Exhibit 13
SELECTED FINANCIAL DATA FOR ANNUAL REPORT
OXFORD INDUSTRIES, INC.
Selected Financial Data
<TABLE>
<S> <C> <C> <C> <C> <C>
$ and shares in thousands, except per share amounts
Year Ended: JUNE 2, 2000 MAY 28, 2000 MAY 29, 2000 MAY 30, 1998 MAY 31, 1996
Net sales $839,533 $862,435 $774,518 $703,195 $664,443
Cost of goods sold 685,841 698,170 619,690 566,182 548,612
Selling, general and
administrative expenses 112,056 116,284 111,041 100,691 101,617
Provision for environmental
Remediation - - - - 4,500
Interest, net 3,827 4,713 3,421 4,114 6,057
Earnings before income taxes 37,809 43,268 40,366 32,208 3,657
Income taxes 14,368 16,875 15,743 12,561 1,463
Net earnings 23,441 26,393 24,623 19,647 2,194
Basic earnings per common
Share 3.04 3.15 2.79 2.25 0.25
Basic number of shares
outstanding 7,718 8,369 8,829 8,744 8,749
Diluted earnings per common
Share 3.02 3.11 2.75 2.23 0.25
Diluted number of shares
outstanding 7,751 8,477 8,957 8,816 8,838
Dividends 6,444 6,801 7,063 6,988 7,007
Dividends per share 0.84 0.82 0.80 0.80 0.80
Total assets 336,566 335,322 311,490 287,117 279,103
Long-term obligations 40,513 40,689 41,428 41,790 45,051
Stockholders' equity 164,314 154,351 159,769 141,517 128,959
Capital expenditures 5,927 7,063 8,801 7,622 8,192
Book value per share at
year-end 21.48 19.46 18.11 16.12 14.65
Return on average
stockholders' equity 14.7% 16.8% 16.3% 14.5% 1.7%
Return on average total assets 7.0% 8.2% 8.2% 6.9% 0.7%
</TABLE>
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. FY 2000 included a 14 week fourth quarter
and the total year contained 53 weeks. FY 1999 and 1998 included a 13 week
fourth quarter and both years contained 52 weeks.
FISCAL YEARS
PERCENT OF SALES PERCENT CHANGE
2000 1999 1998 99-00 98-99
Net Sales 100.0% 100.0% 100.0% -2.7% 11.4%
Cost of Goods Sold 81.7% 81.0% 80.0% -1.8% 12.7%
Gross Profit 18.3% 19.0% 20.0% -6.4% 6.1%
Selling, general and
administrative 13.3% 13.5% 14.3% -3.6% 4.7%
Operating income 5.0% 5.6% 5.7% -13.2% 9.6%
Interest, net 0.5% 0.5% 0.4% -18.8% 37.8%
Earnings before income taxes 4.5% 5.0% 5.2% -12.6% 7.2%
Income taxes 1.7% 2.0% 2.0% -14.9% 7.2%
Net earnings 2.8% 3.1% 3.2% -11.2% 7.2%
Segment Definition
The Company's business segments are the Oxford Shirt Group, Lanier
Clothes, Oxford Slacks, the Oxford Womenswear Group and Corporate and
Other. The Shirt Group operations encompass dress shirts, sport shirts,
golf wear and a broad range of men and boy's 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
Womenswear Group is a producer of a broad range of private label women's
sportswear. Corporate and other includes the Company's corporate offices,
transportation and logistics 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 K of Notes
to Consolidated Financial Statements.
Net Sales Percent Change
$ in thousands 2000 1999 1998 99-00 98-99
Oxford Shirt Group $240,228 $313,171 $310,436 -23.3% 0.9%
Lanier Clothes 174,805 173,924 163,166 0.5% 6.6%
Oxford Slacks 99,880 100,516 117,763 -0.6% -14.6%
Oxford Womenswear Group 324,352 271,786 179,920 19.3% 51.1%
Corporate and Other 268 3,038 3,233 -91.2% -6.0%
Total Net Sales $839,533 $862,435 $774,518 -2.7% 11.4%
Operating Profit Percent Change
$ in Thousands 2000 1999 1998 99-00 98-99
Oxford Shirt Group $ 13,313 $20,455 $20,929 -34.9% -2.3%
Lanier Clothes 11,602 9,128 11,643 27.1% -21.6%
Oxford Slacks 3,931 6,811 9,215 -42.3% -26.1%
Oxford Womenswear Group 20,830 9,418 4,938 121.2% 90.7%
Corporate and Other (8,040) 2,169 (2,938) NM NM
Total Operating Profit $ 41,636 $47,981 $43,787 -13.2% 9.6%
2000 Compared to 1999
Total Company
Net sales decreased 2.7% in 2000 from 1999. The decline was due to a
9.7% decline in average selling price per unit, offset by a 7.7% increase
in the number of units shipped. Excluding the discontinued Polo for Boys
division, net sales for the year increased 7.9%. Excluding Polo the
increase was due to an 18.7% increase in the number of units shipped,
offset by a 9.2% decline in the average sales price per unit.
Cost of goods sold increased to 81.7% of net sales in 2000 from 81.0%
in 1999. The discontinued Polo for Boys and the growth in the Company's
womenswear business were primarily responsible for the shift in the sales
mix toward lower margin products. The Company sourced 89.4% of its
products offshore in 2000, compared to 85.4% in 1999.
Selling, general and administrative expenses (SG&A) expressed as a
percent of net sales declined from 13.5% to 13.3%. The discontinued Polo
for Boys and the growth in the Company's womenswear business with its lower
SG&A structure are primarily responsible for this decline.
Interest expense expressed as a percent of net sales remained constant
at 0.5% in 1999 and 2000. A decrease in weighted average borrowings was
offset by higher weighted average interest rates.
The Company's effective tax rate was 38.0% in 2000 and 39.0% in 1999
and did not differ significantly from the Company's statutory rates.
Segment Results
Oxford Shirt Group
Net sales declined 23.3% to $240,228,000. The decline was principally
the result of the loss of the Polo for Boys license. Excluding Polo for
Boys, sales increased 4.7%. SG&A expenses declined in absolute terms,
while increasing from 16.8% of net sales in 1999 to 18.0% in 2000. The
decline in SG&A was due to the discontinuation of Polo for Boys offset by
integration expenses for the new Izod Club division in the second and third
quarters and start up costs for the new DKNY Kids business in the fourth
quarter. Operating profit declined 34.9% to $13,313,000.
During the second quarter the Company acquired substantially all of
the Izod Club Golf assets and licensed the Izod Club name for men's,
women's and junior golf apparel. The Izod Club lines will continue to be
distributed through pro shops, resorts and golf specialty retailers.
During the third quarter, the Company signed a licensing agreement
with Donna Karan International to market DKNY Kids in the United States and
Canada. The fall 2000 line will be shipped by the Company.
Lanier Clothes
The tailored clothing group posted a sales increase of 0.5%. An
increase of 8.2% in the number of units shipped was offset by a 7.1%
decline in the average selling price per unit. This change is due to a
shift in product mix away from tailored suits toward dress slacks,
sportscoats and suited separates. Operating profit increased 27.1% to
$11,602,000, primarily due to improved gross margins.
During the third quarter, the Company signed a licensing agreement
with Levi Strauss & Co. to market a Slates collection of soft suitings,
tailored components and sportscoats. The line will be introduced for
Spring 2001 delivery.
Oxford Slacks
Oxford Slacks posted a 0.6% sales decline. A 3.4% decline in the
average sales price per unit was partially offset by a 2.8% increase in the
number of units shipped. Sourcing difficulties resulting from a quota
situation in the Far East severely impacted profitability. Operating
income declined 42.3% to $3,931,000.
Oxford Womenswear Group
The Oxford Womenswear Group reported a 19.3% increase in net sales.
The unit sales increase of 26.7% was slightly offset by a 5.8% decline in
the average selling price per unit. Operating income increased 121.2% to
$20,830,000. The dramatic improvement in profitability was driven by the
successful integration of the Next Day Apparel business and an outstanding
year in Sportswear Collections.
Corporate and Other
Net sales declined due to the discontinuation of the Merona royalties.
The decline in Operating Income was primarily due to the loss of royalty
income and LIFO inventory adjustments.
FUTURE OPERATING RESULTS
The highly competitive apparel market continues to benefit the
consumer, who enjoys a wide choice of apparel at virtually inflation-free
prices. This is the result of excess worldwide manufacturing capacity and
the search by manufacturers and retailers for low cost production sources
around the globe.
Uncertainties regarding the future retail environment that may affect
the Company include continued excessive retail floor space per consumer,
constant heavy discounting at the retail level, low inflation or deflation
in wholesale and retail apparel prices and continued growth in direct
importing by retailers. Legislation has passed in Congress that will grant
trade preferences to various Caribbean Basin countries and could materially
enhance the competitiveness of the Company's operations in those countries
including its operations in Costa Rica, the Dominican Republic and
Honduras.
Uncertainties about the economy and consumer spending moderate the
Company's near term growth expectations. The Company remains optimistic
about continued profitability improvement in the coming fiscal year. The
Company will continue its search for acquisitions and licenses with a focus
on high value-added private label and branded opportunities.
1999 Compared to 1998
Total Company
Net sales increased 11.4% in 1999 from 1998. The increase was due to
an 18.1% increase in the number of units shipped, offset by a 5.8% decrease
in the average selling price per unit. The acquisition of Next Day
Apparel, Inc. at the beginning of the second quarter was a major
contributor to both the increase in units shipped and the decline in the
average selling price per unit as Next Day's selling price per unit was
less than the Company's average.
Cost of goods sold increased to 81.0% of net sales in 1999 from 80.0%
in 1998. This increase was due to a shift in product mix, start up costs
for new offshore manufacturing capacity and higher markdowns. The Company
produced 85.4% of its products offshore in 1999, compared to 79.7% in 1998.
Selling general and administrative expenses expressed as a percent of
net sales declined to 13.5% in 1999 from 14.3% in 1998. In addition to
ongoing expense control initiatives, Next Day Apparel and the growth in the
Company's lower expense private label business facilitated the decline.
Interest expense expressed as a percent of net sales increased to 0.5%
in 1999 from 0.4% in 1998. This increase was due to increased borrowings
resulting from the Next Day acquisition and the repurchase of 922,520
shares of the Company's common stock.
The Company's effective tax rate was 39.0% in 1999 and 1998 and did
not differ significantly from the Company's statutory rates.
Segment Results
Oxford Shirt Group
Net sales for the Oxford Shirt Group increased 0.9% to $313,171,000
for the fiscal year. This increase was the result of a 1.3% increase in
the average selling price, offset by a 0.4% decrease in the number of units
shipped. Operating profit declined 2.3% to $20,455,000 or 6.5% of net
sales. Margins were negatively impacted by unusually high markdowns from
the discontinuation of the Polo/Ralph Lauren for Boys business.
Manufacturing profitability was hurt by storm disruption from Hurricane
Mitch, start-up costs for new plants in Mexico and Honduras, and the
closing of a domestic sewing plant in Georgia. These expenditures were
partially offset by a moderate decrease in operating expenses.
Lanier Clothes
The tailored clothing group posted a sales increase of $10,758,000 or
6.6% to $173,924,000. This increase was the result of a 7.4% increase in
the number of units shipped offset by a 0.8% decrease in the average sales
price per unit. Group operating profit decreased 21.6% to $9,128,000 for
the year due primarily to the closure of a domestic sewing facility and the
establishment of a new plant in Honduras. The operating margin was
negatively impacted by increased markdowns and advertising expenses
associated with growing the new branded businesses. Operating margin for
the group declined to 5.2% of sales from 7.1% last year.
Oxford Slacks
Oxford Slacks suffered a sales decline of $17,247,000 or 14.6% to
$100,516,000 for the year. This decline is the result of a 10.4% decline
in the number of units shipped and a 4.8% decline in the average sales
price per unit. Group operating profit decreased $2,404,000 or 26.1% to
$6,811,000. The sales decline, closing of one domestic sewing plant and
the opening of a new manufacturing facility in the Dominican Republic were
responsible for the decrease in profitability. Operating margin declined
to 6.8% of net sales from 7.8% last year.
Oxford Womenswear Group
The Oxford Womenswear Group sales increased $91,866,000 or 51.1% to
$271,786,000 for the year. This increase was due to a 44.1% increase in
the number of units shipped and a 5.4% increase in the average sales price
per unit. Omitting the second quarter acquisition of Next Day Apparel, the
group posted a 14.1% increase in the number of units shipped and a 1.9%
increase in the average sales price per unit. Operating profit for the
Womenswear Group increased $4,480,000 or 90.7% over last year to
$9,418,000. Operating margin improved to 3.5% of sales from 2.7% last year
despite markdowns and reserve accruals required to bring Next Day in line
with Company standards.
LIQUIDITY AND CAPITAL RESOURCES
2000 Compared to 1999
Operating activities generated $34,618,000 in 2000 and $39,493,000 in
1999. The primary factors contributing to this decline were decreased net
earnings and increased inventory offset by a decline in receivables and an
increase in payables.
Investing activities used $8,681,000 in 2000 and $27,267,000 in 1999.
The primary difference was the acquisition of Next Day Apparel, Inc. in the
prior year.
Financing activities used $28,389,000 in 2000 and $11,218,000 in 1999.
The primary differences were the reduction in short-term borrowings in the
current year offset by the decreased purchase and retirement of common
stock.
The Company owns foreign manufacturing facilities and may acquire or
build others in the future. The functional currency for these facilities
is the U.S. dollar. Consequently, the amount of monetary assets and
liabilities subject to exchange rate risk is immaterial.
On July 10, 2000, the Company's Board of Directors declared a cash
dividend of $0.21 per share payable on September 2, 2000 to shareholders of
record on August 15, 2000.
During 2000, the Company purchased and retired 296,500 shares of the
Company's common stock acquired on the open markets and in negotiated
transactions.
1999 Compared to 1998
Operating activities generated $39,493,000 in 1999 and $16,157,000 in
1998. The primary factors contributing to this increase were a smaller
increase in receivables, and a larger decrease in inventory (net of
acquisition) than in the prior year in addition to an increase in trade
payables compared to a decrease in 1998.
Investing activities used $27,267,000 in 1999 compared to $7,842,000
in 1998. This increase was primarily due to the acquisition (asset
purchase) of Next Day Apparel, Inc. completed August 31, 1998.
Financing activities used $11,218,000 in 1999 and $1,559,000 in 1998.
The primary difference was due to increased borrowings offset by the
purchase and retirement of the Company's common stock.
During 1999, the Company purchased and retired 922,520 shares of the
Company's common stock acquired on the open market and in negotiated
transactions.
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 June
2,2000, 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 June 2,2000, $52,000,000 was
in use under these lines, of which $40,000,000 was long-term. In addition,
the Company has $231,500,000 in uncommitted lines of credit, of which
$143,500,000 is reserved exclusively for letters of credit. The Company
pays no commitment fees for these available lines of credit. On June 2,
2000, $6,500,000 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 in 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 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 of this Annual Report.
Oxford Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
$ in thousands, except share amounts June 2, 2000 May 28, 1999
Assets
Current Assets:
Cash and cash equivalents $ 8,625 $ 11,077
Receivables, less allowance for
doubtful accounts of $3,363 in 2000 and
$3,659 in 1999 112,867 114,706
Inventories 153,237 146,928
Prepaid expenses 12,826 13,791
------- -------
Total Current Assets 287,555 286,502
Property, Plant and Equipment, Net 37,107 37,347
Other Assets, Net 11,904 11,473
------- -------
Total Assets $336,566 $335,322
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $18,500 $33,000
Trade accounts payable 68,421 61,397
Accrued compensation 12,026 12,897
Other accrued expenses 22,713 22,429
Dividends payable 1,607 1,694
Income taxes payable 1,148 -
Current maturities of long-term debt 205 351
------- ------
Total Current Liabilities 124,620 131,768
Long-Term Debt, less current maturities 40,513 40,689
Noncurrent Liabilities 4,500 4,500
Deferred Income Taxes 2,619 4,014
Commitments and Contingencies (Note E)
Stockholders' Equity:
Common stock* 7,651 7,932
Additional paid-in capital 11,309 11,244
Retained earnings 145,354 135,175
------- --------
Total Stockholders' Equity 164,314 154,351
------- -------
Total Liabilities and Stockholders' Equity $336,566 $335,322
======== ========
* Par value $1 per share; authorized 30,000,000 common shares; issued and
outstanding shares: 7,651,115 in 2000 and 7,932,059 in 1999.
Par value $1 per share; authorized 30,000,000 preferred shares; none
outstanding.
See notes to consolidated financial statements.
Oxford Industries, Inc. and Subsidiaries
Consolidated Statements of Earnings
Year Ended
$ in thousands, except June 2, 2000 May 28, 1999 May 29, 1998
per share amounts ------------ ------------ ------------
Net Sales $839,533 $862,435 $774,518
Costs and Expenses:
Cost of goods sold 685,841 698,170 619,690
Selling, general and administrative 112,056 116,284 111,041
Interest, net 3,827 4,713 3,421
------- ------- -------
801,724 819,167 734,152
Earnings Before Income Taxes 37,809 43,268 40,366
Income Taxes 14,368 16,875 15,743
-------- -------- --------
Net Earnings $ 23,441 $ 26,393 $ 24,623
======== ======== ========
Basic Earnings Per Common Share $3.04 $3.15 $2.79
====== ===== =====
Diluted Earnings Per Common Share $3.02 $3.11 $2.75
====== ===== =====
See notes to consolidated financial statements.
Oxford Industries, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Additional
$ in thousands, Common Paid-In Retained
except per share amounts Stock Capital Earnings Total
Balance, May 30, 1997 $8,780 $9,554 $123,183 $141,517
Net earnings - - 24,623 24,623
Exercise of stock options 85 2,052 (232) 1,905
Purchase and retirement
of common stock (41) (52) (1,120) (1,213)
Cash dividends, $.80
per share - - (7,063) (7,063)
--------- --------- --------- ---------
Balance, May 29, 1998 $ 8,824 $ 11,554 $139,391 $159,769
Net earnings - - 26,393 26,393
Exercise of stock options 31 777 (100) 708
Purchase and retirement
of common stock (923) (1,087) (23,708) (25,718)
Cash dividends, $.82
per share - - (6,801) (6,801)
--------- --------- --------- ---------
Balance, May 28, 1999 $7,932 $11,244 $135,175 $154,351
Net earnings - - 23,441 23,441
Exercise of stock options 16 480 (182) 314
Purchase and retirement
of common stock (297) (415) (6,636) (7,348)
Cash dividends, $.84
per share - - (6,444) (6,444)
-------- -------- -------- --------
Balance, June 2, 2000 $7,651 $11,309 $145,354 $164,314
======== ======== ======== ========
See notes to consolidated financial statements.
Oxford Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
June 2, May 28, May 29,
$ in thousands Year ended: 2000 1999 1998
------- ------- -------
Cash Flows from Operating Activities:
Net earnings $23,441 $26,393 $24,623
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities
Depreciation and amortization 9,393 8,933 8,107
Gain on sale of property, plant
and equipment (182) (661) (492)
Changes in working capital:
Receivables 1,839 (13,865) (23,018)
Inventories (6,309) 13,901 3,073
Prepaid expenses 965 (73) 2,459
Trade accounts payable 7,024 4,072 (2,419)
Accrued expenses and other
current liabilities (587) 911 2,661
Income taxes payable 1,148 - -
Deferred income taxes (1,395) (57) 1,066
Other noncurrent assets (719) (61) 97
------- ------- -------
Net cash provided by
operating activities 34,618 39,493 16,157
Cash Flows from Investing Activities:
Acquisitions (3,030) (21,712) -
Purchase of property, plant
and equipment (5,927) (7,063) (8,801)
Proceeds from sale of property,
plant and equipment 276 1,508 959
------- ------- -------
Net cash used in investing
activities (8,681) (27,267) (7,842)
Cash Flows from Financing Activities:
Short-term borrowings(repayment) (14,500) 21,500 7,500
Long-term debt repayments (322) (837) (2,697)
Proceeds from exercise of stock
options 314 708 1,905
Purchase and retirement of
common stock (7,348) (25,718) (1,213)
Dividends on common stock (6,533) (6,871) (7,054)
------- ------- -------
Net cash used in
financing activities (28,389) (11,218) (1,559)
Net change in cash and cash equivalents (2,452) 1,008 6,756
Cash and cash equivalents at beginning
of period 11,077 10,069 3,313
------ ------- -------
Cash and cash equivalents at end
of period $8,625 $11,077 $ 10,069
====== ====== ======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest $ 3,900 $ 4,766 $ 3,333
Income taxes 11,242 17,011 12,074
======= ======= =======
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OXFORD INDUSTRIES, INC. AND SUBSIDIARIES
Years Ended June 2, 2000, May 28, 1999 and May 29, 1998
A. Summary of Significant Accounting Policies:
1. Principal Business Activity--Oxford Industries, Inc. (the "Company") is
engaged in the design, manufacture and sale of consumer apparel for men,
women and children. Principal markets for the Company are customers
located primarily in the United States. Company-owned manufacturing
facilities are located primarily in the southeastern United States, Central
America and Asia. In addition, the Company uses foreign and domestic
contractors for other sources of production.
2. Principles of Consolidation--The consolidated financial statements
include the accounts of the Company and all of its subsidiaries. All
material intercompany balances, transactions and profits have been
eliminated.
3. Fiscal Period--The Company's fiscal year ends on the Friday nearest May
31. The fiscal year includes operations for a 53-week period in 2000 and a
52-week period in 1999 and 1998.
4. Revenue Recognition--Revenue is recognized when goods are shipped to
customers.
5. Statement of Cash Flows--The Company considers cash equivalents to be
short-term investments with original maturities of three months or less.
6. Inventories--Inventories are principally stated at the lower of cost
(last-in, first-out method, "LIFO") or market.
7. Property, Plant and Equipment--Depreciation and amortization of
property, plant and equipment are provided on both straight-line (primarily
buildings) and accelerated methods over the estimated useful lives of the
assets as follows:
---------------------------------------------------------------------------
Buildings and improvements 7-40 years
Machinery and equipment 3-15 years
Office fixtures and equipment 3-10 years
Software 4 years
Autos and trucks 2-6 years
Leasehold improvements Lesser of remaining life of the asset or life
of lease
---------------------------------------------------------------------------
8. Income Taxes-- The Company recognizes deferred tax liabilities and
assets based on the difference between financial and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
9. Financial Instruments--The fair values of financial instruments
closely approximate their carrying values.
10. Use of Estimates--The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
11. Change in Accounting Principles- In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards "SFAS" No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value.
Management does not expect SFAS No. 133 to have a significant impact on the
Company's financial condition or results of operations. The Company will
adopt this in its fiscal 2002 financial statements.
B. Inventories:
The components of inventories are summarized as follows:
$ in thousands June 2, 2000 May 28, 1999
Finished goods $ 90,961 $92,195
Work in process 25,903 24,579
Fabric 28,255 23,280
Trim and supplies 8,118 6,874
-------- --------
$ 153,237 $146,928
======= =======
The excess of replacement cost over the value of inventories based
upon the LIFO method was $37,154,000 at June 2, 2000 and $37,367,000 at May
28, 1999. Changes in the LIFO reserve increased earnings $0.02 per share
basic in 2000 and $0.13 per share basic in 1999.
During fiscal 2000, inventory quantities were reduced, which resulted
in a liquidation of LIFO inventory layers carried at lower costs which
prevailed in prior years. The effect of the liquidation was to decrease
cost of goods sold by approximately $147,000 and to increase net earnings
by $91,000 or $0.01 per share basic. During fiscal 1999, the effect of the
liquidation was to decrease cost of goods sold by approximately $1,174,000
and to increase net earnings by $716,000 or $0.09 per share basic. During
fiscal 1998, the effect of the liquidation was to decrease cost of goods
sold by approximately $591,000 and to increase net earnings by $361,000 or
$0.04 per share basic.
C. Property, Plant and Equipment:
Property, plant and equipment, carried at cost, are summarized as follows:
$ in thousands June 2, 2000 May 28, 1999
Land $ 2,256 $ 2,257
Buildings 29,250 29,238
Machinery and equipment 75,207 74,791
Leasehold improvements 7,604 5,641
-------- -------
114,317 111,927
Less accumulated depreciation
and amortization 77,210 74,580
------- -------
$37,107 $37,347
======== =======
D. Notes Payable and Long-Term Debt:
The Company had available for its use lines of credit with several lenders
aggregating $52,000,000 at June 2, 2000. The Company has agreed to pay
commitment fees for these available lines of credit. At June 2, 2000,
$52,000,000 was borrowed under these lines at various rates ranging from
6.8875% to 7.1%. Of the $52,000,000, $40,000,000 is long-term debt. In
addition, the Company has $231,500,000 in uncommitted lines of credit, of
which $143,500,000 is reserved exclusively for letters of credit. The
Company pays no commitment fees for these available lines of credit. At
June 2, 2000, $6,500,000 was borrowed under these lines of credit at 6.99%.
The weighted average interest rate on short-term borrowings during fiscal
2000 was 6.7%.
A summary of long-term debt is as follows:
$ in thousands June 2, 2000 May 28, 1999
Note payable to bank, the rate is a
margin above bank's cost of funds,
which may fluctuate during the life
of the loan (at June 2, 2000 the
rate was 6.8875%); due in August 2001 $ 40,000 $ 40,000
Industrial revenue bonds, mortgage
notes and capital leases at fixed rates
of 6.1% to 7.0% and a variable rate of
79.5% of prime (prime was 9.5% at
June 2, 2000); due in varying
installments to 2004 718 1,040
------- -------
40,718 41,040
Less current maturities 205 351
------ ------
$40,513 $40,689
====== =======
Property, plant and equipment with an aggregate carrying amount at
June 2, 2000 of approximately $205,000 are pledged as collateral on the
industrial revenue bonds.
The aggregate maturities of long-term debt are as follows:
$ in thousands
Fiscal year
2001 $ 205
2002 40,206
2003 187
2004 120
------
$40,718
=======
E. Commitments and Contingencies:
The Company has operating lease agreements for buildings, sales offices and
equipment with varying terms to 2008. The total rent expense under all
leases was approximately $6,002,000 in 2000, $5,897,000 in 1999 and
$4,486,000 in 1998.
The aggregate minimum rental commitments for all noncancelable
operating leases with terms of more than one year are as follows:
$ in thousands
Fiscal year:
2001 $ 4,589
2002 3,717
2003 3,092
2004 1,865
2005 1,469
Thereafter 3,084
-------
$17,816
=======
The Company is also obligated under certain apparel license and design
agreements to make future minimum payments as follows:
$ in thousands
Fiscal Year:
2001 $ 5,430
2002 5,098
2003 4,839
2004 1,387
-------
$16,754
=======
The Company uses letters of credit to facilitate certain apparel
purchases. The total amount of letters of credit outstanding at June 2,
2000 was approximately $64,696,000.
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.
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 groundwater and soil. Based on
advice from its environmental experts, the Company provided $4,500,000 for
this remediation in the fiscal year ended May 31, 1996.
F. Stock Options:
At June 2, 2000, 443,900 shares of common stock were reserved for
issuance under stock option plans. The options granted under the stock
option plans expire either five years or ten years from the date of grant.
Options granted vest in five annual installments. The Company has elected
as permitted under SFAS 123, "Accounting for Stock-Based Compensation," to
follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for
its employee stock options. Under APB 25, because the exercise price of the
Company's employee stock option equals the market price of the underlying
stock on the date of the grant, no compensation expense is recognized.
Pro forma information, regarding net income and income per share, is
required by SFAS 123 and has been determined as if the Company had
accounted for its associate stock option plans under the fair value method
of that statement. The fair value of these options was estimated at the
date of the grant using the Black-Scholes option pricing model with the
following assumption ranges: Risk-free interest rates between 6.51% and
5.09%, dividend yields between 4.5% and 2.4%, volatility factors between
.297 and .312, and the expected life of the options was between five and
ten years. Using this valuation model, the weighted average grant date
value of options granted during the year ended June 2, 2000, was $9.40 per
option.
The effect of applying the fair value method of SFAS 123 to the
Company's option plan does not result in net income and net income per
share that are materially different from the amounts reported in the
Company's consolidated financial statements as demonstrated below (amounts
in thousands except per share data):
2000 1999 1998
Pro forma net income $23,151 $26,154 $24,493
Pro forma earnings
per share-basic $3.00 $3.13 $2.77
Pro forma earnings
per share-diluted $2.99 $3.09 $2.73
A summary of the status of the Company's stock option plan and changes
during the years ended is presented below.
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding, beginning of year 504,740 $25 436,800 $21 541,970 $21
Granted 117,200 28 120,250 36 2,500 32
Exercised (23,000) 19 (33,320) 19 (93,510) 19
Forfeited (155,040) 28 (18,990) 22 (14,160) 20
-------- --- -------- --- -------- ---
Outstanding, end of year 443,900 $25 504,740 $25 436,800 $21
Options exercisable, end of year 132,450 219,940 131,480
The following table summarizes information about stock options outstanding
as of June 2, 2000.
Date of Number of Exericse Number Expiration
Option Grant Shares Price Exercisable Date
------------- -------- -------- ---------- -------------
Sep. 16, 1996 214,700 17.75 109,100 Sep. 16, 2001
Jan. 5, 1998 2,500 32.28 1,000 Jan. 5, 2003
Jul 13, 1998 109,250 35.66 21,850 Jul. 13, 2008
Sep. 24, 1998 2,500 30.72 500 Sep. 24, 2008
Jul. 12, 1999 114,950 27.88 0 Jul. 12, 2009
------- -------
443,900 132,450
======= =======
The Company has a Restricted Stock Plan for issuance of up to 100,000
shares of common stock. At June 2, 2000, 2,942 shares were outstanding
under this plan. The plan allows the Company to compensate its key
employees with shares of common stock containing restrictions on sale and
other restrictions in lieu of cash compensation.
G. Significant Customers:
The Company had four customers that had between 10% and 15% each of the
Company's total sales, in fiscal 2000 and between 10% and 12% in fiscal
1999. Approximately 15% of the Company's revenues in 1998 were derived from
sales to a national retail chain. Approximately 12% of the Company's
revenues in 1998 were derived from sales to another national retail chain.
The Company provides credit, in the normal course of business, to a large
number of retailers in the apparel industry. Approximately 61% of gross
accounts receivable at June 2, 2000, 60% at May 28, 1999 and 56% at May 29,
1998 were attributed to the Company's ten largest customers. The Company
performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses.
H. Retirement Programs:
The Company has retirement savings programs covering substantially all
full-time U.S. employees. If a participant decides to contribute, a
portion of the contribution is matched by the Company. Total expense under
these programs was $1,386,000 in 2000, $1,427,000 in 1999 and $1,351,000 in
1998.
I. Income Taxes:
The provision (benefit) for income taxes includes the following:
$ in thousands 2000 1999 1998
Current:
Federal $11,304 $15,623 $11,699
State 1,662 2,282 1,793
Foreign 521 764 659
------- ------ ------
13,487 18,669 14,151
Deferred 881 (1,794) 1,592
------- ------ ------
$14,368 $16,875 $15,743
==============================
Reconciliations of the U.S. federal statutory income tax rates and the
Company's effective tax rates are summarized as follows:
2000 1999 1998
Statutory rate 35.0% 35.0% 35.0%
State income taxes - net of
federal income tax benefit 2.6 2.7 3.3
Foreign 1.4 1.7 1.6
Tax credits - - (0.3)
Nondeductible expenses and other, net (1.0) (0.4) (0.6)
-------------------------------
Effective rate 38.0% 39.0% 39.0%
===============================
Deferred tax assets and liabilities as of June 2, 2000 and May 28,
1999, are comprised of the following ($ in thousands):
Deferred Tax Assets: June 2, 2000 May 28, 1999
Inventory $ 3,224 $ 4,050
Compensation 1,004 965
Group insurance - 949
Allowance for bad debts 1,286 1,400
Environmental 1,721 1,721
Deferred revenue 982 -
Other, net 1,944 2,027
------ ------
Deferred Tax Assets $10,161 $11,112
Deferred Tax Liabilities:
Depreciation - property, plant and
equipment 317 1,064
Foreign 2,816 1,906
Other, net 1,234 1,467
------ -------
Deferred Tax Liabilities 4,367 4,437
------ -------
Net Deferred Tax Asset $ 5,794 $ 6,675
====== =======
J. Equity and Earnings Per Share:
Basic earnings per share is computed based on the weighted average
number of shares of common stock outstanding of 7,717,888 in 2000 8,368,899
in 1999 and 8,828,501 in 1998. The dilution effect of stock options
outstanding during 2000, 1999 and 1998 added 33,484, 108,553 and 128,897,
respectively, to the weighted average shares outstanding for purposes of
calculating diluted earnings per share.
K. Segments
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Oxford Oxford
Shirt Lanier Oxford Womenswear Corporate
$ in thousand Group Clothes Slacks Group and other Total
2000
Sales $240,228 $174,805 $99,880 $324,352 $268 $839,533
Depreciation and amortization 2,584 1,914 1,148 2,626 1,121 9,393
Operating profit 13,313 11,602 3,931 20,830 (8,040) 41,636
Interest expense, net 3,827
Earnings before taxes 37,809
Assets 114,093 99,810 41,033 93,750 (12,120) 336,566
Purchase of property, plant and
equipment 2,006 1,195 778 653 1,295 5,927
1999
Sales $313,171 $173,924 $100,516 $271,786 $3,038 $862,435
Depreciation and amortization 2,956 2,055 1,102 1,741 1,079 8,933
Operating profit 20,455 9,128 6,811 9,418 2,169 47,981
Interest expense, net 4,713
Earnings before taxes 43,268
Assets 112,596 100,092 38,208 88,063 (3,637) 335,322
Purchase of property, plant and
equipment 2,886 2,182 744 854 397 7,063
1998
Sales $310,436 $163,166 $117,763 $179,920 $3,233 $774,518
Depreciation and amortization 3,289 1,919 1,187 622 1,090 8,107
Operating profit 20,929 11,643 9,215 4,938 (2,938) 43,787
Interest expense, net 3,421
Earnings before taxes 40,366
Assets 146,228 91,003 45,052 44,861 (15,654) 311,490
Purchase of property, plant and
Equipment 3,567 3,031 1,077 328 798 8,801
</TABLE>
---------------------------------------------------------------------------
L. Summarized Quarterly Data (Unaudited):
Following is a summary of the quarterly results of operations for the years
ended June 2, 2000, May 28, 1999 and May 29, 1998:
Fiscal Quarter
$ in thousands, except
per share amounts First Second Third Fourth Total
2000
Net sales $185,737 $219,945 $187,466 $246,385 $839,533
Gross profit 33,700 37,921 34,962 47,109 153,692
Net earnings 4,744 6,851 4,578 7,268 23,441
Basic earnings per share 0.60 0.89 0.60 0.95 3.04
Diluted earnings
per share 0.60 0.88 0.60 0.94 3.02
1999*
Net sales $198,606 $232,521 $206,027 $225,281 $862,435
Gross profit 40,032 43,675 39,976 40,582 164,265
Net earnings 5,966 8,041 6,328 6,058 26,393
Basic earnings per share 0.68 0.95 0.77 0.75 3.15
Diluted earnings
per share 0.67 0.94 0.76 0.74 3.11
1998
Net sales $193,242 $208,062 $178,677 $194,537 $774,518
Gross profit 36,645 41,679 35,520 40,984 154,828
Net earnings 5,410 7,78 5,391 6,041 24,623
Basic earnings
per share 0.61 0.88 0.61 0.69 2.79
Diluted earnings
per share 0.61 0.87 0.60 0.67 2.75
*Includes an after-tax LIFO adjustment in the fourth quarter of $1,837,687
or $0.13 per share favorable in 1999.
--------------------------------------------------------------------------
Net Sales by Product Class
The following table sets forth separately in percentages net sales by class
of similar products for each of the last three fiscal years:
2000 1999 1998
Net Sales:
Menswear 61% 68% 77%
Womenswear 39% 32% 23%
------------------------------
100% 100% 100%
==============================
Common Stock Information:
Market Price on the Quarterly Cash Dividend
New York Stock Exchange Per Share
Fiscal 2000 Fiscal 1999 Fiscal 2000 Fiscal 1999
High Low High Low
1st Quarter 29 5/8 22 3/8 37 28 1/4 .21 .20
2nd Quarter 23 7/16 20 3/16 31 26 1/4 .21 .20
3rd Quarter 21 5/16 16 29 5/8 23 .21 .21
4th Quarter 18 15/16 15 28 1/2 21 9/16 .21 .21
At the close of fiscal 2000, there were 631 stockholders of record.
Oxford Industires, Inc. and Subsidiaries
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The management of Oxford Industries, Inc. is responsible for the
integrity and objectivity of the consolidated financial statements and
other financial information presented in this report. These statements
have been prepared in conformity with accounting principles generally
accepted in the United States consistently applied and include amounts
based on the best estimates and judgments of management.
Oxford maintains a system of internal accounting controls designed to
provide reasonable assurance, at a reasonable cost, that assets are
safeguarded against loss or unauthorized use and that the financial records
are adequate and can be relied upon to produce financial statements in
accordance with generally accepted accounting principles. The internal
control system is augmented by written policies and procedures, an internal
audit program and the selection and training of qualified personnel. This
system includes policies that require adherence to ethical business
standards and compliance with all applicable laws and regulations.
The consolidated financial statements for the years ended June 2,
2000, May 28, 1999 and May 29, 1998 have been audited by Arthur Andersen
LLP, independent public accountants. In connection with its audits, Arthur
Andersen LLP, develops and maintains an understanding of Oxford's
accounting and financial controls and conducts tests of Oxford's accounting
systems and other related procedures as it considers necessary to render an
opinion on the financial statements.
The Audit Committee of the Board of Directors, composed solely of
outside directors, meets periodically with Oxford's management, internal
auditors and independent public accountants to review matters relating to
the quality of financial reporting and internal accounting controls, and
the independent nature, extent and results of the audit effort. The
Committee recommends to the Board appointment of the independent public
accountants. Both the internal auditors and the independent public
accountants have access to the Audit Committee, with or without the
presence of management.
Ben B. Blount, Jr.
Executive Vice President-
Finance, Planning and Administration
and Chief Financial Officer
To Oxford Industries, Inc.
We have audited the accompanying consolidated balance sheets of Oxford
Industries, Inc. (a Georgia corporation) and Subsidiaries as of June 2,
2000 and May 28, 1999 and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the
period ended June 2, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Oxford
Industries, Inc. and subsidiaries as of June 2, 2000 and May 28, 1999 and
the results of their operations and their cash flows for each of the three
years in the period ended June 2, 2000 in conformity with accounting
principles generally accepted in the United States.
Atlanta, Georgia
July 14, 2000
