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, 1996 ------------- OR [ ] Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 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 (I.R.S. Employer incorporation or organization) 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 8, 1996 - --------------------------- ---------------------------- Common Stock, $1 par value 8,801,321
PART I. FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENT OF EARNINGS NINE MONTHS AND QUARTERS ENDED MARCH 1, 1996 AND MARCH 3, 1995 (UNAUDITED) Nine Months Ended Quarter Ended ------------------------- -------------------------- $ in thousands except March 1, March 3, March 1, March 3, per share amounts 1996 1995 1996 1995 -------------------- ------------ ------------ ------------ ------------ Net Sales $514,920 $510,572 $138,600 $153,101 -------- -------- -------- -------- Costs and Expenses: Cost of Goods Sold 428,488 416,442 116,135 127,952 Selling, General and Administrative 75,547 70,016 24,633 21,098 Provision for environmental remediation 4,500 - - - Interest 4,916 2,715 1,199 1,010 -------- -------- -------- -------- Total Costs and Expenses 513,451 489,173 141,967 150,060 -------- -------- -------- -------- Earnings (Loss) Before Income Taxes 1,469 21,399 (3,367) 3,041 Income Taxes 588 8,652 (1,347) 1,217 -------- -------- -------- -------- Net Earnings (Loss) $ 881 $12,747 $(2,020) $1,824 ======== ======== ======== ======== Net Earnings (Loss) Per Common Share $ .10 $1.47 $(0.23) $0.21 ===== ===== ====== ===== Average Number of Shares Outstanding 8,731,074 8,663,153 8,779,344 8,678,243 ========= ========= ========= ========= Dividends Per Share $0.60 $0.56 $0.20 $0.20 ===== ====== ===== ===== See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS MARCH 1, 1996, JUNE 2, 1995 AND MARCH 3, 1995 (UNAUDITED EXCEPT FOR JUNE 2, 1995) March 1, June 2, March 3, $ in thousands 1996 1995 1995 - -------------- ------------ ----------- ----------- Assets - ------ Current Assets: Cash $ 2,408 $ 2,225 $ 3,851 Receivables 89,201 83,962 104,079 Inventories: Finished Goods 79,844 96,013 73,018 Work in Process 18,190 31,014 29,706 Fabric, Trim & Supplies 31,472 42,951 34,748 -------- -------- -------- 129,506 169,978 137,472 Prepaid expenses 16,378 13,023 9,493 -------- -------- -------- Total Current Assets 237,493 269,188 254,895 Property, Plant & Equipment 38,865 38,650 35,203 Other Assets 6,505 1,190 1,262 -------- -------- -------- $282,863 $309,028 $291,360 ======== ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities: Notes Payable $ 36,000 $ 43,500 $ 67,000 Trade Accounts Payable 32,600 54,331 43,743 Accrued Compensation 6,938 8,235 10,042 Other Accrued Expenses 16,968 13,039 12,387 Dividends Payable 1,760 1,739 1,737 Current maturities of long-term debt 4,625 4,732 4,932 -------- -------- -------- Total Current Liabilities 98,891 125,576 139,841 Long-Term Debt, less current maturities 46,230 47,011 10,996 Non-Current liabilities 4,500 - - Deferred Income Taxes 3,868 3,862 4,134 Stockholders' Equity: Common Stock 8,801 8,694 8,686 Additional paid-in capital 8,180 7,020 6,928 Retained Earnings 112,393 116,865 120,775 -------- -------- -------- Total Stockholders' Equity 129,374 132,579 136,389 -------- -------- -------- $282,863 $309,028 $291,360 ======== ======== ======== See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 1, 1996 AND MARCH 3, 1995 (UNAUDITED) Nine Months Ended ------------------------------ March 1, March 3, $ in thousands 1996 1995 - -------------- ------------------------------ Cash Flows From Operating Activities - ------------------------------------ Net earnings $ 881 $ 12,747 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,185 5,644 Loss (gain) on sale of property, plant and equipment 9 (1,065) Changes in working capital: Receivables (3,076) (28,914) Inventories 42,839 (23,007) Prepaid expenses (1,720) 2,909 Trade accounts payable (21,873) (1,280) Accrued expenses and other current liabilities 2,462 (2,235) Non-current liabilities 4,500 - Deferred income taxes 6 404 Other noncurrent assets (1,330) 207 Net cash flows provided by (used in) ----------- --------- operating activities 28,883 (34,590) Cash Flows From Investing Activities - ------------------------------------ Acquisitions (11,488) - Proceeds from sale of business 1,273 - Purchase of property, plant and equipment (7,002) (8,569) Proceeds from sale of property, plant and and equipment 973 2,008 -------- ---------- Net cash used in investing activities (16,244) (6,561) Cash Flows From Financing Activities - ------------------------------------ Short-term borrowings (7,500) 47,500 Payments on long-term debt (888) (1,812) Proceeds from exercise of stock options 1,157 760 Dividends on common stock (5,225) (4,673) Net cash (used in) provided by ------- ------- financing activities (12,456) 41,775 Net change in Cash and Cash Equivalents 183 624 Cash and Cash equivalents at Beginning of Period 2,225 3,227 -------- -------- Cash and Cash Equivalents at End of Period $ 2,408 $ 3,851 ======== ======== Supplemental Disclosure of Cash Flow Information - ------------------------------------------------ Cash paid for: Interest $ 4,926 $ 2,635 Income taxes 1,628 10,378 See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS AND QUARTERS ENDED MARCH 1, 1996 AND MARCH 3, 1995 (UNAUDITED) 1. The foregoing unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of results to be expected for the year. 2. The financial information presented herein should be read in conjunction with the consolidated financial statements included in the Registrant's Annual Report on Form 10-K for the fiscal year ended June 2, 1995. 3. The Company is involved in certain legal matters primarily arising in the normal course of business. In the opinion of management, the Company's liability under any of these matters would not materially affect its financial condition or results of operations. 4. The Company discovered a past unauthorized disposal of a substance believed to be dry cleaning fluid on one of its properties. The Company believes that remedial action will be required, including continued investigation, monitoring and treatment of ground water and soil. Based on advice from its environmental experts, the Company has provided $4,500,000 for this remediation, in the first quarter of the current fiscal year.
Item 2 Management's Discussion and Analysis of Financial --------------------------------------------------------- Condition and Results of Operations ----------------------------------- Results of Operations - ---------------------- NET SALES Net Sales for the third quarter of the 1996 fiscal year, which ended March 1, 1996, decreased by 9.5% from net sales for the third quarter of the previous year. Net sales for the first nine months of the current year increased 0.9% from net sales for the same period of the prior year. Mens Shirt Group sales declined. Increased sales in Tommy Hilfiger Dress Shirts, Polo for Boys, Tommy Hilfiger Golf and Ely & Walker did not quite offset the decline in private label shirts. Tailored Clothing sales declined due to weakness in the private label sector. Mens Slacks sales increased due to continued success of the Everpress wrinkle-free product. The Womenswear sales decline was due primarily to the restructuring of the RENNY division and the divestiture of B.J. Designs. The Company continued to strengthen strategic alliances with its larger, more financially stable customers. Sales to the Company's fifty largest customers continued to outpace the Company's overall sales performance. The Company experienced an overall net sales unit volume decrease of 16.2% while experiencing an average 7.8% increase in the average sales price per unit during the third quarter of the current year. For the first nine months of the current year, the Company experienced a 0.7% decrease in overall net sales unit volume while incurring a 1.5% increase in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold as a percentage of net sales was 83.8% for the third quarter of the current year and 83.6% for the third quarter of the previous year. For the first nine months of the current year, cost of goods sold as a percentage of net sales was 83.2% compared to 81.6% for the same period in the prior year. The most significant event during the quarter was the Company's decision to end its Savane brand and Process 2000 licensing agreements with Farah and to discontinue the wet processing of wrinkle-free shirts. The difficulties associated with wet processing wrinkle-free shirts have not been resolved to a level of satisfaction which would warrant continuation of this product line. The Company will complete its obligations to Farah when it completes shipping the Fall 1996 season. The Company closed the Vidalia, GA wet processing facility in the current quarter and will close the Juarez, Mexico facility upon completion of production in June-July, 1996. Future wrinkle-free shirts will be made from pre-cured or post-cured fabrics treated at the fabric mill. During the third quarter, the Company provided amounts for the anticipated cost and expenses associated with this exit.
The Company continued its inventory reduction plan in the third quarter. Even though sales declined approximately $14,501,000, modest gains were still achieved in inventory reduction. The production curtailment associated with this inventory reduction negatively impacted manufacturing efficiencies and overhead absorption. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by 16.8% to $24,633,000 in the third quarter of fiscal 1996 from $21,098,000 in the same period of fiscal 1995. Selling, general and administrative expenses (excluding the environmental charge taken in the first quarter) increased by 7.9% to $75,547,000 in the first nine months of fiscal 1996 from $70,016,000 in the same period of fiscal 1995. As a percentage of net sales, selling, general and administrative expenses increased to 17.8% for the third quarter of fiscal 1996 from 13.8% for the third quarter of the prior year and increased to 14.7% for the first nine months of the current year from 13.7% for the first nine months of the prior year. Included in selling, general and administrative expenses are start-up cost for the Tommy Hilfiger Golf line which began shipments in the second fiscal quarter, costs associated with the continued expansion and rengineering of two distribution centers and amounts provided for exiting wrinkle-free wet processing as described previously. INTEREST EXPENSE Net interest expense as a percentage of net sales increased to 0.9% in the third quarter of the current year from 0.7% in the third quarter of the previous year, and increased to 1.0% for the first nine months of fiscal 1996 from 0.5% for the same period in the prior year. This increase was due to an increase in average short-term borrowing and long-term debt from the same periods in the prior year. INCOME TAXES The Company's effective income tax rate was 40.0% in fiscal 1996 for both the third quarter and the first nine months, and 40.0% for the third quarter and 40.4% for the first nine months of fiscal 1995. FUTURE OPERATING RESULTS The Company expects that the apparel business environment will continue to show few signs of improving in the near term. The Company continues to be impacted by increased foreign competition and fierce competition at retail which doesn't permit the passing on of cost increases. The Company expects fourth quarter sales to be flat when compared to last year's fourth quarter. The Company expects to return to profitability in the fourth quarter without the adverse effects of wet processing; however, profitability in the fourth quarter will not be as high as in some recent years. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------ OPERATING ACTIVITIES Operating activities generated $28,883,000 during the first nine months of the current year and used $34,590,000 in the first
nine months of the previous year. The primary factors contributing to this change were a smaller increase in receivables and a decrease in inventory offset by a decrease in net earnings and a larger decrease in trade accounts payable as compared to the first nine month of the prior year. The decrease in the accounts receivable balance in the current year from the prior year was primarily due to the decreased sales in the current quarter. The decrease in inventory in the current year from the prior year was the result of planned inventory control mentioned above achieved through production curtailment. The reduction in trade accounts payable in the current year from the prior year was due to the inventory reduction. INVESTING ACTIVITIES Investing activities used $16,244,000 during the first nine months of the current year and used $6,561,000 in the first nine months of the prior year. The primary factors contributing to the increase in the current year were the acquisition of Ely & Walker in the first quarter and Confecciones Monzini, S.A. located in Tegucigalpa, Honduras in the current quarter. Monzini produces approximately 72,000 dozen dress shirts per year and became a part of the Mens Shirt Group. During the second quarter, the Company completed the sale of its Los Angeles based B.J. Design Concepts division. B.J. Design Concepts was the Company's smallest stand-alone operating division with annual sales of approximately $20,000,000. FINANCING ACTIVITIES Financing activities used $12,456,000 in the first nine months of fiscal 1996 and generated $41,775,000 in the first nine months of fiscal 1995. The primary factor contributing to this change was the reduction of short-term borrowing due to the operating and investing activities described above. Due to the exercise of employee stock options, a net of 113,490 shares of the Company's common stock have been issued during the nine months ended March 1, 1996 and no shares have been issued from March 1, 1996 through April 8, 1996. WORKING CAPITAL Working capital increased from $115,054,000 at the end of the third quarter of fiscal 1995 to $143,612,000 at the end of the 1995 fiscal year and decreased to $138,602,000 at the end of the third quarter of fiscal 1996. The ratio of current assets to current liabilities was 1.8 at the end of the third quarter of the 1995 fiscal year, 2.1 at the end of the 1995 fiscal year and 2.4 at the end of the third quarter of the 1996 fiscal year. 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 short-term borrowings. The uses of funds primarily include working capital requirements, capital expenditures, acquisitions, dividends and repayment of long-term debt. The Company regularly utilizes committed bank lines of
credit and other uncommitted bank resources to meet working capital requirements. On March 1, 1996, the Company had available for its use lines of credit with several lenders aggregating $50,000,000. The Company has agreed to pay commitment fees for these available lines of credit. At March 1, 1996 $50,000,000 was in use under these lines. Of the $50,000,000, $40,000,000 is long term. In addition, the Company has $178,000,000 in uncommitted lines of credit, of which $88,000,000 is reserved exclusively for letters of credit. The Company pays no commitment fees for these available lines of credit. At March 1, 1996, $26,000,000 was in use under these lines of credit. Maximum short-term borrowings from all sources during the first nine months of the current year were $125,500,000. The Company anticipates continued use and availability of both committed and uncommitted short-term borrowing resources as working capital needs may require. The Company considers possible acquisitions of apparel-related businesses that are compatible with its long-term strategies. There are no present plans to sell securities or enter into off-balance sheet financing arrangements. 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 fiscal 1995.
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------- (a) Exhibits. -------- 10(j) Amendment dated December 1, 1995 to Note Agreement between the Company and SunTrust of Georgia. Incorporated by reference to the Company's Form 10-K for fiscal year ended June 2, 1995. 11 Statement re computation of per share earnings. 27 Financial Data Schedule (b) Reports on Form 8-K. -------------------- The Registrant did not file any reports on Form 8-K during the quarter ended March 1, 1996.
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. OXFORD INDUSTRIES, INC. ----------------------- (Registrant) /s/Ben B. Blount, Jr. --------------------- Date: April 12, 1996 Ben B. Blount Jr. --------------- Chief Financial Officer