim period.
NOTE 2 -- ACCOUNTING POLICIES
The summary of the Company's significant accounting polices in its
audited consolidated financial statements for the fiscal year ended March 31,
2002 describes its accounting policies. Except as noted below, accounting
policies are the same as the fiscal year ended March 31, 2002.
NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 requires entities to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period and
the capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, the entity either settles the obligation for
the amount recorded or incurs a gain or loss. SFAS 143 is effective for fiscal
years beginning after June 15, 2002. Management believes that the adoption of
this statement will not have a material effect on the Company's future results
of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"), and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business." The FASB issued SFAS 144 to establish a single accounting model,
based on the framework established in SFAS 121, for long-lived assets to be
disposed of by sale. SFAS 144 broadens the presentation of discontinued
operations in the income statement to include a component of an entity (rather
than a segment of a business). A component of an entity comprises operations and
cash flows that can be clearly distinguished, operationally and for financial
reporting purposes, from the rest of the entity. SFAS 144 also requires that
discontinued operations be measured at the lower of the carrying amount or fair
value less cost to sell. The Company adopted SFAS 144 on April 1, 2002. The
provisions of this statement for assets held for sale or other disposal
generally are required to be applied prospectively after the adoption date to
newly initiated disposal activities and, therefore, will depend on future
actions initiated by management. As a result, the
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Company cannot determine the potential effects that adoption of SFAS 144 will
have on its consolidated financial statements with respect to future disposal
decisions, if any.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), which is effective
for exit or disposal activities that are initiated after December 31, 2002, with
earlier application encouraged. This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of SFAS 146 are to be applied prospectively from the date of adoption. The
Company has not yet assessed any potential impact the issuance of this standard
may have on its financial position or future results of operations.
NOTE 4 -- NET INCOME PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share," basic and diluted
income per common share has been computed using the weighted-average number of
shares of common stock outstanding during the period. Potentially dilutive
securities outstanding at December 31, 2002 and 2001 which convert to common
share equivalents consist of common stock warrants to purchase 102,222 shares of
the Company's Class C Common Stock.
NOTE 5 -- SEGMENTS
The Company's business segments are wholesale and retail and restaurant
operations. The wholesale operations consist of the importing of men's and
women's sportswear sold primarily to retail stores throughout the United States.
The retail and restaurant operations consist of retail clothing and restaurants
that sell products by and promote the "Tommy Bahama" brand name in the United
States.
The accounting policies of the segments are consistent with those
described in our audited consolidated financial statements for the fiscal year
ended March 31, 2002. All intercompany revenue and profits or losses are
eliminated in consolidation. We evaluate each segment based upon earnings before
interest and income taxes. Effective April 1, 2002, the Company began allocating
corporate overhead
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
expenses to each segment based upon each segment's usage of corporate resources.
The amount allocated to the retail and restaurant segment for the nine months
ended December 31, 2002 was $3,536.
RETAIL AND
WHOLESALE RESTAURANT ELIMINATIONS TOTAL
--------- ---------- ------------ --------
December 31, 2002:
Net sales........................ $169,616 $84,554 $(28,716) $225,454
Depreciation and amortization.... $ 1,029 $ 2,076 $ -- $ 3,105
Earnings before interest and
income taxes.................. $ 28,060 $ 3,720 $ 225 $ 32,005
Total assets..................... $100,177 $66,449 $(48,113) $118,513
Purchases of property and
equipment..................... $ 4,122 $ 5,612 $ -- $ 9,734
December 31, 2001:
Net sales........................ $144,815 $68,704 $(21,416) $192,103
Depreciation and amortization.... $ 788 $ 2,042 $ -- $ 2,830
Earnings before interest and
income taxes.................. $ 23,591 $ 3,017 $ (260) $ 26,348
Total assets..................... $ 84,372 $55,475 $(42,234) $ 97,613
Purchases of property and
equipment..................... $ 1,531 $ 3,811 $ -- $ 5,342
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
GENERAL
The unaudited pro forma combined statement of earnings for the year ended
May 31, 2002 gives effect to the following events as if each had occurred on
June 2, 2001 (with respect to Oxford) and April 1, 2001 (with respect to
Viewpoint). The unaudited pro forma combined statement of earnings for the nine
months ended February 28, 2003 gives effect to the following events as if each
had occurred on June 1, 2002 (with respect to Oxford) and April 1, 2002 (with
respect to Viewpoint). The unaudited pro forma balance sheet gives effect to the
following events as if each had occurred on February 28, 2003:
- the issuance of $200 million of notes on May 16, 2003;
- the acquisition of Viewpoint;
- borrowings under our new senior secured revolving credit facility, as
necessary to consummate the acquisition of Viewpoint and repay all
amounts due under notes payable related to our accounts receivable
securitization facility; and
- the issuance to Viewpoint stockholders of 388,200 shares of our common
stock (with a market value of $10.0 million).
The acquisition of Viewpoint will be accounted for using the purchase
method of accounting. The fair value of Viewpoint's assets and related
liabilities are based on preliminary estimates. Additional analysis will be
required to determine the fair value of Viewpoint's assets and liabilities,
primarily with respect to inventory, property, plant and equipment, intangible
assets and certain assumed liabilities. Viewpoint's accounts will change from
the amounts shown based on the valuations. The final allocation of the
acquisition consideration may result in significant differences from the pro
forma amounts reflected in the unaudited pro forma combined financial
statements.
The unaudited pro forma combined financial statements are based on
assumptions that we believe are reasonable under the circumstances and are
intended for informational purposes only. They are not necessarily indicative of
our future financial position or results of operations or of the financial
positions or results of operations that would have actually occurred had the
acquisition of Viewpoint taken place as of the dates or for the periods
presented.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
PRO FORMA
OXFORD VIEWPOINT COMBINED
YEAR ENDED YEAR ENDED PRO FORMA YEAR ENDED
MAY 31, 2002 MARCH 31, 2002 ADJUSTMENTS MAY 31, 2002
---------------- ------------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales............................. $ 677,264 $284,953 $ -- $ 962,217
Cost of goods sold.................... 544,016 138,503 -- 682,519
---------- -------- -------- ----------
Gross profit.......................... 133,248 146,450 -- 279,698
Licensing revenue..................... -- 2,434 -- 2,434
Selling, general and administrative... 115,729 103,909 (3,051)(1) 216,587
Earnings before interest and taxes.... 17,519 44,975 3,051 65,545
Other expense......................... -- 277 -- 277
Interest expense, net................. 243 7,517 19,960(2) 27,720
Minority interest in net loss of
subsidiaries........................ -- 87 -- 87
---------- -------- -------- ----------
Earnings before income taxes.......... 17,276 37,268 (16,909) 37,635
Income taxes.......................... 6,704 13,350 (6,561)(3) 13,493
---------- -------- -------- ----------
Net earnings.......................... $ 10,572 $ 23,918 $(10,348) $ 24,142
========== ======== ======== ==========
PRO FORMA EARNINGS PER SHARE
Basic................................. $ 1.41 $ 3.04
Diluted............................... $ 1.40 $ 3.01
PRO FORMA SHARES OUTSTANDING
Basic................................. 7,493,678 459,982(4) 7,953,660
Diluted............................... 7,549,277 459,982(4) 8,009,259
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
PRO FORMA
COMBINED
OXFORD VIEWPOINT NINE
NINE MONTHS NINE MONTHS MONTHS
ENDED ENDED ENDED
FEBRUARY 28, DECEMBER 31, PRO FORMA FEBRUARY 28,
2003 2002 ADJUSTMENTS 2003
---------------- ------------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales.............................. $ 566,529 $225,454 $ -- $ 791,983
Cost of goods sold..................... 447,968 110,893 -- 558,861
---------- -------- -------- ----------
Gross profit........................... 118,561 114,561 -- 233,122
Licensing revenue...................... -- 2,732 -- 2,732
Selling, general and administrative.... 92,462 85,564 -- 178,026
Earnings before interest and taxes..... 26,099 31,729 -- 57,828
Other (income)......................... -- (385) -- (385)
Interest expense, net.................. 149 4,613 14,352(5) 19,114
Minority interest in net loss of
subsidiaries......................... -- 52 -- 52
---------- -------- -------- ----------
Earnings before income taxes........... 25,950 27,553 (14,352) 39,151
Income taxes........................... 10,250 9,187 (5,669)(6) 13,768
---------- -------- -------- ----------
Net earnings........................... $ 15,700 $ 18,366 $ (8,683) $ 25,383
========== ======== ======== ==========
PRO FORMA EARNINGS PER SHARE
Basic.................................. $ 2.09 $ 3.23
Diluted................................ $ 2.08 $ 3.21
PRO FORMA SHARES OUTSTANDING
Basic.................................. 7,516,526 350,140(7) 7,866,666
Diluted................................ 7,557,633 350,140(7) 7,907,773
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
PRO FORMA
OXFORD VIEWPOINT PRO FORMA COMBINED
FEBRUARY 28, 2003 DECEMBER 31, 2002 ADJUSTMENTS FEBRUARY 28, 2003
----------------- ----------------- ----------- -----------------
(DOLLARS IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents..... $ 6,526 $ 7,247 $ -- $ 13,773
Receivables................... 149,880 27,632 -- 177,512
Inventories................... 98,885 40,230 -- 139,115
Other Current Assets.......... 9,515 7,222 -- 16,737
-------- -------- -------- --------
Total current assets....... $264,806 $ 82,331 $ -- $347,137
Property, plant and equipment... 23,573 25,327 -- 48,900
Other assets.................... 3,897 4,622 (552)(8) 7,967
Intangible assets, net.......... 5,839 5,537 175,170(9) 186,546
Deferred financing costs, net... -- 696 15,130(10) 15,826
-------- -------- -------- --------
Total Assets............... $298,115 $118,513 $189,748 $606,376
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable................. $ 10,000 $ 5,803 $(15,803)(11) $ --
Senior credit facility........ 62,941(12) 62,941
Trade accounts payable........ 58,758 31,905 -- 90,663
Current maturities of
long-term debt............. 128 7,589 (7,589)(13) 128
Accrued compensation.......... 19,208 -- -- 19,208
Other accrued expenses........ 19,231 13,460 (861)(14) 31,830
-------- -------- -------- --------
Total current
liabilities.............. $107,325 $ 58,757 $ 38,688 $204,770
Long-term debt, less current
maturities.................... 29 16,427 (16,427)(15) 29
Notes payable to shareholders... -- 26,114 (26,114)(16) --
Notes offered hereby............ -- -- 200,000(17) 200,000
Other noncurrent liabilities.... 4,500 2,251 (1,452)(18) 5,299
Minority interest............... -- 17 -- 17
Stockholders' equity
Common stock.................. 7,520 4 428(19) 7,952
Additional paid in capital.... 14,705 29,714 (20,146)(20) 24,273
Retained earnings............. 164,036 85,430 (85,430)(21) 164,036
Treasury stock................ -- (100,201) 100,201(22) --
-------- -------- -------- --------
Total stockholders' equity...... 186,261 14,947 (4,947) 196,261
-------- -------- -------- --------
Total Liabilities and
Stockholders' Equity.......... $298,115 $118,513 $189,748 $606,376
======== ======== ======== ========
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
YEAR ENDED MAY 31, 2002 UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(1) Reflects the elimination of $1.0 million of financing costs under Oxford's
accounts receivable securitization facility, which was terminated in
connection with entering into Oxford's new senior secured revolving credit
facility, and the elimination of $2.0 million of Oxford's goodwill to
reflect the pro forma adoption on June 2, 2001 of SFAS 142. SFAS 142
requires that goodwill, including previously existing goodwill and
intangible assets with indefinite useful lives not be amortized, but
instead tested for impairment at the adoption and at least annually
thereafter.
(2) Reflects the adjustment of interest expense to give effect to (i)
borrowings under Oxford's new senior secured revolving credit facility,
(ii)the issuance of $200 million of notes, (iii) amortization of debt
issuance costs of $2.4 million and (iv) the elimination of Viewpoint's
interest expense. Debt issuance costs are amortized on a straight line
method which approximates an effective interest method over the terms of
the related debt facilities.
(3) Tax effects of the pro forma adjustments have been calculated based on
Oxford's statutory rate of 38.8% during the period presented.
(4) Reflects the issuance of 459,982 shares of Oxford's common stock with a
total market value of $10.0 million, based on a market price of $21.74 per
share. The price per share reflects the average high and low trading prices
of Oxford's stock for the ten trading days prior to the beginning of
Oxford's fiscal year ended May 31, 2002.
NINE MONTHS ENDED FEBRUARY 28, 2003 UNAUDITED PRO FORMA COMBINED STATEMENT OF
EARNINGS
(5) Reflects the adjustment of interest expense to give effect to (i)
borrowings under Oxford's new senior secured revolving credit facility,
(ii) the issuance of $200 million of notes, (iii) amortization of debt
issuance costs of $1.8 million and (iv) the elimination of Viewpoint's
interest expense. Debt issuance costs are amortized on a straight line
method which approximates an effective interest method over the terms of
the related debt facilities.
(6) Tax effects of the pro forma adjustments have been calculated based on
Oxford's statutory rate of 39.5% during the period presented.
(7) Reflects the issuance of 350,140 shares of Oxford's common stock with a
total market value of $10.0 million, based on a market price of $28.56 per
share. The price per share reflects the average high and low trading prices
of Oxford's stock for the ten trading days prior to the beginning of the
nine months ended February 28, 2003.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF FEBRUARY 28, 2003
(8) Reflects the deferred tax effect of the pro forma adjustments.
(9) Oxford's acquisition of Viewpoint will be accounted for by the purchase
method of accounting, pursuant to which the acquisition consideration is
allocated among the acquired tangible and intangible assets and assumed
liabilities in accordance with their estimated fair values on the date of
acquisition. The
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition consideration and estimated allocation of the acquisition
consideration, which does not reflect up to $75.0 million of potential
contingent consideration, are as follows (dollars in thousands):
Acquisition consideration:
Cash consideration..................................... $240,000
Estimated working capital adjustment to cash
consideration......................................... (5,700)
Fair value of shares of common stock issued............ 10,000
Transaction related fees............................... 2,815
--------
Total acquisition consideration........................ $247,115
========
Allocation of acquisition consideration:
Net assets of Viewpoint based on historical carrying
amounts as of December 31, 2002....................... $ 14,947
Existing Viewpoint indebtedness to be repaid by
Viewpoint stockholders at closing..................... 55,933
Accrued interest expense on Viewpoint's debt included
in accrued liabilities to be funded by Viewpoint
stockholders at closing (Note 14)..................... 861
Increase (decrease) in net assets to reflect estimated
fair value adjustments under the purchase method of
accounting:
Elimination of Viewpoint deferred financing costs (Note
10)................................................... (696)
Deferred rent (Note 18)................................ 1,452
Deferred tax effect of the pro forma adjustments (Note
8).................................................... (552)
Elimination of Viewpoint's existing goodwill of $5.5
million and the estimated increase in intangible
assets of $180.7 million related to the acquisition... 175,170
--------
$247,115
========
(10) Reflects estimated financing fees and expenses related to the notes and
Oxford's new senior secured revolving credit facility, which will be
capitalized and amortized over their respective terms, and the elimination
of $696,000 of unamortized deferred financing costs related to Viewpoint
debt that will be repaid at closing from the cash consideration.
(11) To eliminate Oxford's short term debt and Viewpoint's short term debt.
(12) To reflect borrowings under Oxford's new senior secured revolving credit
facility simultaneous with Oxford's acquisition of Viewpoint.
(13) To eliminate Viewpoint's current maturities of long-term debt.
(14) To eliminate the accrued interest on Viewpoint's debt.
(15) To eliminate Viewpoint's long term debt.
(16) To eliminate Viewpoint's notes payable to shareholders.
(17) To reflect the issuance of $200 million of notes.
(18) To eliminate Viewpoint's deferred rent.
(19) To eliminate Viewpoint's common stock and to record the issuance of 431,648
shares of Oxford's common stock based on a market price of $23.167 per
share at $1 par value and the associated paid in capital. The price per
share reflects the average high and low trading prices of Oxford's stock
for the ten days prior to the beginning of the nine months ended February
28, 2003.
(20) To eliminate Viewpoint's additional paid in capital of $29.7 million and to
record $9.6 million in paid in capital for the issuance of 431,648 shares
of our common stock.
(21) To eliminate the retained earnings of Viewpoint.
(22) To eliminate Viewpoint's treasury stock.
(c) Exhibits
2.1* Stock Purchase Agreement, dated as of April 26, 2003, among
Viewpoint International, Inc., the Stockholders of Viewpoint International, Inc.
and Oxford Industries, Inc.
2.2* Earnout Agreement, dated as of June 13, 2003, among the
Stockholders of Viewpoint International, Inc. and Oxford Industries, Inc.
2.3 Registration Rights Agreement, dated as of May 16, 2003, among
Oxford Industries, Inc., Lionshead Clothing Company, Inc., Merona Industries,
Inc., Oxford Carribean, Inc., Oxford Garment, Inc., Oxford Private Limited of
Delaware, Inc., Oxford Receivables Company, Piedmont Apparel Corporation,
Oxford Clothing Corporation, Oxford International, Inc., Oxford of South
Carolina, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust
Capital Markets, Inc.
23.1 Consent of Mahoney Cohen & Company, CPA, P.C.
99.1 Text of press release dated June 13, 2003.
99.2 Text of press release dated April 27, 2003 (Incorporated by
reference to Exhibit 99.1 to Oxford's Form 8-K filed April 27, 2003).
99.3 Text of press release dated April 27, 2003 (Incorporated by
reference to Exhibit 99.2 to Oxford's Form 8-K filed April 27, 2003).
* Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to
furnish supplementally to the Securities and Exchange Commission, upon request,
any omitted schedules or similar attachments.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OXFORD INDUSTRIES, INC.
By: /s/ Ben B. Blount, Jr.
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Ben B. Blount, Jr.
Executive Vice President and Chief Financial
Officer
Date: June 26, 2003