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 27, 1999 --------------- 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 4, 1999 - --------------------------- ---------------------------- Common Stock, $1 par value 7,720,967 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS QUARTERS ENDED AUGUST 27, 1999 AND AUGUST 28, 1998 (UNAUDITED) Quarter Ended -------------------------- $ in thousands except share and per August 27, August 28, share amounts 1999 1998 - ------------------------- ---------- ------------ Net Sales $185,737 $198,606 -------- -------- Costs and Expenses: Cost of goods sold 152,037 158,574 Selling, general and administrative 25,168 29,502 Interest 880 749 -------- -------- 178,085 188,825 -------- -------- Earnings Before Income Taxes 7,652 9,781 Income Taxes 2,908 3,815 -------- -------- Net Earnings $ 4,744 $ 5,966 ======== ======== Basic Earnings Per Common Share $.60 $.68 ======== ======== Diluted Earnings Per Common Share $.60 $.67 ======== ======== Basic Number of Shares Outstanding 7,860,757 8,774,152 ========= ========= Diluted Numbers of Shares Outstanding 7,938,368 8,924,269 ========= ========== Dividends Per Share $0.21 $0.20 ====== ====== - ------------------------- See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS AUGUST 27, 1999, MAY 28, 1999 AND AUGUST 28, 1998 (UNAUDITED EXCEPT FOR MAY 28, 1999) August 27, May 28, August 28, $ in thousands 1999 1999 1998 - -------------- ------------ -------- ----------- Assets - ------ Current Assets: Cash $ 9,949 $ 11,077 $ 4,172 Receivables 118,425 114,706 126,546 Inventories: Finished goods 92,234 92,195 100,739 Work in process 23,983 24,579 22,679 Fabric, trim & supplies 22,602 30,154 26,651 -------- -------- -------- 138,819 146,928 150,069 Prepaid expenses 13,466 13,791 14,911 -------- -------- -------- Total Current Assets 280,659 286,502 295,698 Property, Plant and Equipment 37,012 37,347 36,125 Other Assets 11,289 11,473 4,403 -------- -------- -------- $328,960 $335,322 $336,226 ======== ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities: Notes payable $ 42,500 $ 33,000 $ 46,500 Trade accounts payable 47,099 61,397 49,963 Accrued compensation 9,350 12,897 9,123 Other accrued expenses 25,785 22,429 18,822 Dividends payable 1,630 1,694 1,727 Income taxes 4,043 - 4,670 Current maturities of long-term debt 271 351 446 -------- -------- -------- Total Current Liabilities 130,678 131,768 131,251 Long-Term Debt, less current maturities 40,689 40,689 41,351 Non-Current Liabilities 4,500 4,500 4,500 Deferred Income Taxes 1,282 4,014 3,944 Stockholders' Equity: Common stock 7,715 7,932 8,536 Additional paid-in capital 11,121 11,244 11,521 Retained earnings 132,975 135,175 135,123 -------- -------- -------- Total Stockholders' Equity 151,811 154,351 155,180 -------- -------- -------- Total Liabilities and Stockholders' Equity $328,960 $335,322 $336,226 ======== ======== ======== - ------------------- See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS QUARTERS ENDED AUGUST 27, 1999 AND AUGUST 28, 1998 (UNAUDITED) Quarter Ended ----------------------------- August 27, August 28, $ in thousands 1999 1998 - -------------- ------------ ------------ Cash Flows from Operating Activities: - ------------------------------------- Net earnings $ 4,744 $ 5,966 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 2,064 1,901 Gain on sale of property, plant and equipment (56) (5) Changes in working capital: Receivables (3,719) (25,757) Inventories 8,109 (3,361) Prepaid expenses 325 (1,290) Trade accounts payable (14,298) (7,142) Accrued expenses and other current liabilities (191) (2,958) Income taxes payable 4,043 4,670 Deferred income taxes (2,732) (127) Other noncurrent assets (221) 15 Net cash flows used in -------- -------- operating activities (1,932) (28,088) Cash Flows from Investing Activities: - ------------------------------------- Purchase of property, plant and equipment (1,327) (2,224) Proceeds from sale of property, plant and and equipment 59 87 -------- -------- Net cash used in investing activities (1,268) (2,137) Cash Flows from Financing Activities: - ------------------------------------- Short-term borrowings 9,500 35,000 Payments on long-term debt (80) (80) Proceeds from exercise of stock options 179 287 Purchase and retirement of common stock (5,853) (9,117) Dividends on common stock (1,674) (1,762) -------- -------- Net cash provided by financing activities 2,072 24,328 Net Change in Cash and Cash Equivalents (1,128) (5,897) Cash and Cash Equivalents at Beginning of Period 11,077 10,069 -------- -------- Cash and Cash Equivalents at End of Period $ 9,949 $ 4,172 ======== ======== Supplemental Disclosure of Cash Flow Information - ------------------------------------------------ Cash paid for: Interest, net $ 933 $ 818 Income taxes 33 (325) See notes to consolidated financial statements. OXFORD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTERS ENDED AUGUST 27, 1999 AND AUGUST 28, 1998 (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 28, 1999. 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. Oxford Industries, Inc adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which requires certain financial statement footnote disclosure as to the Company's business segments, which are the Oxford Shirt Group, Lanier Clothes, Oxford Slacks, the Oxford Womenswear Group and corporate and other. The Shirt Group operations encompass dress and sport shirts, and a broad range of men's and boys' sportswear. 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 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 Quarters ended August 27, 1999 and August 28, 1998 (unaudited) Oxford Oxford Shirt Lanier Oxford Womenswear Corporate $ in thousand Group Clothes Slacks Group and other Total 2000 Sales $61,305 $35,949 $23,327 $65,117 $39 $185,737 Depreciation and amortization 579 439 264 547 235 2,064 Operating profit 4,768 2,451 1,253 2,662 (2,602) 8,532 Interest expense, net 880 Earnings before taxes 7,652 Assets 108,348 102,017 39,863 88,594 (9,862) 328,960 Purchase of property, plant and equipment 672 191 248 88 128 1,327 1999 Sales $88,881 $43,856 $26,894 $38,536 $439 $198,606 Depreciation and amortization 757 483 270 123 268 1,901 Operating profit 8,261 3,075 2,174 557 (3,537) 10,530 Interest expense, net 749 Earnings before taxes 9,781 Assets 161,135 107,138 44,875 46,900 (23,822) 336,226 Purchase of property, plant and equipment 1,041 752 104 121 206 2,224 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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. FIRST QUARTER FIRST QUARTER FY 2000 FY 1999 CHANGE $000's % $000's % $000's % ------- ------ -------- ------- ------- ------ Net sales 185,737 100.0% 198,606 100.0% (12,869) -6.5% Cost of goods sold 152,037 81.9% 158,574 79.8% (6,537) -4.1% Gross profit 33,700 18.1% 40,032 20.2% (6,332) -15.8% Selling,general & admin 25,168 13.6% 29,502 14.9% (4,334) -14.7% Operating income 8,532 4.6% 10,530 5.3% (1,998) -19.0% Interest 880 0.5% 749 0.4% 131 17.5% Earnings before income 7,652 4.1% 9,781 4.9% (2,129) -21.8% Income taxes 2,908 1.6% 3,815 1.9% (907) -23.8% Net earnings 4,744 2.6% 5,966 3.0% (1,222) -20.5% Effective with the Company's 1999 fiscal year, the Company adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information", as disclosed in footnote 4. All data with respect to the Company's specific segments included within "Management Discussion and Analysis" is presented before applicable intercompany eliminations. FIRST QUARTER FIRST QUARTER FY 2000 FY 1999 CHANGE Net Sales ($ In thousands) $000's % $000's % $000's % ------ ------ ------- ----- ------ ------ Oxford Shirt Group 61,305 33.0% 88,881 44.8% (27,576) -31.0% Lanier Clothes 35,949 19.4% 43,856 22.1% (7,907) -18.0% Oxford Slacks 23,327 12.6% 26,894 13.5% (3,567) -13.3% Oxford Womenswear Group 65,117 35.0% 38,536 19.4% 26,581 69.0% Corporate and Other 39 0.0% 439 0.2% (400) -91.1% ------ ----- ------ ----- ------- ------ Total Net Sales 185,737 100.0% 198,606 100.0% (12,869) -6.5% FIRST QUARTER FIRST QUARTER FY 2000 FY 1999 CHANGE Operating Income ($ In thousands) $000's %Sales $000's %Sales $000's %Sales ------ ------- ------ ------ ------ ------ Oxford Shirt Group 4,768 7.8% 8,261 9.3% (3,493) -42.3% Lanier Clothes 2,451 6.8% 3,075 7.0% (624) -20.3% Oxford Slacks 1,253 5.4% 2,174 8.1% (921) -42.4% Oxford Womenswear Group 2,662 4.1% 557 1.4% 2,105 377.9% Total Company Net sales decreased 6.5% from the first quarter of the prior year. Although unit sales increased 12.3%, a 16.7% decrease in the average unit selling price contributed to the overall dollar sales decline. The sales decrease was due primarily to the phase out of Polo for Boys and lower than planned shipments of private label apparel during the quarter. Cost of goods sold increased to 81.9% of net sales in the current quarter from 79.8% in the prior year. The shift in sales mix caused by the loss of Polo with its higher gross margin and the addition of Next Day with its lower gross margin was the primary cause for the relative increase in cost of goods sold. Gross margin was also negatively impacted by continued underabsorbed costs on several offshore manufacturing start-ups and plant expansions initiated last year. This underabsorption is expected to diminish in subsequent quarters as these plants emerge from the start-up phase and begin to contribute to profitability. Selling, general and administrative (S,G&A) decreased both in absolute terms and as a percent of net sales. The decline is attributed to the absence of Polo with its higher S,G&A expense levels and the addition of Next Day with its lower S,G&A expense levels. Interest expense increased from 0.4% of net sales in the prior year to 0.5% of net sales in the current year. The Company's effective tax rate was 39.0% in the prior year and 38.0% in the current year and does not differ significantly from the Company's statutory rates. Segment Results Oxford Shirt Group Sales for the Oxford Shirt Group decreased 31.0% to $61,305,000 due primarily to the absence of the Polo for Boys business. Average unit selling price declined 4.6% and unit sales decreased 27.8%. Oxford Shirtings and Tommy Hilfiger Dress Shirts posted sales declines. Tommy Hilfiger Golf had a sales gain and OxSport and Ely & Walker were essentially flat. Profitability was significantly impacted by the loss of Polo. Operating profit declined 42.3% to $4,768,000 or 7.8% of net sales. Underabsorbed manufacturing costs at the new plants in Mexico and Honduras also contributed to the earnings shortfall. Operating expenses declined both in absolute terms and as a percentage of net sales. Lanier Clothes Lanier Clothes reported first quarter sales of $35,949,000 down 18.0% from last year's total of $43,856,000. For the group, unit sales decreased 14.9% and the average unit selling price decreased 3.7%. The sales decline was concentrated in the private label divisions, particularly among the direct mail and national chain customers. Branded sales were up, led by the Nautica Tailored Clothing division. Group operating profit declined 20.3% to $2,451,000 from $3,075,000 last year. Operating expenses decreased but were a higher percentage of sales due to the sales decline. Start-up costs for the new plant in Honduras also hurt profitability. Operating margin declined to 6.8% from 7.0% last year. Oxford Slacks Group Oxford Slacks posted a first quarter sales decline of $3,567,000 or 13.3% to $23,327,000. This decline was the result of an 11.0% decrease in the number of units shipped and a 2.5% decrease in the average unit selling price. Weaknesses in the Specialty Catalog, Young Men's and Mature Men's divisions were responsible for the sales decline. Group operating profit decreased by 42.4% to $1,253,000 for the quarter. Profitability was negatively impacted by the sales decline and start-up expenses for the new plant in the Dominican Republic. Operating margin declined to 5.4% from 8.1% last year. Oxford Womenswear Group First quarter net sales for the Oxford Womenswear Group increased 69.0% to $65,117,000. Unit sales increased 66.3% and average unit selling price increased 1.6%. Though a majority of the sales gain was attributable to the acquisition of Next Day Apparel, sales excluding Next Day increased by 8.0% for the quarter. The Sportswear Separates and Sportswear Collections divisions posted sales gains. Group operating profit increased 377.9% to $2,662,000 or 4.1% of net sales. The group continues to benefit from the leveraging of expenses over a higher sales base. FUTURE OPERATING RESULTS Last year's record sales and earnings will make for another difficult quarterly comparison. The Company expects second quarter sales and earnings declines comparable to those in the first quarter. The Company remains optimistic that more favorable quarterly comparisons in the second half, beginning in December, are achievable. LIQUIDITY AND CAPITAL RESOURCES Operating Activities Operating activities used $1,932,000 in the first quarter of the current year and $28,088,000 in the same period of the prior year. The primary factors contributing to the change in the amount of funds used was a smaller increase in receivables in the current year, and a decrease in inventory in the current year compared to a slight increase in the prior year offset by a larger decrease in trade payables than in the prior year. Investing Activities Investing activities used $2,137,000 in the first quarter of the prior year and $1,268,000 in the first quarter of the current year. The change in investing activities was due to a slight decrease in the purchase of property, plant and equipment. Financing Activities Financing activities generated $2,072,000 in the first quarter of the current year and $24,328,000 in the comparable period of the prior year. The primary factors contributing to this change in the funds generated was a smaller increase in short-term borrowing in the current year, slightly offset by decreased amounts used to purchase and retire common stock. On October 4, 1999 the Company's Board of Directors declared a cash dividend of $0.21 per share, payable on November 27, 1999 to shareholders of record on November 15, 1999. During the quarter, the Company purchased and retired 225,000 shares of the Company's common stock acquired in the open market. Working Capital Working capital declined from $164,447,000 at the end of the first quarter of the prior year to $154,734,000 at the end of the 1999 fiscal year and decreased to $149,981,000 at the end of the first quarter of the current year. The ratio of current assets to current liabilities was 2.3 at the end of the first quarter of the prior year, 2.2 at the end of the 1999 fiscal year and 2.1 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, 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 August 27, 1999 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 27, 1999, $52,000,000 was in use under these lines, of which $40,000,000 was long-term. In addition, the Company has $226,500,000 in uncommitted lines of credit, of which $128,500,000 is reserved exclusively for letters of credit. The Company pays no commitment fees for these available lines of credit. On August 27, 1999, $30,500,000 was in use under these lines of credit. Maximum borrowings from all these sources during the current year were $82,500,000 of which $40,000,000 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. 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. YEAR 2000 UPDATE The Company is continuing to assess 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 primary information systems have been tested, and non-compliant software or technology has been modified or replaced. The Company is continuing to survey 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. (As the Company adds new customers and suppliers constantly, this portion of the review will be on-going.) The company also continues to evaluate, test, or replace all secondary systems (e.g. alarm systems, computer controlled equipment). While the Company currently believes it will be able to modify or replace all 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 the Company to minimize the risks of any unresolved Year 2000 problems on its 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, since the inception of the project in 1996 to its completion, to be approximately $1,600,000. These costs are being expensed as incurred. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements included herein contain forward-looking statements with respect to anticipated future results, which are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results. These risks and uncertainties include, but are not 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 28, 1999. 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 23, 1999 covering the Company's long term note due February 19, 2001. 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 27, 1999. 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 7, 1999 Ben B. Blount, Jr. --------------- Chief Financial Officer