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 NOVEMBER 30, 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 January 7, 2002
Common Stock, $1 par value
7,512,558
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS AND SIX MONTHS ENDED NOVEMBER 30, 2001 AND DECEMBER 1, 2000
(UNAUDITED)
$ in thousands except per share amount
Quarters Ended
Six Months Ended
November 30, 2001
December 1, 2000
Net Sales
$156,528
$194,869
$336,058
$399,237
Cost of goods sold
128,983
159,073
272,193
326,097
Gross Profit
27,545
35,796
63,865
73,140
Selling, general and administrative
26,824
30,188
58,027
60,816
Earnings Before Interest and Taxes
721
5,608
5,838
12,324
Interest
(22)
1,248
51
2,356
Earnings Before Income Taxes
743
4,360
5,787
9,968
Income Taxes
282
1,657
2,199
3,788
Net Earnings
$461
$2,703
$3,588
$6,180
Basic Earnings Per Common Share
$0.06
$0.36
$0.48
$0.82
Diluted Earnings Per Common Share
Basic Number of Shares Outstanding
7,509,781
7,471,708
7,474,312
7,554,393
Diluted Number of Shares Outstanding
7,539,739
7,480,281
7,513,898
7,566,043
Dividends Per Share
$0.21
$0.42
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 2001, JUNE 1, 2001 AND DECEMBER 1, 2000
(UNAUDITED EXCEPT FOR JUNE 1, 2001)
$ in thousands
June 1, 2001
Assets
Current Assets:
Cash
$7,746
$10,185
$8,539
Receivables
71,609
50,699
102,766
Inventories:
Finished Goods
75,146
92,623
102,284
Work in process
13,151
22,064
24,064
Fabric, trim & Supplies
22,873
32,683
32,487
111,170
147,370
158,835
Prepaid expenses
11,545
11,416
11,269
Total Current Assets
202,070
219,670
281,409
Property, Plant and Equipment
30,814
33,516
35,350
Deferred Income Taxes
600
-
401
Other Assets
8,924
10,054
10,819
Total Assets
$242,408
$263,240
$327,979
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable
$ -
$23,500
Trade accounts payable
34,363
54,787
62,840
Accrued compensation
11,496
11,617
11,565
Other accrued expenses
18,639
18,252
20,677
Dividends Payable
1,577
1,549
1,551
Income taxes
2,924
302
Current Maturities of long-term debt
225
263
194
Total Current Liabilities
66,300
89,392
120,629
Long Term Debt, less current maturities
289
399
40,402
Noncurrent Liabilities
4,500
9
Stockholders' Equity:
Common Stock
7,513
7,406
7,387
Additional paid in capital
14,539
11,741
11,078
Retained earnings
149,267
149,793
143,983
Total Stockholders' equity
171,319
168,940
162,448
Total Liabilities and Stockholders' Equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 2001 AND DECEMBER 1, 2000
Cash Flows From Operating Activities
Net earnings
Adjustments to reconcile net earnings to
Net cash used in operating activities:
Depreciation and amortization
4,306
4,523
Gain on sale of property, plant and equipment
79
34
Changes in working capital:
(20,910)
10,101
Inventories
36,200
(5,598)
Prepaid Expenses
(1,235)
(951)
(20,424)
(5,581)
Accured expenses and other current liabilities
266
(2,497)
Income taxes payable
(2,924)
(846)
Deferred income taxes
497
(512)
Other noncurrent assets
81
36
Net cash (used in) provided by operating activities
(476)
4,889
Cash Flows from Investing Activities
Purchase of property, plant and equipment
(709)
(2,340)
Proceeds from sale of property, plant and equipment
75
590
Net cash used in investing activities
(634)
(1,750)
Cash flows from financing Activities
Short-term borrowings
5,000
Long-term debt
(148)
(122)
Proceeds from issuance of common stock
1,939
186
Purchase and retirement of common stock
(5,081)
Dividends on common stock
(3,120)
(3,208)
Net cash used in financing activities
(1,329)
(3,225)
Net change in Cash and Cash Equivalents
(2,439)
(86)
Cash and Cash Equivalents at the Beginning of Period
10,185
8,625
Cash and Cash Equivalents at End of Period
Supplemental disclosure of Cash Flow Information
Cash paid (received) for:
Interest, net
($67)
$2,628
3,998
5,626
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED NOVEMBER 30, 2001 AND DECEMBER 1, 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 and other costs and services that are not allocated to operating groups.
Oxford Industries, Inc.
Segment Information
(unaudited)
Oxford Shirt Group
$44,746
$60,713
$99,215
$122,279
Lanier Clothes
38,464
46,861
79,175
90,238
Oxford Slacks
18,460
26,202
40,462
52,936
Oxford Womenswear Group
54,740
60,968
116,967
133,595
Corporate and other
118
125
239
189
Total
$ in thousand
$519
$606
$1,038
$1,199
443
460
896
875
249
283
503
547
688
713
1,378
1,393
259
491
509
$2,148
$2,321
$4,306
$4,523
EBIT
$(2,549)
$332
$(1,122)
$1,265
1,661
3,096
6,068
6,077
1,560
1,494
3,300
281
416
4,317
4,430
929
204
(4,919)
(2,748)
$721
$5,608
$5,838
$12,324
Interest expense (income), net
Earnings before taxes
$743
$4,360
$5,787
$9,968
November, 30, 2001
ASSETS
$88,740
$114,579
84,481
104,215
34,783
44,160
58,655
80,662
(24,251)
(15,637)
$252
$693
825
20
217
74
362
100
243
Tota
$709
$2,340
5. During its fiscal 2001 year, the Company entered into a $90 million asset backed revolving securitization facility under which the Company sells a defined pool of its accounts receivable to a wholly-owned special purpose subsidiary (the "Securitization Facility"). The Company has $10 million outstanding under the Securitization Facility as of November 30, 2001. The unpaid balance of accounts receivable sold was approximately $82.3 million. The Company continues to service these receivables and maintains a retained interest in the receivables. The Company has not recorded a servicing asset or liability since the cost to service the receivables approximates the servicing income. The retained interest totaling approximately $72.3 million represents the excess of the receivables sold to the wholly-owned special purpose entity over the amount funded to the Company. The retained interest in the receivables sold is included in the caption "Receivables" in the accompanying consolidated balance sh eet as of November 30, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth items in the Consolidated Statements of Earnings as a percent of net sales and the percentage change of those items as compared to the prior year. All dollar amounts within "Management's Discussion and Analysis" are expressed in thousands, except dividends per share. (Percentages are calculated based on actual data, but percentage columns may not add due to rounding.) Certain prior year information has been restated to be consistent with the current presentation.
Quarters Ended November
Six Months Ended November
FY 2002
FY 2001
% Change
-19.7%
-15.8%
Cost of Goods Sold
-18.9%
-16.5%
-23.1%
-12.7%
S,G&A
-11.1%
-4.6%
-87.1%
-52.6%
Interest, Net
-101.8%
-97.8%
Earnings Before Taxes
-83.0%
-41.9%
-82.9%
As a Percentage of Net Sales
100.0%
82.4%
81.6%
0.8%
81.0%
81.7%
-0.7%
17.6%
18.4%
-0.8%
19.0%
18.3%
0.7%
17.1%
15.5%
1.6%
17.3%
15.2%
2.1%
0.5%
2.9%
-2.4%
1.7%
3.1%
-1.4%
0.0%
0.6%
-0.6%
2.2%
-1.7%
2.5%
0.2%
0.9%
-0.2%
0.3%
1.4%
-1.1%
1.1%
1.5%
-0.4%
Total Company
Net sales declined 19.7% from the second quarter of the prior year. The unit sales decline of 12.8% for the quarter was exacerbated by a 7.9% decline in the average selling price, reflecting continuing deflation in wholesale apparel prices. Efforts by the Company's customers to lower retail inventories have led to increased order deferrals, cancellations and returns. Replenishment programs, which represent a significant percentage of the Company's business, have been running below plan.
For the six months, sales declined 15.8% to $336,058 from $399,237 in the prior year. The unit sales decline of 14.5% was compounded by a 1.6% decline in the average selling price per unit.
Cost of goods sold increased to 82.4% of net sales in the current quarter from 81.6% in the prior year. The shortfall in sales and the highly promotional retail climate resulted in higher markdowns. Underabsorbed manufacturing expenses attributable to lower production volumes negatively impacted gross margins. The Company took aggressive steps to manage inventories and reduce costs by significantly downsizing or permanently closing several offshore sewing facilities during the quarter.
For the six months, cost of goods sold declined to 81.0% of net sales in the current year from 81.7% in the prior year.
Selling, general and administrative expenses (S,G&A) increased to 17.1% of net sales in the second quarter from 15.5% in the prior year. While S,G&A increased as a percentage of sales, in absolute terms S,G&A declined from $30,188 in the second quarter of the prior year to $26,824 in the second quarter of the current year, a percentage decline of 11.1%.
For the six months, S,G&A declined from $60,816 in the prior year to $58,027 in the current year, a 4.6% decline.
Interest expense declined in the second quarter of the current year compared to the second quarter of the prior year due to lower average borrowing requirements and lower average interest rates. In addition, approximately $386 of financing cost for the trade receivables securitization program were reflected as S,G&A expense rather than interest expense.
For the six months, approximately $937 of financing cost for the trade receivables securitization program were reflected as S,G&A expense rather than interest expense.
The Company's effective tax rate was 38.0% for all periods in both the current year and the prior year and does not differ significantly from the Company's statutory rates.
Segment Results
The Company's business segments are the Oxford Shirt Group, Lanier Clothes, Oxford Slacks, and the Oxford Womenswear Group. The Shirt Group operations encompass dress and sport shirts, golf and children's apparel. Lanier Clothes produces suits, sportscoats, 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 and other costs and services that are not allocated to operating groups. All data with respect to the Company's specific segments included within "Management's Discussion and Analysis" is presented before applicable intercompany eliminations. (See Note 4 of Notes to Consolidated Financial Statements for additional segment information.)
-26.3%
-17.9%
-12.3%
-29.5%
-23.6%
Womenswear Group
-10.2%
-12.4%
Corporate and Other
-5.6%
26.5%
Total Net Sales
28.6%
31.2%
29.5%
30.6%
24.6%
24.0%
23.6%
22.6%
11.8%
13.4%
12.0%
13.3%
35.0%
31.3%
34.8%
33.5%
0.1%
EBIT Margin
-867.8%
-5.7%
-46.4%
4.3%
6.6%
-74.4%
6.0%
-32.5%
355.4%
N/A
Total Operating Income
-188.7%
1.0%
-0.1%
7.7%
6.7%
-54.7%
3.7%
6.2%
-2.6%
3.3%
79.0%
The Oxford Shirt Group reported a 26.3% sales decline from $60,713 in the second quarter of the prior year to $44,746 in the current year. A unit sales decline of 20.3% was exacerbated by a 7.3% decline in the average selling price per unit. The sales decline was spread evenly among the group's business units. Second quarter EBIT fell from a profit of $332 in the prior year to a loss of $2,549 in the current year, primarily due to the loss in the sales volume.
For the six months, net sales declined from $122,279 in the prior year to $99,215 in the current year, an 18.9% decline. EBIT declined from a profit of $1,265 in the prior year to a loss of $1,122 in the current year. This decline in EBIT was again primarily due to the loss in sales volume.
Lanier Clothes reported sales of $38,464, down 17.9% from last year. A unit sales decline of 12.4% was compounded by 6.3% decline in the average selling price per unit. The decline resulted primarily from weak sales at department stores. Higher returns, allowances and markdowns resulted in a $1,435 decline in EBIT to $1,661.
For the six months, net sales declined $11,063 to $79,175. EBIT declined $9 to $6,068.
Oxford Slacks Group
Oxford Slacks reported second quarter sales of $18,460, down 29.5% from last year. A unit sales volume decline of 26.2% was compounded by a 4.4% decline in the average selling price per unit. Underabsorbed manufacturing expenses caused by the sales decline significantly reduced profitability. Second quarter EBIT declined $1,161 to $399.
For the six months, sales declined $12,474, to $40,462 in the current year. EBIT declined $1,806 to $1,494 in the current year. The EBIT decline was primarily due to the loss in sales volume.
The Womenswear Group reported a second quarter sales decline of 10.2% to $54,740 in the current year. A unit sales volume decline of 6.2% was exacerbated by a 4.2% decline in the average selling price per unit. The sales decline was driven primarily by lower shipments to direct mail customers. The Company permanently closed two sewing facilities in Mexico during the quarter. The cost incurred with this closure was approximately $1,100. EBIT declined $135 to $281 in the current year.
For the six months, net sales declined $16,628 to $116,967 in the current year. EBIT declined $113 to $4,317 in the current year.
The Corporate and Other change in EBIT was primarily due to LIFO accounting in the second quarter and for the six months.
FUTURE OPERATING RESULTS
The Company expects current economic conditions to continue for the balance of this fiscal year. The Company's Spring order bookings are down as retailers continue to make conservative forward commitments. The Company intends to maintain its focus on asset management and closely monitor production plans to ensure that inventory levels stay in line with anticipated demand. The Company plans to continue expense reduction initiatives until there is some improvement in the top line.
The Company believes that third quarter sales and earnings should closely approximate results for the second quarter just ended. The Company also expects fourth quarter sales to be down by a similar percentage but that earnings should improve materially over the second quarter.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Operating activities used $476 through the second quarter of the current year and generated $4,889 through the second quarter of the prior year. The difference was primarily due to the sum of decreased net earnings, an increase in receivables and a greater reduction in trade payables partially offset by the decline in inventory.
Investing Activities
Investing activities used $634 through the second quarter of the current year and $ 1,750 through the second quarter of the prior year. The primary difference was decreased capital expenditures.
Financing Activities
Financing activities used $1,329 through the second quarter of the current year and $3,225 through the second quarter of the prior year. The primary difference was the reduced repurchase of common stock offset by the elimination of short term borrowings.
The Company established a $90,000 accounts receivables securitization program on May 3, 2001, under which the Company sells a defined pool of its accounts receivable to a securitization conduit. The Company used the proceeds from receivables securitization to eliminate outstanding bank borrowings. The receivables securitization program expires May 2, 2002, but may be extended from time to time by the mutual agreement of both parties. As of November 30, 2001, the Company had $10,000 outstanding from the securitization conduit.
On January 7, 2002, the Company's Board of Director's declared a cash dividend of $0.21 payable on March 2, 2002 to shareholders of record on February 15, 2002.
The Company did not purchase any shares of its common stock during the second quarter of the current year.
Working Capital
($ in Thousands)
Second Quarter FY 2002
Fourth Quarter FY 2001
Second Quarter FY 2001
Current Assets
$ 202,070
$ 219,670
$ 281,409
$ 135,770
$ 130,278
$ 160,780
Current Ratio
3.0
2.5
2.3
FUTURE LIQUIDITY AND CAPITAL RESOURCES
The uses of funds primarily include working capital requirements, capital expenditures, acquisitions, stock repurchases, dividends and repayment of short-term debt. 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 produ cts 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 the 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 1, 2001.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter ended November 30, 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.
Date: January 10, 2002.
Ben B. Blount, Jr
Chief Financial Officer
/s/Paul J. Soni
Paul J. Soni
Controller
(Chief Accounting Officer)