3
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 27, 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
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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
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(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 4, 1999
- --------------------------- ----------------------------
Common Stock, $1 par value 8,290,008
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
- -----------------------------
OXFORD INDUSTRIES, INC
CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS AND QUARTERS ENDED NOVEMBER 27, 1998 AND NOVEMBER 28, 1997
(UNAUDITED)
Six Months Ended Quarter Ended
------------------------- ------------------------
$ in thousands except November 27, November 28, November 27, November 28,
per share amounts 1998 1997 1998 1997
------------ ----------- ------------ -----------
Net Sales $431,127 $401,304 $232,521 $208,062
Costs and Expenses:
Cost of goods sold 347,420 322,980 188,846 166,383
Selling, general and
administrative 58,514 54,701 29,011 27,906
Interest 2,231 1,999 1,482 1,018
------- ------- ------- -------
Total Costs and
Expenses 408,165 379,680 219,339 195,307
------- ------- ------- -------
Earnings Before Income
Taxes 22,962 21,624 13,182 12,755
Income Taxes 8,955 8,433 5,141 4,974
------- ------- ------- -------
Net Earnings $ 14,007 $13,191 $ 8,041 $ 7,781
======== ======= ======= =======
Basic Earnings Per
Common Share $1.63 $1.49 $0.95 $0.88
======= ======= ======= =======
Diluted Earnings Per
Common Share $1.61 $1.47 $0.94 $0.87
======= ======= ======= =======
Basic Number of Shares
Outstanding 8,590,730 8,826,844 8,406,712 8,845,774
========= ========= ========= =========
Diluted Number of Shares
Outstanding 8,719,552 8,953,429 8,512,134 8,964,559
========= ========= ========= =========
Dividends Per Share $0.40 $0.40 $0.20 $0.20
========= ========= ========= =========
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 27, 1998, MAY 29, 1998 AND NOVEMBER 28, 1997
(UNAUDITED EXCEPT FOR MAY 29, 1998)
$ in thousands November 27, May 29, November 28,
- -------------- 1998 1998 1997
----------- ------- -----------
Assets
- ------
Current Assets:
Cash $ 4,042 $ 10,069 $ 3,274
Receivables 119,974 100,789 112,458
Inventories:
Finished goods 92,368 89,906 78,520
Work in process 26,873 24,330 24,102
Fabric, trim & supplies 31,985 32,472 30,801
-------- -------- --------
151,226 146,708 133,423
Prepaid expenses 15,442 13,621 12,829
-------- -------- --------
Total Current Assets 290,684 271,187 261,984
Property Plant and Equipment 38,333 35,682 34,429
Other Assets 12,048 4,621 5,164
-------- -------- --------
Total Assets $341,065 $311,490 $301,577
======== ======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
Notes payable $45,500 $11,500 $10,500
Trade accounts payable 56,437 57,105 52,539
Accrued compensation 10,492 12,020 10,891
Other accrued expenses 21,214 18,883 21,401
Dividends payable 1,658 1,765 1,771
Income taxes 1,231 - 296
Current maturities of long-
term debt 445 449 1,946
-------- -------- --------
Total Current Liabilities 136,977 101,722 99,344
Long-Term Debt, less
current maturities 41,253 41,428 41,680
Noncurrent Liabilities 4,500 4,500 4,500
Deferred Income Taxes 3,849 4,071 3,252
Stockholders' Equity:
Common stock 8,289 8,824 8,854
Additional paid in
capital 11,271 11,554 11,341
Retained earnings 134,926 139,391 132,606
-------- -------- --------
Total Stockholders' Equity 154,486 159,769 152,801
-------- -------- --------
Total Liabilities and
Stockholders' Equity $341,065 $311,490 $301,577
======== ======== ========
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 27, 1998 AND NOVEMBER 28, 1997
(UNAUDITED)
November 27, November 28,
1998 1997
Cash Flows From Operating Activities ---------------------------------
- ------------------------------------
Net earnings $ 14,007 $ 13,191
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization 4,280 3,895
Gain on sale of property, plant
and equipment (47) (48)
Changes in working capital:
Receivables (19,133) (34,687)
Inventories 9,603 16,358
Prepaid expenses (1,724) 3,251
Trade accounts payable (888) (6,985)
Accrued expenses and other current liabilities (2,709) 4,050
Income taxes payable 1,231 296
Deferred income taxes (222) 247
Other noncurrent assets (51) (33)
Net cash provided by (used in) ----------- ---------
operating activities 4,347 (465)
Cash Flows From Investing Activities
- ------------------------------------
Acquisitions (21,403) -
Purchase of property, plant and equipment (3,584) (3,320)
Proceeds from sale of property, plant and
and equipment 187 87
-------- ----------
Net cash used in investing activities (24,800) (3,233)
Cash Flows From Financing Activities
- ------------------------------------
Short-term borrowings 34,000 6,500
Payments on long-term debt (179) (948)
Proceeds from exercise of stock options 361 1,627
Purchase and retirement of common stock (16,267) -
Dividends on common stock (3,489) (3,520)
Net cash provided by -------- -------
financing activities 14,426 3,659
Net change in Cash and Cash Equivalents (6,027) (39)
Cash and Cash Equivalents at Beginning of Period 10,069 3,313
-------- -------
Cash and Cash Equivalents at End of Period $ 4,042 $ 3,274
======== =======
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
Cash paid for:
Interest $ 2,305 $ 2,064
Income taxes 8,595 6,427
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED NOVEMBER 27, 1998 AND NOVEMBER 28, 1997
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.
NET SALES
Net sales for the second quarter of the 1999 fiscal year,
which ended November 27, 1998, increased 11.8% from net sales for the
same period of the prior year. Net sales for the first six months of
the current year increased 7.4% from net sales for the same period of
the prior year.
Most of the increase in net sales for the second quarter came
from Next Day Apparel, Inc. (Next Day), whose assets were acquired at
the beginning of the quarter. The net sales increase by the Company's
ongoing operations in the second quarter was led by Lanier Clothes,
the Company's Tailored Clothing Group, where sales increases in
Nautica, Oscar de la Renta, Geoffrey Beene and Women's Tailored
Clothing were partially offset by a sales decline in private label.
The Oxford Shirt Group had higher sales with increased sales in
OxSport, the private label sport shirt division, Tommy Hilfiger Dress
Shirts, Polo/Ralph Lauren for Boys and Ely & Walker and sales
declines in Oxford Shirtings, the private label dress shirt division,
and Tommy Hilfiger Golf. The Tommy Hilfiger Golf decline was due to
the Company's decision to further restrict distribution. The
Womenswear Group generated increased sales in its Collections and
Separates divisions, offset by a sales decline in its Catalog &
Special Markets division. Oxford Slacks experienced a sales decline
primarily attributable to weak sales in the specialty catalog sector.
In the second quarter of the current year, the Company
experienced an 18.0% increase in unit volume and a decline of 5.2% in
the weighted average sales price per unit. For the first half of the
current year, the Company experienced a 9.9% increase in unit volume
and a decline of 2.0% in the weighted average sales price per unit.
The single greatest contributor to this change was the Next Day
acquisition, which is a lower cost - lower margin private label
business.
COST OF GOODS SOLD
Cost of goods sold as a percentage of net sales was 81.2% in
the second quarter of the current year and 80.0% in the second quarter
of the previous year. For the first half of the current year, cost of
goods sold as a percentage of net sales was 80.6% compared to 80.5%
for the first half of the prior year. The increase in cost of goods
sold as a percentage of net sales was due to a number of factors. The
Company began sewing operations in its new facilities in Honduras and
Mexico during the quarter. The acquisition of Next Day, while
accretive to earnings, lowered the overall gross margin of the
Company. The Company experienced some damage and disruption of six of
it facilities in the Dominican Republic and Honduras due to Hurricanes
Georges and Mitch. All six plants impacted by the hurricanes are now
back to normal operations. During the second quarter, the Company
announced the closure of its domestic sewing facility in Luverne,
Alabama. Subsequent to the end of the second quarter, the Company
announced the closure of its domestic sewing facility in Fayette,
Alabama.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (S G & A) expenses
increased by 4.0% from $27,906,000 or 13.4% of net sales in the second
quarter of the prior year to $29,011,000 or 12.5% of net sales in the
second quarter of the current year. S G & A increased by 7.0% from
$54,701,000 or 13.6% of net sales in the first half of the prior year
to $58,514,000 or 13.6% of net sales in the first half of the current
year. The largest contributor to the decreased ratio of S G & A to
net sales in the second quarter was the acquisition of Next Day with
its lower S G & A structure. Offsetting the Next Day impact somewhat
was the continued increase in licensed designer business which has an
S G & A structure more than twice the expense levels of the Company's
private label business.
INTEREST EXPENSE
Net interest expense increased by 45.6% from $1,018,000 or
0.5% of sales in the second quarter of the prior year to $1,482,000 or
0.6% of net sales in the second quarter of the current year. For the
first half of the current year, net interest expense increased by
11.6% from $1,999,000 or 0.5% of sales in the first half of the prior
year to $2,231,000 or 0.5% of net sales in the first half of the
current year. The increase in interest expense was primarily due to
higher borrowings for the acquisition of Next Day and repurchase of
the Company's common stock.
INCOME TAXES
The Company's effective tax rate was 39.0% in the second
quarter and first half of both the current year and the previous year
and does not differ significantly from the Company's statutory rate.
FUTURE OPERATING RESULTS
The Company anticipates continued challenging conditions in
the apparel sector where a highly promotional environment will keep
pressure on operating margins. The Company will continue to invest in
its strategic initiatives in marketing and manufacturing. Barring any
worsening of business conditions, the Company expects a moderate
increase in sales and earnings compared to last year's second half.
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 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
will not materially impact the Company's financial condition or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Operating activities generated $4,347,000 in the first half
of the current year and used $465,000 in the first half of the prior
year. The primary factors contributing to the change in the amount of
funds generated was a smaller increase in receivables than in the
prior year slightly offset by a smaller decrease in inventory than in
the prior year.
INVESTING ACTIVITIES
Investing activities used $24,800,000 in the first half of
the current year and used $3,233,000 in the first half of the prior
year. The primary factors contributing to the change in the use of
funds was the acquisition of the assets of Next Day Apparel, Inc.
FINANCING ACTIVITIES
Financing activities generated $14,426,000 in the first half
of the current year and $3,659,000 in the first half of the previous
year. The primary factors contributing to this change was increased
short-term borrowings somewhat offset by the purchase and retirement
of the Company's common stock. The increase in short-term borrowing
was primarily due to the acquisition of Next Day and the purchase of
Company stock.
On January 4, 1999, the Company's Board of Directors declared a
cash dividend of $.21 per share payable on February 27, 1999 to
shareholders of record on February 12, 1999. This is a 5% increase
from the previous quarterly dividend of $.20 per share.
During the first half, the Company purchased on the open market
and retired 550,000 shares of the Company's common stock. Subsequent
to the end of the second quarter up to January 4, 1999, the Company
purchased on the open market and retired 80,000 shares of the
Company's common stock.
During the first half, the Company issued 18,920 shares of the
Company's common stock in conjunction with the Company's employee
stock option plans.
WORKING CAPITAL
Working capital increased from $162,640,000 at the end of the
second quarter of the prior year to $169,465,000 at the end of the
1998 fiscal year and decreased to $153,707,000 at the end of the
second quarter of the current year. The ratio of current assets to
current liabilities was 2.6 at the end of the second quarter of the
prior year, 2.7 at the end of the prior fiscal year, and 2.1 at the
end of the second 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 November 27, 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 November 27, 1998, $52,000,000 was in use under these
lines, of which $40,000,000 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 November 27,
1998, $33,500,000 was in use under these lines of credit. Maximum
borrowings from all these sources during the current year were
$108,500,000 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.
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.
---------
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
On September 2, 1998, The Registrant filed a report on Form 8-K.
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: January 7, 1999 Ben B. Blount, Jr.
--------------- Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-28-1999
<PERIOD-END> NOV-27-1998
<CASH> 4,042
<SECURITIES> 0
<RECEIVABLES> 124,662
<ALLOWANCES> 4,688
<INVENTORY> 151,226
<CURRENT-ASSETS> 290,684
<PP&E> 114,934
<DEPRECIATION> 76,601
<TOTAL-ASSETS> 341,065
<CURRENT-LIABILITIES> 136,977
<BONDS> 0
0
0
<COMMON> 8,289
<OTHER-SE> 146,197
<TOTAL-LIABILITY-AND-EQUITY> 341,065
<SALES> 431,127
<TOTAL-REVENUES> 431,127
<CGS> 347,420
<TOTAL-COSTS> 347,420
<OTHER-EXPENSES> 58,514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,231
<INCOME-PRETAX> 22,962
<INCOME-TAX> 8,955
<INCOME-CONTINUING> 14,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,007
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.61
</TABLE>
OXFORD INDUSTRIES, INC.
222 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(404) 659-2424
January 7, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Document Control - EDGAR
Re: Oxford Industries, Inc.
1999 Second Quarter Form 10-Q
-----------------------------
Ladies and Gentlemen:
Enclosed for filing by Oxford Industries, Inc. (the
"Company") by direct transmission is the Company's Form 10-Q for
the fiscal quarter ended November 27, 1998.
One complete copy of this Report is being mailed today to
the New York Stock Exchange, on which the common stock of the
Company is listed.
Please direct any questions or comments to the attention of
the undersigned.
Very Truly Yours,
OXFORD INDUSTRIES, INC.
/s/Ben B. Blount, JR.
---------------------
Ben B. Blount, Jr.
Chief Financial Officer
Enclosures
cc: New York Stock Exchange
