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 August 28, 1998 --------------- 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 October 5, 1998 - --------------------------- ---------------------------- Common Stock, $1 par value 8,537,928 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS QUARTERS ENDED AUGUST 28, 1998 AND AUGUST 29, 1997 (UNAUDITED) Quarter Ended -------------------------- $ in thousands except share and per August 28, August 29, share amounts 1998 1997 - ------------------------- ---------- ------------ Net Sales $198,606 $193,242 -------- -------- Costs and Expenses: Cost of goods sold 158,574 156,597 Selling, general and administrative 29,502 26,795 Interest 749 981 -------- -------- 188,825 184,373 -------- -------- Earnings Before Income Taxes 9,781 8,869 Income Taxes 3,815 3,459 -------- -------- Net Earnings $ 5,966 $ 5,410 ======== ======== Basic Earnings Per Common Share $.68 $.61 ======== ======== Diluted Earnings Per Common Share $.67 $.61 ======== ======== Basic Number of Shares Outstanding 8,774,152 8,807,891 ========= ========= Diluted Numbers of Shares Outstanding 8,924,269 8,933,702 ========= ========= Dividends Per Share $0.20 $0.20 ====== ====== - ------------------------- See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS AUGUST 28, 1998, MAY 29, 1998 AND AUGUST 29, 1997 (UNAUDITED EXCEPT FOR MAY 29, 1998) August 28, May 29, August 29, $ in thousands 1998 1998 1997 - -------------- ------------ -------- ----------- Assets - ------ Current Assets: Cash $ 4,172 $ 10,069 $ 4,266 Receivables 126,546 100,789 121,633 Inventories: Finished goods 100,739 89,906 85,076 Work in process 22,679 24,330 23,996 Fabric, trim & supplies 26,651 32,472 34,902 -------- -------- -------- 150,069 146,708 143,974 Prepaid expenses 14,911 13,621 14,317 -------- -------- -------- Total Current Assets 295,698 271,187 284,190 Property, Plant and Equipment 36,125 35,682 34,629 Other Assets 4,403 4,621 5,268 -------- -------- -------- $336,226 $311,490 $324,087 ======== ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities: Notes payable $ 46,500 $ 11,500 $ 44,500 Trade accounts payable 49,963 57,105 48,462 Accrued compensation 9,123 12,020 9,096 Other accrued expenses 18,822 18,883 20,645 Dividends payable 1,727 1,765 1,765 Income taxes 4,670 - 2,340 Current maturities of long-term debt 446 449 1,950 -------- -------- -------- Total Current Liabilities 131,251 101,722 128,758 Long-Term Debt, less current maturities 41,351 41,428 41,790 Non-Current Liabilities 4,500 4,500 4,500 Deferred Income Taxes 3,944 4,071 3,028 Stockholders' Equity: Common stock 8,536 8,824 8,825 Additional paid-in capital 11,521 11,554 10,590 Retained earnings 135,123 139,391 126,596 -------- -------- -------- Total Stockholders' Equity 155,180 159,769 146,011 -------- -------- -------- Total Liabilities and Stockholders' Equity $336,226 $311,490 $324,087 ======== ======== ======== - ------------------- See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS QUARTERS ENDED AUGUST 28, 1998 AND AUGUST 29, 1997 (UNAUDITED) Quarter Ended ----------------------------- August 28, August 29, $ in thousands 1998 1997 - -------------- ------------ ------------ Cash Flows from Operating Activities: - ------------------------------------- Net earnings $ 5,966 $ 5,410 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 1,901 1,917 (Gain) loss on sale of property, plant and equipment (5) 4 Changes in working capital: Receivables (25,757) (43,862) Inventories (3,361) 5,807 Prepaid expenses (1,290) 1,763 Trade accounts payable (7,142) (11,062) Accrued expenses and other current liabilities (2,958) 1,499 Income taxes payable 4,670 2,340 Deferred income taxes (127) 23 Other noncurrent assets 15 67 Net cash flows used in -------- -------- operating activities (28,088) (36,094) Cash Flows from Investing Activities: - ------------------------------------- Purchase of property, plant and equipment (2,224) (1,748) Proceeds from sale of property, plant and and equipment 87 37 -------- -------- Net cash used in investing activities (2,137) (1,711) Cash Flows from Financing Activities: - ------------------------------------- Short-term borrowings 35,000 40,500 Payments on long-term debt (80) (834) Proceeds from exercise of stock options 287 847 Purchase and retirement of common stock (9,117) - Dividends on common stock (1,762) (1,755) -------- -------- Net cash provided by financing activities 24,328 38,758 Net Change in Cash and Cash Equivalents (5,897) 953 Cash and Cash Equivalents at Beginning of Period 10,069 3,313 -------- -------- Cash and Cash Equivalents at End of Period $ 4,172 $ 4,266 ======== ======== Supplemental Disclosure of Cash Flow Information - ------------------------------------------------ Cash (received) paid for: Interest, net $ 818 $ 980 Income taxes (325) 200 See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTERS ENDED AUGUST 28, 1998 AND AUGUST 29, 1997 (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 May 29, 1998. 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations NET SALES Net sales for the first quarter of the 1999 fiscal year, which ended August 28, 1998, increased 2.8% from net sales for the same period of the prior year. The increase in first quarter net sales was led by the Oxford Shirt Group, where increased sales by Polo/Ralph Lauren for Boys, Ely & Walker, Tommy Hilfiger Dress Shirts, and OxSport were slightly offset by decreased sales in Tommy Hilfiger Golf and Oxford Shirtings. Lanier Clothes, the Company's Tailored Clothing Group, produced increased sales in Nautica, Geoffrey Beene, private label and initial shipments of its Women's Tailored Clothing offset marginally by decreased sales in Oscar de la Renta. The Womenswear Group generated a net increase in sales with increases in its Collections and Separates divisions somewhat offset by a decline in its Catalog & Special Markets division. Oxford Slacks had a sales decline. In the first quarter of the current year, the Company experienced an overall net sales unit volume increase of 1.1%, while experiencing a 2.0% increase in the weighted average net sales price per unit. COST OF GOODS SOLD Cost of goods sold as a percentage of net sales decreased from 81.0% in the first quarter of the prior year to 79.8% in the current quarter. The decrease in cost of goods sold was due to growth in higher margin designer licensed business, improved manufacturing performance and increased offshore sourcing. Markdowns, irregulars and other margin variances were lower. During the first quarter, the Company announced the forthcoming closure of its sewing facility in Camden, South Carolina. Subsequent to the end of the first quarter, the Company announced the forthcoming closure of its sewing facility in Luverne, Alabama. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative (S G & A) expenses increased by 10.1% from $26,795,000 or 13.9% of net sales in the first quarter of the prior year to $29,502,000 or 14.9% of net sales in the first quarter of fiscal 1999. The major contributor to this increase was the increased licensed designer business, which requires S G & A expense at more than twice the expense levels of the Company's private label business. INTEREST EXPENSE Net interest expense declined by 23.6% from $981,000 or 0.5% of sales in the first quarter of the prior year to $749,000 or 0.4% of sales in the current quarter. The reduction in interest expense was due to improved asset management. INTEREST TAXES The Company's effective tax rate was 39.0% for the first quarter of both the current year and the prior year and does not differ significantly from the Company's statutory rate. FUTURE OPERATING RESULTS The Company's optimism is dampened somewhat by the current political and economic uncertainties at home and abroad. The Company should have sales and earnings exceeding those of the prior year if current business conditions continue. The Company will begin sewing operations in its new sewing facilities in Honduras and Mexico in the second quarter. Subsequent to the end of the first quarter, the Company completed the acquisition of Next Day Apparel, Inc. Next day is headquartered in Walhalla, South Carolina, with marketing offices in New York City and manufacturing plants in Honduras. Sales for Next Day's latest fiscal year were in excess of $100,000,000. Next Day will operate as a division of the Company's Womenswear Group. YEAR 2000 The Company is working to resolve the effects of the Year 2000 issue on its information systems. The Year 2000 issue, which is common to most businesses, concerns the inability of information systems to properly recognize and process dates and date sensitive information on and beyond January 1, 2000. In 1996, the Company began a Company-wide assessment of the vulnerability of its systems to the Year 2000 issue. Based on such assessment, the Company has developed a Year 2000 compliance plan, under which all key information systems are being tested, and non-compliant software or technology is being modified or replaced. The Company is also surveying the Year 2000 compliance status and compatibility of customers and suppliers systems which interface with the Company's systems or could otherwise impact the Company's operations. While the Company currently believes it will be able to modify or replace its affected systems in ample time to minimize any detrimental effects on its operations, failure to do so, or the failure of the Company's major customers and suppliers to modify or replace their affected systems, could have a material adverse impact on the Company's results of operations, liquidity or consolidated financial positions in the future. The most reasonably likely worst case scenario of failure by the Company or its customers or suppliers to resolve the Year 2000 issue would be a temporary slow down or cessation of manufacturing operations at one or more of the Company's facilities and a temporary inability on the part of the Company to timely process orders and billings and to deliver finished product to customers. The Company is considering various contingency options, including identification of alternate suppliers, vendors and service providers, and manual alternatives to systems operation, which will allow them to minimize the risks of any unresolved Year 2000 problems on their operations, and to minimize the effect of any unforeseen Year 2000 failures. The Company currently estimates the incremental cost of the work needed to resolve the Year 2000 issue will not materially impact the Company's financial condition or results of operations. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES Operating activities used $28,088,000 in the first quarter of the current year and $36,094,000 in the same period of the prior year. The primary factors contributing to this decreased used funds in the current year was a smaller increase in receivables than in the prior year offset by an increase in inventory in the current year. INVESTING ACTIVITIES Investing activities used $2,137,000 in the first quarter of the current year and $1,711,000 in the same period of the prior year. The difference was a slight increase in the purchase of property, plant, and equipment. FINANCING ACTIVITIES Financing activities generated $24,328,000 in the first quarter of the current year and $38,758,000 in the first quarter of the prior year. The primary difference was a smaller increase is short-term borrowings offset by increased purchase and retirement of common stock in the current year. On October 5, 1998 the Company's Board of Directors declared a cash dividend of $.20 per share payable on November 28, 1998 to shareholders of record on November 13, 1998. During the first quarter and through October 5, 1998, the Company purchased and retired 325,000 shares of the Company's common stock acquired on the open market. During the first quarter and through October 5, 1998, the Company issued 16,840 shares of the Company's common stock in conjunction with Company's employee stock option plans. WORKING CAPITAL Working capital increased from $155,432,000 at the end of the first quarter of the prior year to $169,465,000 at the end of the 1998 fiscal year and decreased to $164,447,000 at the end of the first quarter of the current year. The ratio of current assets to current liabilities was 2.2 at the end of the first quarter of the prior year, 2.7 at the end of the prior fiscal year, and 2.3 at the end of the first quarter of the current 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 both short-term and long-term borrowings. The uses of funds primarily include working capital requirements, capital expenditures, acquisitions, 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 August 28, 1998, the Company had available for its use lines of credit with several lenders aggregating 52,000,000. The Company has agreed to pay commitment fees for these available lines of credit. On August 28, 1998, 52,000,000 was in use under these lines, of which $40,000.00 was long-term. In addition, the Company has $220,500,000 in uncommitted lines of credit, of which $137,500,000 is reserved exclusively for letters of credit. The Company pays no commitment fees for these available lines of credit. On August 28, 1998, $34,500,000 was in use under these lines of credit. Maximum borrowings from all these sources during the current year were $86,500,000 of which $46,500,000 was short-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. There are no present plans to sell securities (other than through employee stock option plans and other employee benefits)or enter into off-balance sheet financing arrangements. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements included herein are "forward-looking statements" within the meaning of the federal securities laws. This includes any statements concerning plans and objectives of management relating to the Company's operations or economic performance, and assumptions related thereto. In addition, the Company and its representatives may from time to time make other oral or written statements that are also forward-looking statements. These forward-looking statements are made based on management's expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those express or implied in the forward- looking statements. Important factors that could cause the actual results of operations or financial condition of the Company to differ include, but are not necessarily limited to, general economic and apparel business conditions, continued retailer and consumer acceptance of company products, and global manufacturing costs. 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 May 29, 1998. 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 August 24, 1998 covering the Company's long term note due February 23, 2000. 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 August 28, 1998. 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: October 8, 1998 Ben B. Blount, Jr. --------------- Chief Financial Officer