SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant To Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended March 2, 2001
OR
[ ] Transition Report Pursuant To Section 13 or 15(d) of
For the transition period from____ to____
Commission File Number 1-4365
OXFORD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Georgia
58-0831862
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification number)
222 Piedmont Avenue, N.E., Atlanta, Georgia 30308
(Address of principal executive offices)
(Zip Code)
(404) 659-2424
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Number of shares outstanding
Title of each class
as of April 2, 2001
Common Stock, $1 par value
7,371,511
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
OXFORD INDUSTRIES, INC
CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS AND QUARTER ENDED MARCH 2, 2001 AND FEBRUARY 25, 2000
(UNAUDITED)
Quarter Ended
Nine Months Ended
March 2, 2001
February 25, 2000
$197,404
$187,466
$596,641
$593,148
160,599
152,504
486,696
486,565
36,805
34,962
109,945
106,583
29,224
26,755
90,040
77,855
7,581
8,207
19,905
28,728
1,271
823
3,627
2,643
6,310
7,384
16,278
26,085
2,398
2,806
6,186
9,912
$3,912
$4,578
$10,092
$16,173
$0.53
$0.60
$1.35
$2.09
$2.08
7,376,783
7,651,115
7,495,370
7,741,770
7,662,566
7,503,218
7,785,557
$0.21
$0.63
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
MARCH 2, 2001, JUNE 2, 2000 AND FEBRUARY 25, 2000
(UNAUDITED EXCEPT FOR JUNE 2, 2000)
June 2, 2000
$6,150
$8,625
$12,939
135,989
112,867
119,597
117,785
90,961
85,514
27,490
25,903
22,776
24,141
36,373
25,458
169,416
153,237
133,748
12,115
12,826
13,056
323,670
287,555
279,340
34,381
37,107
37,644
10,660
11,904
12,519
$368,711
$336,566
$329,503
$64,000
$18,500
$32,500
59,547
68,421
55,268
9,344
12,026
9,754
21,088
22,713
24,234
1,548
1,607
994
1,148
-
189
205
191
156,710
124,620
123,554
40,483
40,513
40,607
4,500
2,438
2,619
2,190
7,372
7,651
11,056
11,309
11,310
146,152
145,354
139,691
164,580
164,314
158,652
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 2, 2001 AND FEBRUARY 25, 2000
Net cash used in operating activities:
6,893
6,639
(91)
(137)
Changes in working capital:
(23,122)
(4,891)
(16,179)
13,180
(711)
735
(8,874)
(6,129)
(4,307)
(1,338)
(154)
0
(181)
(1,824)
(329)
(770)
(35,541)
21,638
Cash Flows from Investing Activities
(2,634)
(3,306)
(4,657)
805
217
(2,501)
(7,074)
Cash flows from financing Activities
45,500
(500)
(46)
(242)
186
314
(5,314)
(7,348)
(4,759)
(4,926)
35,567
(12,702)
(2,475)
1,862
8,625
11,077
Supplemental disclosure of Cash Flow Information
$3,347
$2,447
6,414
9,905
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 2, 2001 AND FEBRUARY 25, 2000
The Shirt Group operations encompass dress and sport shirts, golf and children's apparel. Lanier Clothes produces suits, sportcoats, suit separates and dress slacks. Oxford Slacks is a producer of private label dress and casual slacks and shorts. The Oxford Womenswear Group is a producer of budget and moderate priced private label women’s apparel.
Corporate and other is a reconciling category for reporting purposes and includes the Company’s corporate offices, transportation and logistics and other costs and services that are not allocated to operating groups.
Oxford Industries, Inc
Segment Information
(unaudited)
Three Months Ended
$51,895
$46,612
$174,174
$172,869
40,212
40,670
130,450
128,880
22,959
22,042
75,895
71,542
82,271
78,082
215,866
219,679
67
60
256
178
$610
$653
$1,809
$1,833
482
486
1,357
1,367
296
277
843
827
721
673
2,114
1,891
261
255
770
$2,370
$2,344
$6,893
$6,639
$(1,710)
$(683)
$(445)
$8,876
2,985
2,269
9,062
8,899
501
759
3,801
3,653
5,457
6,159
9,887
12,703
348
(297)
(2,400)
(5,403)
$7,581
$8,207
$19,905
$28,728
$6,310
$7,384
$16,278
$26,085
Mar. 2, 2001
Feb. 25, 2000
$110,359
$99,953
106,849
90,905
44,059
40,578
122,023
104,377
(14,579)
(6,310)
$852
$1,863
1,106
547
273
466
632
394
443
1,387
$3,306
$4,657
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS
($ in thousands)
RESULTS OF OPERATIONS
SUMMARIZED FINANCIAL DATA for the quarter and nine months ended February 2001 and 2000 are as follows. (Percentages are calculated based on actual data, but percentage columns may not add due to rounding.)
THREE MONTHS ENDEDFEBRUARY
NINE MONTHS ENDEDFEBRUARY
%CHANGE
2001
2000
5.3%
0.6%
0.0%
3.2%
9.2%
15.7%
-7.6%
-30.7%
54.4%
37.2%
-14.5%
-37.6%
100.0%
81.4%
81.6%
82.0%
-0.4%
18.6%
18.4%
18.0%
0.4%
14.8%
14.3%
0.5%
15.1%
13.1%
2.0%
3.8%
4.4%
-0.6%
3.3%
4.8%
-1.5%
0.2%
3.9%
-0.7%
2.7%
-1.7%
1.2%
1.5%
-0.3%
1.0%
1.7%
2.4%
-1.0%
Total Company
NET SALES for the third quarter were $197,404, up 5.3% from $187,466 reported in the prior year. The unit sales increase of 8.1% was slightly offset by a decline of 2.6% in the average selling price per unit.
Net sales for the nine months were $596,641, up 0.6% from $593,148 in the prior year. Increased sales in the Oxford Slacks Group more than offset the decline in Oxford Womenswear. Lanier Clothes and the Oxford Shirt Group achieved slight increases.
COST OF GOODS SOLD as a percentage of sales remained constant at 81.4% in the third quarter of the current year and the prior year. Cost of Goods Sold as a percentage of sales for the nine months declined to 81.6% in the current year from 82.0% the prior year. The increased gross margin reflected:
S,G&A EXPENSE for the third quarter increased to 14.8% of net sales in the current year from 14.3% of net sales in the prior year. S,G&A expense for the nine months increased to 15.1% of net sales in the current year from 13.1% last year. The higher S,G&A Expense for the quarter and the nine months was attributable to: Continuing expenditures required to establish and grow several new marketing initiatives launched last year, (DKNY Kids, Izod Club Golf, Tommy Hilfiger Womens Golf, and Slates Tailored Clothing.)
INTEREST EXPENSE for the quarter increased to $1,271, up 54.4% from $823 for the same period last year. For the nine months, interest expense increased to $3,627, up 37.2% from $2,643 last year. The increase in interest expense was due to:
EFFECTIVE TAX RATE for the quarter and nine months was 38.0% and was unchanged from the same periods for the prior year. The effective tax rate does not differ significantly from the Company’s statutory rate.
Segment Results
The Company is engaged in the design, manufacture and sale of consumer apparel for men, women and children. Principal markets for the Company are customers located primarily in the United States. The Company’s business units are aggregated into the following reportable segments:
All data with respect to the Company’s specific segments are presented before applicable intercompany eliminations. Certain prior year information has been restated to be consistent with the current presentation. (Percentages are calculated based on actual data, but columns may not add due to rounding.)
NET SALES
11.3%
0.8%
-1.1%
4.2%
6.1%
5.4%
11.7%
43.8%
26.3%
24.9%
29.2%
29.1%
20.4%
21.7%
21.9%
11.6%
11.8%
12.7%
12.1%
41.7%
36.2%
37.0%
EBIT MARGIN
EBIT
CHANGE
150.4%
-3.3%
31.6%
7.4%
5.6%
-34.0%
2.2%
3.4%
-11.4%
6.6%
7.9%
-217.2%
N/A
-105.0%
5.1%
1.8%
6.9%
4.1%
5.0%
-22.2%
4.6%
5.8%
-55.6%
Oxford Shirt Group
Net sales for the Oxford Shirt Group increased 11.3% in the third quarter to $51,895 from $46,612 last year. The unit sales volume increase of 11.6% was slightly offset by a 0.2% decline in the average sales price per unit. Sales increases in the golf divisions and DKNY Kids were partially offset by declines in the dress shirt and sport shirt divisions. Higher operating expenses associated with new marketing initiatives reduced EBIT for the group to a loss of $1,710 in the current quarter from a loss of $683 last year. For the nine months, sales for this segment increased 0.8% and EBIT declined from $8,876 last year to a loss of $445 in the current year.
Lanier Clothes
Lanier Clothes reported third quarter sales of $40,212, a decline of 1.1% from $40,670 last year. The decline in the average selling price per unit of 3.6% was partially offset by a 2.5% increase in unit sales volume. The unit and average selling price data have been impacted by the shift in product mix from suits to separates. Higher profit margins were somewhat offset by higher operating expenses for a net increase in EBIT to $2,985, up 31.6% from $2,269 last year. For the nine months, sales increased 1.2% and the EBIT margin remained constant at 6.9%.
Oxford Slacks Group
The Oxford Slacks Group reported third quarter sales of $22,959 up 4.2% from $22,042 last year. An increase in the average selling price per unit of 8.7% was slightly offset by a unit sales decline of 4.1%. Most of the sales increase resulted from growth in specialty catalog, the group’s largest distribution tier. Third quarter EBIT declined to $501 from $759 due to manufacturing inefficiencies resulting from the conversion of several of the group’s plants to a new premium construction pant. For the nine months, sales increased 6.1% and the EBIT margin declined to 5.0% of net sales in the current year from 5.1% last year.
Oxford Womenswear Group
The Oxford Womenswear Group reported a third quarter net sales increase of 5.4% to $82,271 from $78,082 last year. The unit sales volume increase of 9.3% was slightly offset by a decline in the average selling price per unit of 3.6%. The sales increase was driven by additional fashion programs with several major mass merchants and direct mail retailers. Product mix and a competitive environment put downward pressure on margins. EBIT for the quarter declined 11.4% to $5,457 this year from $6,159 last year. For the nine months, sales declined 1.7% and the EBIT margin declined from 5.8% last year to 4.6% this year.
Corporate and Other
Corporate and other includes the Company’s corporate offices, transportation and logistics and other costs and services that are not allocated to operating groups. For the nine months, the primary difference in EBIT is due to LIFO accounting. Fiscal 1999 ended with abnormally high markdowns restored. In fiscal 2000, marked down inventory was liquidated to more normal levels resulting in an unfavorable charge to the income statement. In fiscal 2001, the amount of marked down inventory liquidated returned to normal levels resulting in a smaller unfavorable charge to the income statement. Under LIFO accounting, markdowns are not recognized until the inventory is liquidated.
FUTURE OPERATING RESULTS
The extremely challenging retail environment faced by the apparel industry has overshadowed the improvements the Company has made in many of its businesses. Gross margins are up through three quarters but high operating expenses have been the critical issue with respect to the Company’s financial performance this year. These expenditures, however, play an important role in the Company’s strategy to invest in new value-added private label and branded initiatives. The recent launch of several new merchandising divisions has demonstrated the Company’s progress in this area. Though these initiatives have negatively impacted short-term results, the Company remains committed to building a foundation for future growth and profitability.
The Company expects fourth quarter sales to be down 10-15% from last year’s record quarter. Continuing weakness at retail and a shorter accounting period are primarily responsible for the decline. Diluted earnings per share are expected to fall within a range of 10-20% below last year’s diluted earnings per share of $0.94 reflecting continuing improvement in gross margins and moderately higher operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
Cash flow from operations is the Company’s primary source of liquidity. Management monitors leverage through its debt-to-total capital ratio. Working capital management is achieved primarily by monitoring the Company’s investment in accounts receivable and inventories and by the amount of accounts payable.
Leverage
Total debt represented 38.9% of total capital at the end of February 2001 as compared to 26.4% at the end of May 2000 and 31.6% at the end of the February 2000. The Company believes it has adequate borrowing capacity to pursue strategic acquisitions.
Working Capital
Working capital increased from $155,786 at the end of the third quarter of the prior year to $162,935 at the end of the 2000 fiscal year and increased to $166,960 at the end of the third quarter of the current year. The ratio of current assets to current liabilities was 2.3 at the end of the third quarter of the prior year, 2.3 at the end of the 2000 fiscal year and 2.1 at the end of the third quarter of the current year. Accounts Receivable at the end of the third quarter of the current year increased $16,392 or 13.7% compared to the prior year. Customer accounts receivable days outstanding decreased from 52.0 days in the prior year to 51.8 days in the current year. Accounts payable increased $4,279 or 7.7% compared to the prior year. The increase from changes in accounts receivable and inventory, were partially offset by the increase in accounts payable. The inventory buildup was due to sluggish retail sell throughs of basic replenishment items and inventory buildups for new marketing divisions. The Company’s overall inventory days on hand were 82.3 at the end of the third quarter of the current year and 75.0 in the prior year.
Investing Activities
Capital expenditures were $3,306 for the first nine months compared to $4,657 in the prior year.
Financing Activities
The Company continued its stock repurchase activity during the quarter with the purchase and retirement of 15,004 shares of common stock. Stock repurchase activity for the nine months totaled 289,604 shares. At quarter end, the remaining open authorization to repurchase outstanding shares was approximately 1,468,227 shares.
On April 2, 2001 the Company’s Board of Directors declared a cash dividend of $0.21 per share, payable on June 2, 2001 to shareholders of record on May 15, 2001.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
The Company believes it has the ability to generate cash and/or has available borrowing capacity to meet its foreseeable needs. The sources of funds primarily include funds provided by operations and both short-term and long-term borrowings. The uses of funds primarily include working capital requirements, capital expenditures, acquisitions, stock repurchases, dividends and repayment of short-term and long-term debt. The Company regularly utilizes committed bank lines of credit and other uncommitted bank resources to meet working capital requirements. On March 2, 2001 the Company had available for its use lines of credit with several lenders aggregating $45,000. The Company has agreed to pay commitment fees for these available lines of credit. On March 2, 2001, $45,000 was in use under these lines, of which $40,000 was long-term. In addition, the Company has $196,500 in uncommitted lines of credit, of which $133,500 is generally reserved for letters of credit. The Company pays no commitment fees for these available lines of credit. On March 2, 2001, $59,000 was in use under these lines of credit. Maximum borrowings from all these sources during the current year were $104,000 of which $40,000 was long-term. The Company anticipates continued use and availability of both committed and uncommitted resources as working capital needs may require.
The Company considers possible acquisitions of apparel-related businesses that are compatible with its long-term strategies. The Company's Board of Directors has authorized the Company to purchase shares of the Company's common stock on the open market and in negotiated trades as conditions and opportunities warrant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report contains forward-looking statements of the Company’s beliefs or expectations regarding anticipated future results of the Company. These statements are based on numerous assumptions and are subject to risks and uncertainties. Although the Company feels that the beliefs and expectations in the forward-looking statements are reasonable, it does not and cannot give any assurance that the beliefs and expectations will prove to be correct. Many factors could significantly affect the Company’s operations and cause the Company’s actual results to be substantially different from the Company’s expectations. Those factors include, but are not limited to: (i) general economic and apparel business conditions; (ii) continued retailer and consumer acceptance of the Company’s products; (iii) global manufacturing costs; (iv) the financial condition of customers or suppliers; (v) changes in capital market conditions; (vi) governmental and business conditions in countries where the Company’s products are manufactured; (vii) changes in trade regulations; (viii) the impact of acquisition activity; (ix) changes in the Company’s plans, strategies, objectives, expectations or intentions, which may happen at any time in the discretion of the Company; and (x) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission. The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise.
ADDITIONAL INFORMATION
For additional information concerning the Company's operations, cash flows, liquidity and capital resources, this analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements contained in the Company’s Annual Report for the fiscal year ended June 2, 2000.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10(i) Note Agreement between the Company and SunTrust of Georgia dated February 18, 2001 covering the Company’s long term note due June 15, 2001
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter ended March 2, 2001.
SIGNATURES
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 thereunto duly authorized.
(Registrant)
/s/Ben B. Blount, Jr.
Chief Financial Officer