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 1, 2002
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 1, 2002
Common Stock, $1 par value
7,513,629
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED STATEMENT OF EARNINGS
QUARTERS AND NINE MONTHS ENDED MARCH 1, 2002 AND March 2, 2001
(UNAUDITED)
$ in thousands except per share amount
Quarters Ended
Nine Months Ended
March 1, 2002
March 2, 2001
Net Sales
$149,495
$197,404
$485,553
$596,641
Cost of goods sold
120,583
160,599
392,776
486,696
Gross Profit
28,912
36,805
92,777
109,945
Selling, general and administrative
26,697
29,224
84,724
90,040
Earnings Before Interest and Taxes
2,215
7,581
8,053
19,905
Interest
26
1,271
77
3,627
Earnings Before Income Taxes
2,189
6,310
7,976
16,278
Income Taxes
832
2,398
3,031
6,186
Net Earnings
$1,357
$3,912
$4,945
$10,092
Basic Earnings Per Common Share
$0.18
$0.53
$0.66
$1.35
Diluted Earnings Per Common Share
Basic Number of Shares Outstanding
7,512,635
7,376,783
7,487,040
7,495,370
Diluted Number of Shares Outstanding
7,573,933
7,534,031
7,503,218
Dividends Per Share
$0.21
$0.63
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
MARCH 1, 2002 JUNE 1, 2001 AND MARCH 2, 2001
(UNAUDITED EXCEPT FOR JUNE 1, 2001)
$ in thousands
June 1, 2001
Assets
Current Assets:
Cash
$4,610
$10,185
$6,150
Receivables
107,363
50,699
135,989
Inventories:
Finished Goods
77,609
92,623
117,785
Work in process
10,625
22,064
27,490
Fabric, trim & Supplies
17,187
32,683
24,141
105,421
147,370
169,416
Prepaid expenses
12,133
11,416
9,607
Total Current Assets
229,527
219,670
321,162
Property, Plant and Equipment
29,369
33,516
34,381
Deferred Income Taxes
1,066
-
70
Other Assets
8,918
10,054
10,660
Total Assets
$268,880
$263,240
$366,273
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable
$26,500
$ -
$64,000
Trade accounts payable
36,376
54,787
59,547
Accrued compensation
7,515
11,617
9,344
Other accrued expenses
19,433
18,252
21,088
Dividends Payable
1,578
1,549
1,548
Income taxes
1,382
2,924
994
Current Maturities of long-term debt
204
263
189
Total Current Liabilities
92,988
89,392
156,710
Long Term Debt, less current maturities
289
399
40,483
Noncurrent Liabilities
4,500
9
Stockholders' Equity:
Common Stock
7,513
7,406
7,372
Additional paid in capital
14,567
11,741
11,056
Retained earnings
149,023
149,793
146,152
Total Stockholders' equity
171,103
168,940
164,580
Total Liabilities and Stockholders' Equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 1, 2002 AND MARCH 2, 2001
Cash Flows From Operating Activities
Net earnings
Adjustments to reconcile net earnings to
Net cash used in operating activities:
Depreciation and amortization
6,445
6,893
Gain on sale of property, plant and equipment
34
(91)
Changes in working capital:
(56,664)
(23,122)
Inventories
41,949
(16,179)
Prepaid Expenses
(1,165)
711
(18,411)
(8,874)
Accrued expenses and other current liabilities
(2,921)
(4,307)
Income taxes payable
(1,542)
(154)
Deferred income taxes
(627)
(181)
Other noncurrent assets
(438)
(329)
Net cash used in operating activities
(28,395)
(35,541)
Cash Flows from Investing Activities
Purchase of property, plant and equipment
(981)
(3,306)
Proceeds from sale of property, plant and equipment
224
805
Net cash used in investing activities
(757)
(2,501)
Cash flows from Financing Activities
Short-term borrowings
26,500
45,500
Long-term debt
(169)
(46)
Proceeds from issuance of common stock
1,943
186
Purchase and retirement of common stock
(5,314)
Dividends on common stock
(4,697)
(4,759)
Net cash provided by financing activities
23,577
35,567
Net change in Cash and Cash Equivalents
(5,575)
(2,475)
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 for:
Interest, net
$ 104
$3,347
4,018
6,414
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 1, 2002 AND MARCH 2, 2001
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
$40,158
$51,895
$139,373
$174,174
Lanier Clothes
34,503
40,212
113,678
130,450
Oxford Slacks
19,060
22,959
59,522
75,895
Oxford Womenswear Group
55,674
82,271
172,641
215,866
Corporate and other
100
67
339
256
Total
$ in thousand
$521
$610
$1,559
$1,809
450
482
1,346
1,357
266
296
769
843
674
721
2,052
2,114
228
261
719
770
$2,139
$2,370
$6,445
$6,893
EBIT
$(599)
$(1,710)
$(1,721)
$(445)
2,947
2,985
9,015
9,062
883
501
2,377
3,801
588
5,457
4,905
9,887
(1,604)
348
(6,523)
(2,400)
$2,215
$7,581
$8,053
$19,905
Interest expense, net
Earnings before taxes
$2,189
$6,310
$7,976
$16,278
Mar. 1, 2002
Mar. 2, 2001
ASSETS
$88,474
$110,359
77,945
106,849
37,379
44,059
80,591
122,023
(15,509)
(17,017)
$361
$852
396
1,106
37
273
83
632
104
443
Tota
$981
$3,306
In July 2001, the FASB also issued SFAS No. 143, Accounting for Asset Retirement Obligations ("SFAS No. 143"). SFAS No. 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 No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluating the effect of this statement on the Company's results of operations and financial position.
In August 2001, the FASB issued statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 supersedes FASB statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS No. 121"), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30) for the disposal of a segment of a business( as previously defined in Opinion 30). The FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. SFAS No. 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 ca sh flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. SFAS No. 144 also requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. SFAS No. 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.
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.
Quarter Ended February
Nine Months Ended February
FY 2002
FY 2001
% Change
-24.3%
-18.6%
Cost of Goods Sold
-24.9%
-19.3%
-21.4%
-15.6%
S,G&A
-8.6%
-5.9%
-70.8%
-59.5%
Interest, Net
-98.0%
-97.9%
Earnings Before Taxes
-65.3%
-51.0%
As a Percentage of Net Sales
100.0%
80.7%
81.4%
-0.7%
80.9%
81.6%
19.3%
18.6%
0.7%
19.1%
18.4%
17.9%
14.8%
3.1%
17.4%
15.1%
2.3%
1.5%
3.8%
-2.3%
1.7%
3.3%
-1.6%
0.0%
0.6%
-0.6%
3.2%
-1.7%
1.6%
2.7%
-1.1%
1.2%
1.0%
-0.4%
0.9%
2.0%
Total Company
Net sales for the third quarter declined 24.3% to $149,495 from $197,404 in the third quarter of the prior year. The decline in sales was primarily due to a 23.0% decline in unit sales that was exacerbated by a 1.7% decline in the average selling price per unit. The sales decline affected all segments and all major channels of distribution with the exception of chain stores which showed a slight sales increase. Third quarter sales were negatively impacted by prevailing economic conditions, weak consumer demand and conservative purchasing plans by many of the Company's retail customers.
For the nine months, sales declined 18.6% to $485,553 from $596,641 in the prior year. The unit sales decline of 17.5% was further impacted by a 1.3% decline in the average selling price per unit.
Cost of goods sold decreased to 80.7% of net sales in the current quarter from 81.4% in the prior year. The decline in cost of goods sold reflected a more favorable product mix and improvements in sourcing operations.
For the nine months, cost of goods sold declined to 80.9% in the current year from 81.6% in the prior year.
Selling, general and administrative expenses (S,G&A) declined 8.6% in the third quarter to $26,697 from $29,224 in the prior year but increased as a percentage of net sales to 17.9% in the current quarter from 14.8% in the prior year. Included in S,G&A for the quarter were $1,726 in bad debt expenses attributable to the Kmart bankruptcy (this represents approximately 50% of the total exposure).
For the nine months, S,G&A declined 5.9% from the prior year, but increased as a percentage of net sales to 17.4% in the current year from 15.1% in the prior year.
Interest expense declined in the third quarter of the current year compared to the prior year due to lower average borrowing requirements and lower average interest rates. In addition, approximately $93 of financing cost for the trade receivables securitization program were reflected as S,G&A expense rather than interest expense.
For the nine months, approximately $1,030 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 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.)
-22.6%
-20.0%
-14.2%
-12.9%
-17.0%
-21.6%
Womenswear Group
-32.3%
Corporate and Other
49.3%
32.4%
Total Net Sales
26.9%
26.3%
28.7%
29.2%
23.1%
20.4%
23.4%
21.9%
12.7%
11.6%
12.3%
37.2%
41.7%
35.6%
36.2%
0.1%
EBIT Margin
-65.0%
-1.5%
-3.3%
-1.3%
8.5%
7.4%
76.2%
4.6%
2.2%
-89.2%
1.1%
6.6%
-560.9%
N/A
Total Operating Income
286.7%
-1.2%
-0.3%
-0.5%
7.9%
6.9%
-37.5%
4.0%
5.0%
-50.4%
2.8%
171.8%
The Oxford Shirt Group reported a 22.6% sales decline from $51,895 in the third quarter of the prior year to $40,158 in the current year. A unit sales decline of 15.9% was exacerbated by an 8.0% decline in the average selling price per unit. The bulk of the sales decline occurred in the specialty store distribution channel. The discontinuation of the DKNY Kids business also contributed to the decline. A more favorable product mix resulted in an improvement in EBIT to a loss of $599 in the current quarter from a loss of $1,710 in the prior year.
For the nine months, net sales declined 20.0% from $174,174 in the prior year to $139,373 in the current year. A 16.2% decline in unit sales was further impacted by a 4.4% decline in the average selling price per unit. EBIT declined from a loss of $445 in the prior year to a loss of $1,721 in the current year.
Lanier Clothes reported sales of $34,503, a decline of 14.2% from the prior year. A unit sales decline of 8.0% was compounded by a 6.7% decline in the average selling price per unit. Weak demand from the group's department store customers was primarily responsible for the sales decline. EBIT declined slightly to $2,947 in the current quarter from $2,985 in the prior year.
For the nine months, Lanier Clothes sales declined 12.9% from $130,450 in the prior year to $113,678 in the current year. A 6.7% decline unit sales was compounded by a 6.6% decline in the average selling price per unit. EBIT declined 0.5% from $9,062 in the prior year to $9,015 in the current year.
Oxford Slacks Group
Oxford Slacks reported third quarter sales of $19,060, down 17.0% from $22,959 in the prior year. The unit sales decline of 7.3% was further impacted by a 10.5% decline in the average selling price per unit. The sales decline was primarily in the group's direct mail distribution channel. Lower operating expenses and favorable costing variances resulted in an improvement in EBIT to $883 in the current quarter from $501 in the prior year.
For the nine months, net sales declined 21.6% from $75,895 in the prior year to $59,522 in the current year. A 14.8% decline in unit sales was compounded by a 7.9% decline in the average selling price per unit. EBIT declined from $3,801 in the prior year to $2,377 in the current year.
The Womenswear Group reported a sales decline in the third quarter of 32.3% from $82,271 in the prior year to $55,674 in the current year. A unit sales decline of 28.1% was further impacted by a decline of 5.9% in the average selling price per unit. The sales decline was driven primarily by lower shipments to major mass merchant retailers and lower replenishment take-outs. Lower sales and $1,726 in bad debt expenses associated with the Kmart bankruptcy reduced EBIT to $588 from $5,457 last year.
For the nine months, the Womenswear Group sales declined 20.0% from $215,866 in the prior year to $172,641 in the current year. A 19.4% decline in unit sales was compounded by a slight 0.6% decline in the average selling price per unit. EBIT declined from $9,887 in the prior year to $4,905 in the current year primarily due to the loss in sales volume and the bad debt write off.
The Corporate and Other change in EBIT was primarily due to underabsorbed sourcing costs in the Hong Kong sourcing office and LIFO accounting adjustments in the third quarter and for the nine months.
FUTURE OPERATING RESULTS
While the Company has observed some preliminary signs of improvement in a number of its segments, the Company is maintaining a conservative outlook for the fourth quarter. The Company's focus will remain on prudent planning and aggressive asset management. The Company's financial position remains quite strong and is well positioned to capitalize on opportunities when economic activity begins to accelerate.
Fourth quarter sales and diluted earnings per share are expected to decline by approximately 20% from last year's fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Operating Activities used $28,395 through the third quarter of the current year and used $35,541 through the third quarter of the prior year. The difference was primarily due to decreased inventory offset by decreased net earnings, a greater increase in accounts receivable and a greater decline in trade accounts payable.
Investing Activities
Investing Activities used $757 through the third quarter of the current year and used $2,501 through the third quarter of the prior year. The primary difference was decreased capital expenditures.
Financing Activities
Financing Activities generated $23,577 through the third quarter of the current year and $35,567 through the third quarter of the prior year. The primary difference was a smaller increase in short-term borrowings offset by the decrease in the purchase and retirement of the Company's common stock.
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 had approximately 64 million available under the securitization program on March 1,2002. The Company used the proceeds from receivables securitization to eliminate outstanding bank borrowings. In an effort to provide greater clarity, the Company amended its trade receivables securitization agreement on January 31, 2002 and, as a result, discontinued the off balance sheet treatment of the program. Total debt at the current quarter-end stood at $26,993, down $77,679 or 74.2% from $104,672 last year.
On April 1, 2002, the Company's Board of Director's declared a cash dividend of $0.21 per share payable on June 1, 2002 to shareholders of record on May 15, 2002. The Company did not purchase any shares of its common stock during the third quarter of the current year.
Working Capital
($ in Thousands)
Third Quarter FY 2002
Fourth Quarter FY 2001
Third Quarter FY 2001
Current Assets
$ 229,527
$ 219,670
$ 321,162
$ 136,539
$ 130,278
$ 164,452
Current Ratio
2.5
2.0
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.
Critical Accounting Policies
The Company's critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Consolidated Financial Statements. These policies have been consistently applied in all material respects and address such matters as concentrations of credit risk, accounts receivable securitization, accounts receivable valuation, inventory management and revenue recognition. While the estimates and judgements associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances.
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 at 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.
10(m) Omnibus Amendment No. 1. Amendment to the accounts receivable sale and accounts receivable loan agreements (exhibits 10(j) and 10(k)). Dated January 31, 2002.
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter ended March 2, 2002.
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: April 11, 2002.
Ben B. Blount, Jr
Executive Vice President, and Chief Financial Officer
(Principal Financial Officer)