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 | |
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 incorporation or organization) | (I.R.S. Employer 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 |
|
Common Stock, $1 par value |
|
Table of contents
OXFORD INDUSTRIES, INC. | |
INDEX TO FORM 10-Q | |
August 30, 2002 | |
PART 1 FINANCIAL INFORMATION | Page |
Item 1 Financial Statements | |
Consolidated Statements Of Earnings | 3 |
Consolidated Balance Sheets | 4 |
Consolidated Statements of Cash Flows | 5 |
Notes to Consolidated Financial Statements | 6 |
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 |
Item 3 Quantitative and Qualitative Disclosures About Market Risk | 15 |
Item 4 Evaluation of Disclosure Controls and Procedures | 15 |
PART II OTHER INFORMATION | |
Item 6 Exhibits and Reports on Form 8-K | 15 |
Signatures and Certifications | 16 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | |||||||||
CONSOLIDATED STATEMENT OF EARNINGS | |||||||||||
QUARTERS AND NINE MONTHS ENDED MARCH 1, 2002 AND March 2, 2001 | |||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||
(UNAUDITED) | (UNAUDITED) | (UNAUDITED) | |||||||||
$ in thousands except per share amount | Quarters Ended | Nine Months Ended | |||||||||
$ in thousands except per share amounts | Quarter Ended | ||||||||||
March 1, 2002 | March 2, 2001 | March 1, 2002 | March 2, 2001 | August 30, 2002 | August 31, 2001 | ||||||
Net Sales | $149,495 | $197,404 | $485,553 | $596,641 | Net Sales | $ 172,139 | $ 179,530 | ||||
Cost of goods sold | 120,583 | 160,599 | 392,776 | 486,696 | Cost of goods sold | 133,677 | 143,210 | ||||
Gross Profit | 28,912 | 36,805 | 92,777 | 109,945 | Gross Profit | 38,462 | 36,320 | ||||
Selling, general and administrative | 26,697 | 29,224 | 84,724 | 90,040 | Selling, general and administrative | 30,968 | 31,203 | ||||
Earnings Before Interest and Taxes | 2,215 | 7,581 | 8,053 | 19,905 | Earnings Before Interest and Taxes | 7,494 | 5,117 | ||||
Interest | 26 | 1,271 | 77 | 3,627 | |||||||
Interest expense, net | Interest expense, net | 41 | 73 | ||||||||
Earnings Before Income Taxes | 2,189 | 6,310 | 7,976 | 16,278 | Earnings Before Income Taxes | 7,453 | 5,044 | ||||
Income Taxes | 832 | 2,398 | 3,031 | 6,186 | Income Taxes | 2,943 | 1,917 | ||||
Net Earnings | $1,357 | $3,912 | $4,945 | $10,092 | Net Earnings | $4,510 | $3,127 | ||||
Basic Earnings Per Common Share | $0.18 | $0.53 | $0.66 | $1.35 | Basic Earnings Per Common Share | $0.60 | $0.42 | ||||
Diluted Earnings Per Common Share | $0.18 | $0.53 | $0.66 | $1.35 | Diluted Earnings Per Common Share | $0.60 | $0.42 | ||||
Basic Number of Shares Outstanding | 7,512,635 | 7,376,783 | 7,487,040 | 7,495,370 | Basic Number of Shares Outstanding | 7,515,577 | 7,439,168 | ||||
Diluted Number of Shares Outstanding | 7,573,933 | 7,376,783 | 7,534,031 | 7,503,218 | Diluted Number of Shares Outstanding | 7,560,674 | 7,487,273 | ||||
Dividends Per Share | $0.21 | $0.21 | $0.63 | $0.63 | Dividends Per Share | $0.21 | $0.21 | ||||
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | ||||||||
MARCH 1, 2002 JUNE 1, 2001 AND MARCH 2, 2001 | ||||||||||
(UNAUDITED EXCEPT FOR JUNE 1, 2001) | ||||||||||
(UNAUDITED EXCEPT FOR MAY 31, 2002) | (UNAUDITED EXCEPT FOR MAY 31, 2002) | |||||||||
$ in thousands | $ in thousands | March 1, 2002 | June 1, 2001 | March 2, 2001 | $ in thousands | August 30, 2002 | May 31, 2002 | August 31, 2001 | Assets | Current Assets: |
Cash | $4,610 | $10,185 | $6,150 | Cash and cash equivalents | $ 6,253 | $ 17,591 | $ 6,330 | |||
Receivables | 107,363 | 50,699 | 135,989 | Receivables | 121,011 | 103,198 | 59,387 | |||
Inventories: | Inventories: | |||||||||
Finished Goods | 77,609 | 92,623 | 117,785 | Finished Goods | 57,458 | 54,382 | 91,748 | |||
Work in process | 10,625 | 22,064 | 27,490 | Work in process | 13,459 | 11,681 | 16,484 | |||
Fabric, trim & Supplies | 17,187 | 32,683 | 24,141 | Fabric, trim & Supplies | 19,103 | 18,478 | 19,483 | |||
105,421 | 147,370 | 169,416 | 90,020 | 84,541 | 127,715 | |||||
Prepaid expenses | Prepaid expenses | 12,133 | 11,416 | 9,607 | Prepaid expenses | 10,133 | 9,754 | 11,450 | ||
Total Current Assets | 229,527 | 219,670 | 321,162 | Total Current Assets | 227,417 | 215,084 | 204,882 | |||
Property, Plant and Equipment | 29,369 | 33,516 | 34,381 | |||||||
Property, Plant and Equipment, net | Property, Plant and Equipment, net | 26,079 | 27,188 | 32,151 | ||||||
Deferred Income Taxes | Deferred Income Taxes | 1,066 | - | 70 | Deferred Income Taxes | - | - | 256 | ||
Other Assets | 8,918 | 10,054 | 10,660 | |||||||
Other Assets, net | Other Assets, net | 8,216 | 8,241 | 9,468 | ||||||
Total Assets | $268,880 | $263,240 | $366,273 | Total Assets | $261,712 | $250,513 | $246,757 | Liabilities and Stockholders' Equity | Current Liabilities | |
Notes payable | $26,500 | $ - | $64,000 | Notes payable | $ 2,500 | $ - | $ - | |||
Trade accounts payable | 36,376 | 54,787 | 59,547 | Trade accounts payable | 45,666 | 43,320 | 35,928 | |||
Accrued compensation | 7,515 | 11,617 | 9,344 | Accrued compensation | 10,734 | 12,752 | 9,730 | |||
Other accrued expenses | 19,433 | 18,252 | 21,088 | Other accrued expenses | 14,860 | 12,250 | 20,541 | |||
Dividends Payable | 1,578 | 1,549 | 1,548 | Dividends Payable | 1,578 | 1,578 | 1,571 | |||
Income taxes | 1,382 | 2,924 | 994 | Income taxes payable | 2,924 | - | 1,570 | |||
Current Maturities of long-term debt | 204 | 263 | 189 | Current maturities of long-term debt | 236 | 255 | 245 | |||
Total Current Liabilities | 92,988 | 89,392 | 156,710 | Total Current Liabilities | 78,498 | 70,155 | 69,585 | |||
Long Term Debt, less current maturities | 289 | 399 | 40,483 | |||||||
Long-Term Debt, less current maturities | Long-Term Debt, less current maturities | 139 | 139 | 399 | ||||||
Noncurrent Liabilities | Noncurrent Liabilities | 4,500 | 4,500 | 4,500 | Noncurrent Liabilities | 4,500 | 4,500 | 4,500 | ||
Deferred Income Taxes | Deferred Income Taxes | - | 9 | - | Deferred Income Taxes | 423 | 518 | - | Stockholders' Equity: | |
Common Stock | 7,513 | 7,406 | 7,372 | Common Stock | 7,516 | 7,515 | 7,504 | |||
Additional paid in capital | 14,567 | 11,741 | 11,056 | Additional paid-in capital | 14,633 | 14,615 | 14,386 | |||
Retained earnings | 149,023 | 149,793 | 146,152 | Retained earnings | 156,003 | 153,071 | 150,383 | |||
Total Stockholders' equity | Total Stockholders' equity | 171,103 | 168,940 | 164,580 | Total Stockholders' equity | 178,152 | 175,201 | 172,273 | ||
Total Liabilities and Stockholders' Equity | Total Liabilities and Stockholders' Equity | $268,880 | $263,240 | $366,273 | Total Liabilities and Stockholders' Equity | $261,712 | $250,513 | $246,757 |
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | OXFORD INDUSTRIES, INC. | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
NINE MONTHS ENDED MARCH 1, 2002 AND MARCH 2, 2001 | |||||||||||
(UNAUDITED) | (UNAUDITED) | (UNAUDITED) | |||||||||
Quarter Ended | |||||||||||
$ in thousands | $ in thousands | March 1, 2002 | March 2, 2001 | $ in thousands | August 30, 2002 | August 31, 2001 | Cash Flows From Operating Activities | ||||
Net earnings | Net earnings | $4,945 | $10,092 | Net earnings | $4,510 | $3,127 | Adjustments to reconcile net earnings to | ||||
Net cash used in operating activities: | Net cash used in operating activities: | Net cash used in operating activities: | |||||||||
Depreciation and amortization | 6,445 | 6,893 | Depreciation and amortization | 1,463 | 2,158 | ||||||
Gain on sale of property, plant and equipment | 34 | (91) | (Gain)/loss on sale of property, plant and equipment | (45) | 3 | ||||||
Changes in working capital: | Changes in working capital: | Changes in working capital: | |||||||||
Receivables | (56,664) | (23,122) | Receivables | (17,813) | (8,688) | ||||||
Inventories | 41,949 | (16,179) | Inventories | (5,479) | 19,655 | ||||||
Prepaid Expenses | (1,165) | 711 | Prepaid Expenses | (346) | (858) | ||||||
Trade accounts payable | (18,411) | (8,874) | Trade accounts payable | 2,346 | (18,859) | ||||||
Accrued expenses and other current liabilities | (2,921) | (4,307) | Accrued expenses and other current liabilities | 592 | 402 | ||||||
Income taxes payable | (1,542) | (154) | Income taxes payable | 2,924 | (1,354) | ||||||
Deferred income taxes | Deferred income taxes | (627) | (181) | Deferred income taxes | (128) | 559 | |||||
Other noncurrent assets | (438) | (329) | |||||||||
Other assets | Other assets | 5 | 63 | ||||||||
Net cash used in operating activities | (28,395) | (35,541) | Net cash used in operating activities | (11,971) | (3,792) | ||||||
Cash Flows from Investing Activities | Cash Flows from Investing Activities | Cash Flows from Investing Activities | |||||||||
Purchase of property, plant and equipment | (981) | (3,306) | Purchases of property, plant and equipment | (412) | (284) | ||||||
Proceeds from sale of property, plant and equipment | 224 | 805 | Proceeds from sale of property, plant and equipment | 122 | 12 | ||||||
Net cash used in investing activities | (757) | (2,501) | Net cash used in investing activities | (290) | (272) | ||||||
Cash flows from Financing Activities | |||||||||||
Cash Flows from Financing Activities | Cash Flows from Financing Activities | ||||||||||
Short-term borrowings | 26,500 | 45,500 | Short-term borrowings | 2,500 | - | ||||||
Long-term debt | (169) | (46) | Long-term debt | (19) | (18) | ||||||
Proceeds from issuance of common stock | 1,943 | 186 | Proceeds from issuance of common stock | 20 | 1,776 | ||||||
Purchase and retirement of common stock | - | (5,314) | Dividends on common stock | (1,578) | (1,549) | ||||||
Dividends on common stock | (4,697) | (4,759) | Net cash provided by financing activities | 923 | 209 | ||||||
Net cash provided by financing activities | 23,577 | 35,567 | |||||||||
Net change in Cash and Cash Equivalents | Net change in Cash and Cash Equivalents | (5,575) | (2,475) | Net change in Cash and Cash Equivalents | (11,338) | (3,855) | |||||
Cash and Cash Equivalents at the Beginning of Period | Cash and Cash Equivalents at the Beginning of Period | 10,185 | 8,625 | Cash and Cash Equivalents at the Beginning of Period | 17,591 | 10,185 | |||||
Cash and Cash Equivalents at End of Period | $4,610 | $6,150 | |||||||||
Cash and Cash Equivalents at the End of Period | Cash and Cash Equivalents at the End of Period | $6,253 | $6,330 | ||||||||
Supplemental disclosure of Cash Flow Information | |||||||||||
Supplemental Disclosure of Cash Flow Information | Supplemental Disclosure of Cash Flow Information | ||||||||||
Cash paid for: | Cash paid (received) for: | ||||||||||
Interest, net | $ 104 | $3,347 | Interest, net | $74 | ($70) | ||||||
Income taxes | 4,018 | 6,414 | Income taxes | 43 | 2,253 |
See notes to consolidated financial statements.
OXFORD INDUSTRIES, INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
The Shirt Group operations encompass branded and private label dress and sport shirts golf and children'sbranded golf apparel. Lanier Clothes produces branded and private label suits, sportcoats,sportscoats, suit separates and dress slacks. Oxford Slacks is a producer of private label dress and casual slacks and walk shorts. The Oxford Womenswear Group is a producer of budget and moderate priced private label women's apparel.
sportswear. Corporate and otherOther is a reconciling category for reporting purposes and includes the Company's corporate offices, transportation and logistics, LIFO inventory accounting adjustments and other costs and services that are not allocated to the operating groups.
Oxford Industries, Inc. | |||||
Segment Information | |||||
(unaudited) | |||||
$ in thousands | |||||
Quarters Ended | Nine Months Ended | ||||
March 1, 2002 | March 2, 2001 | March 1, 2002 | March 2, 2001 | ||
Net Sales | |||||
Oxford Shirt Group | $40,158 | $51,895 | $139,373 | $174,174 | |
Lanier Clothes | 34,503 | 40,212 | 113,678 | 130,450 | |
Oxford Slacks | 19,060 | 22,959 | 59,522 | 75,895 | |
Oxford Womenswear Group | 55,674 | 82,271 | 172,641 | 215,866 | |
Corporate and other | 100 | 67 | 339 | 256 | |
Total | $149,495 | $197,404 | $485,553 | $596,641 |
Quarter Ended | |||
August 30, 2002 | August 31, 2001 | ||
$ in thousands | (unaudited) | (unaudited) | |
Net Sales | |||
Oxford Shirt Group | $47,173 | $54,469 | |
Lanier Clothes | 36,940 | 40,711 | |
Oxford Slacks | 21,354 | 22,002 | |
Oxford Womenswear Group | 66,599 | 62,227 | |
Corporate and other | 73 | 121 | |
Total | $172,139 | $179,530 |
Oxford Industries, Inc. | Oxford Industries, Inc. | Oxford Industries, Inc. | ||||||
Segment Information | ||||||||
(unaudited) | ||||||||
Notes to Consolidated Financial Statements (continued) | Notes to Consolidated Financial Statements (continued) | |||||||
$ in thousand | Quarters Ended | Nine Months Ended | ||||||
3. Segment information(continued) | 3. Segment information(continued) | |||||||
$ in thousands | Quarter Ended | |||||||
August 30, 2002 | August 31, 2001 | |||||||
March 1, 2002 | March 2, 2001 | March 1, 2002 | March 2, 2001 | (unaudited) | (unaudited) | |||
Depreciation and amortization | ||||||||
Oxford Shirt Group | $521 | $610 | $1,559 | $1,809 | $453 | $519 | ||
Lanier Clothes | 450 | 482 | 1,346 | 1,357 | 406 | 453 | ||
Oxford Slacks | 266 | 296 | 769 | 843 | 202 | 254 | ||
Oxford Womenswear Group | 674 | 721 | 2,052 | 2,114 | 246 | 690 | ||
Corporate and other | 228 | 261 | 719 | 770 | 156 | 242 | ||
Total | $2,139 | $2,370 | $6,445 | $6,893 | $1,463 | $2,158 | ||
EBIT | ||||||||
Earnings before interest and taxes (EBIT) | ||||||||
Oxford Shirt Group | $(599) | $(1,710) | $(1,721) | $(445) | $1,254 | $1,427 | ||
Lanier Clothes | 2,947 | 2,985 | 9,015 | 9,062 | 4,896 | 4,407 | ||
Oxford Slacks | 883 | 501 | 2,377 | 3,801 | 1,349 | 1,095 | ||
Oxford Womenswear Group | 588 | 5,457 | 4,905 | 9,887 | 3,541 | 4,036 | ||
Corporate and other | (1,604) | 348 | (6,523) | (2,400) | (3,546) | (5,848) | ||
Total | $2,215 | $7,581 | $8,053 | $19,905 | 7,494 | 5,117 | ||
Interest expense, net | 26 | 1,271 | 77 | 3,627 | 41 | 73 | ||
Earnings before taxes | $2,189 | $6,310 | $7,976 | $16,278 | ||||
Earnings before income taxes | $7,453 | $5,044 | ||||||
Nine Months Ended | ||||||||
Mar. 1, 2002 | Mar. 2, 2001 | |||||||
ASSETS | ||||||||
Oxford Shirt Group | $88,474 | $110,359 | ||||||
Lanier Clothes | 77,945 | 106,849 | ||||||
Oxford Slacks | 37,379 | 44,059 | ||||||
Oxford Womenswear Group | 80,591 | 122,023 | ||||||
Corporate and other | (15,509) | (17,017) | ||||||
Total | $268,880 | $366,273 | ||||||
Purchase of property, plant and equipment | Purchase of property, plant and equipment | Purchase of property, plant and equipment | ||||||
Oxford Shirt Group | $361 | $852 | $219 | $141 | ||||
Lanier Clothes | 396 | 1,106 | 68 | 53 | ||||
Oxford Slacks | 37 | 273 | 77 | 6 | ||||
Oxford Womenswear Group | 83 | 632 | 1 | 47 | ||||
Corporate and other | 104 | 443 | 47 | 37 | ||||
Total | $981 | $3,306 | $412 | $284 | ||||
August 30, 2002 | August 31, 2001 | |||||||
(unaudited) | (unaduited) | |||||||
Assets | ||||||||
Oxford Shirt Group | $82,181 | $106,883 | ||||||
Lanier Clothes | 75,458 | 94,376 | ||||||
Oxford Slacks | 34,546 | 38,808 | ||||||
Oxford Womenswear Group | 86,071 | 77,907 | ||||||
Corporate and other | (16,544) | (71,217) | ||||||
Total | $261,712 | $246,757 |
Oxford Industries, Inc. |
Notes to Consolidated Financial Statements (continued) |
4. Receivable Sales: During its fiscal 2001 year, the Company entered into a $90 million asset backed revolving securitization facility under which the Company sells a defined pool of its accounts receivable to a wholly-owned special purpose subsidiary (the "Securitization Facility"). The Company had approximately $64$56 million available under the securitization facility as of March 1,August 30, 2002. The Company amended its trade receivable securitization agreement in January 2002 and, as a result, discontinued the off balance sheet treatment of the program. In addition, the facility was reduced to $65 million in order to reduce fees while still providing the Company with sufficient availability to cover its anticipated needs. The Company has $25$2.5 million outstanding under the Securitization Facility as of MarchAugust 30, 2002.
The Company had $53 million outstanding under the Securitization Facility as of August 31, 2001. The unpaid balance of accounts receivable sold were approximately $113 million. The Company continued to service these receivables and maintained a retained interest in the receivables. The Company had not recorded a servicing asset or liability since the cost to service the receivables approximated the servicing income. The retained interest totaling approximately $60.2 million represented the excess of the receivables sold to the wholly-owned special purpose entity over the amount funded to the Company. The retained interest in the receivables sold is included in the caption "Receivables" in the accompanying consolidated balance sheet as of August 31, 2001.
5. New Accounting Standards: Effective June 1, 2002.
The adoption of SFAS No. 142. SFAS No. 142 is effectiverequired the Company to perform an initial impairment assessment on all goodwill as of the beginning of its fiscal year 2003 for fiscal years beginning after December 15, 2001. Earlyeach of its reporting units. In this assessment, the Company compared the fair value of the reporting unit to its carrying value. The fair values of the reporting units were calculated based on the present value of future cash flows. The assumptions used in these discounted cash flow analyses were consistent with the reporting unit's internal planning. Upon adoption of SFAS 142, the SFAS No. 142 is not permitted nor is retroactive application to prior period (interim or annual) financial statements. Management is currently evaluating the effectCompany had no impairment of this statement on the Company's results of operations.
In July 2001, the FASB alsoFinancial Accounting Standards Board ("FASB") issued SFASStatement No. 143, Accounting"Accounting for Asset Retirement ObligationsObligations" ("SFAS No. 143"). SFAS No. 143 which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the entity either settles the obligation for the amount recorded or incurs a gain or loss. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluatingbelieves that the effectadoption of this statement will not have a material effect on the Company's future results of operations and financial position.operations.
Oxford Industries, Inc. |
Notes to Consolidated Financial Statements (continued) |
In August 2001, the FASB issued statementStatement No. 144, Accounting"Accounting for the Impairment or Disposal of Long-Lived AssetsAssets" ("SFAS No. 144"). SFAS No.Statement 144 supersedes FASB statement No.SFAS 121, Accounting"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed OfOf" ("SFAS No. 121"), and the accounting and reporting provisions of APBAccounting Principles Board Opinion No. 30, Reporting"Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30)Transactions" ("Opinion 30") for the disposal of a segment of a business( asbusiness (as previously defined in Opinion 30). The FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. SFAS No. 144 broadens the presentation of discontinued operations in the income statement to include a component of an entity (rather than a segmentsegme nt of a business). A component of an entity comprises operations and ca shcash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. SFAS No. 144 also requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and should be applied prospectively. The adoption of SFAS 144 had no impact on the Company.
In April 2002, FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections" ("SFAS 145"), which clarifies the criteria under which extinguishment of debt can be considered as extraordinary and rescinds the related Statement Nos. 4 and 64 in addition to Statement No. 44 and also makes technical corrections to other Statements of Financial Standards. The Company plans to adopt SFAS 145 in January 2003. Management is evaluatingbelieves that the effectadoption of this statement will not have a material effect on the Company's future results of operations and financial position.operations.
6. Earnings Per Share
| Quarter Ended | |||
August 30, 2002 | August 31, 2001 | |||
In thousands, except share and per share amounts | ||||
Basic and diluted earnings available to Stockholders (numerator): | $4,510 | $3,127 | ||
Shares (denominator): | ||||
Weighted average shares outstanding | 7,515,577 | 7,439,168 | ||
Dilutive securities: | ||||
Options | 45,097 | 48,105 | ||
Total assuming conversion | 7,560,674 | 7,487,273 | ||
Per share amounts: | ||||
Basic per common share | $0.60 | $0.42 | ||
Diluted per common share | $0.60 | $0.42 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITIONFINANCIAL 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. All dollar amounts within "Management's Discussionin the following tables and Analysis"text are expressed in thousands, except dividends per share.thousands. (Percentages are calculated based on actual data, but percentage columns may not add due to rounding.) Certain prior year information has been restated to be consistent with the current presentation.
Quarter Ended February | Nine Months Ended February | First Quarter | First Quarter | |||||||||||||
FY 2002 | FY 2001 | % Change | FY 2002 | FY 2001 | % Change | FY 2003 | FY 2002 | Change | ||||||||
Net Sales | $149,495 | $197,404 | -24.3% | $485,553 | $596,641 | -18.6% | $ 172,139 | 100.0% | $ 179,530 | 100.0% | $ (7,391) | -4.1% | ||||
Cost of Goods Sold | 120,583 | 160,599 | -24.9% | 392,776 | 486,696 | -19.3% | 133,677 | 77.7% | 143,210 | 79.8% | (9,533) | -6.7% | ||||
Gross Profit | 28,912 | 36,805 | -21.4% | 92,777 | 109,945 | -15.6% | 38,462 | 22.3% | 36,320 | 20.2% | 2,142 | 5.9% | ||||
S,G&A | 26,697 | 29,224 | -8.6% | 84,724 | 90,040 | -5.9% | 30,968 | 18.0% | 31,203 | 17.4% | (235) | -0.8% | ||||
EBIT | 2,215 | 7,581 | -70.8% | 8,053 | 19,905 | -59.5% | 7,494 | 4.4% | 5,117 | 2.9% | 2,377 | 46.5% | ||||
Interest, Net | 26 | 1,271 | -98.0% | 77 | 3,627 | -97.9% | ||||||||||
Earnings Before Taxes | 2,189 | 6,310 | -65.3% | 7,976 | 16,278 | -51.0% | ||||||||||
Interest expense, Net | 41 | 0.0% | 73 | 0.0% | (32) | -43.8% | ||||||||||
Earnings Before Income Taxes | 7,453 | 4.3% | 5,044 | 2.8% | 2,409 | 47.8% | ||||||||||
Income Taxes | 832 | 2,398 | -65.3% | 3,031 | 6,186 | -51.0% | 2,943 | 1.7% | 1,917 | 1.1% | 1,026 | 53.5% | ||||
Net Earnings | $1,357 | $3,912 | -65.3% | $4,945 | $10,092 | -51.0% | $ 4,510 | 2.6% | $ 3,127 | 1.7% | $ 1,383 | 44.2% | ||||
As a Percentage of Net Sales | ||||||||||||||||
Net Sales | 100.0% | 100.0% | 100.0% | 100.0% | ||||||||||||
Cost of Goods Sold | 80.7% | 81.4% | -0.7% | 80.9% | 81.6% | -0.7% | ||||||||||
Gross Profit | 19.3% | 18.6% | 0.7% | 19.1% | 18.4% | 0.7% | ||||||||||
S,G&A | 17.9% | 14.8% | 3.1% | 17.4% | 15.1% | 2.3% | ||||||||||
EBIT | 1.5% | 3.8% | -2.3% | 1.7% | 3.3% | -1.6% | ||||||||||
Interest, Net | 0.0% | 0.6% | -0.6% | 0.0% | 0.6% | -0.6% | ||||||||||
Earnings Before Taxes | 1.5% | 3.2% | -1.7% | 1.6% | 2.7% | -1.1% | ||||||||||
Income Taxes | 0.6% | 1.2% | -0.6% | 0.6% | 1.0% | -0.4% | ||||||||||
Net Earnings | 0.9% | 2.0% | -1.1% | 1.0% | 1.7% | -0.7% | ||||||||||
Total Company
Effective June 1, 2002, the Company adopted SFAS 142. Adoption of this new statement is considered a change in accounting principle and affects the Company's financial results in several ways. Under SFAS 142, the Company no longer amortizes goodwill, which will reduce S, G & A expenses by approximately $2,021 for fiscal 2003. Instead, the new statement requires an initial test at adoption, and subsequent tests at least annually thereafter, of recorded goodwill to determine if the carrying values of such assets exceed their implied fair values as calculated under the new rules. The adoption of SFAS 142 resulted in no charge related to the impairment of goodwill in the first quarter of fiscal year 2003.
Net sales for the third quarter declined 24.3% to $149,4954.1% from $197,404$179,530 in the thirdfirst quarter of the prior year to $172,139 in the first quarter of the current year. TheMost of the sales decline in sales was primarily due to the discontinuation of the DKNY Kids business. Excluding the DKNY Kids business, net sales declined 1.9% as a 23.0% decline in unit sales that was exacerbated by a 1.7%10.0% decline in the average selling price per unit. The sales decline affected all segments and all major channels of distribution with the exception of chain stores which showedunit was mostly offset by a slight sales increase. Third quarter sales were negatively impacted by prevailing economic conditions, weak consumer demand and conservative purchasing plans by many of the Company's retail customers.
For the nine months, sales declined 18.6% to $485,553 from $596,6419.1% increase in the prior year.number of units shipped. The unit sales decline of 17.5% was further impacted by a 1.3% decline in the average selling price per unit.unit was due in part to the continued deflation in apparel prices and due in part to a small shift in the first quarter sales base from menswear to womenswear. The Company's womenswear products normally carry a substantially lower average selling price per unit than its menswear products.
Cost of goods sold decreaseddeclined from 79.8% in the first quarter of the prior year to 80.7% of net sales77.7% in the current quarterquarter. The improvement came from 81.4% in the prior year. The decline inmore cost of goods sold reflected aeffective product sourcing, reduced markdown cost and more favorable product mix and improvements in sourcing operations.
For the nine months, cost of goods sold declined to 80.9% in the current year from 81.6% in the prior year.efficient manufacturing.
Selling, general and administrative (S,G & A) expenses (S,G&A) declined 8.6% in the third quarter to $26,697absolute terms but increased from $29,22417.4% of sales in the prior year but increased as a percentageto 18.0% of net sales to 17.9% in the current quarter from 14.8% in the prior year. Included in S,G&A for the quarter were $1,726 in bad debt expenses attributable to the Kmart bankruptcy (this represents approximately 50% of the total exposure).
For the nine months, S,G&A declined 5.9% from the prior year, but increased as a percentage of net sales to 17.4% in the current year from 15.1% in the prior year.
Interest expense declined in the thirdfirst quarter of the current year compared to the prior year due to lower average borrowing requirements and lower average interest rates. In addition, approximately $93Approximately $551 of financing cost for the trade receivables securitization program werewas reflected as S,G&A expense & A rather than interest expense.
Forexpense in the nine months, approximately $1,030first quarter of financing cost for the trade receivables securitization program were reflected as S,G&A expense rather than interest expense.prior year.
The Company's effective tax rate was 38.0% for all periods39.5% in both the current year and 38.0% in the prior year and does not differ significantly fromyear. These changes are primarily attributable to the relative level of pre-tax earnings in the various taxing jurisdictions to which the Company's statutory rates.earnings are subject.
Segment Results
The Company's business segments are the Oxford Shirt Group, Lanier Clothes, Oxford Slacks and the Oxford Womenswear Group. The Shirt Group operations encompass branded and private label dress and sport shirts golf and children'sbranded golf apparel. Lanier Clothes produces branded and private label suits, sportscoats, suit separates and dress slacks. Oxford Slacks is a producer of private label dress and casual slacks and walk shorts. The Oxford Womenswear Group is a producer of budget and moderate-priced private label women's apparel.sportswear. Corporate and otherOther is a reconciling category for reporting purposes and includes the Company's corporate offices, transportation and logistics, LIFO inventory accounting adjustments and other costs and services that are not allocated to the 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. (SeeSee Note 43 of Notes to Consolidated Financial Statements for additional segment information.)Statements.
First Quarter | First Quarter | |||||||
Net Sales | FY 2003 | FY 2002 | Change | |||||
Oxford Shirt Group | $ 47,173 | 27.4% | $ 54,469 | 30.3% | (7,296) | -13.4% | ||
Lanier Clothes | 36,940 | 21.5% | 40,711 | 22.7% | (3,771) | -9.3% | ||
Oxford Slacks | 21,354 | 12.4% | 22,002 | 12.3% | (648) | -2.9% | ||
Oxford Womenswear Group | 66,599 | 38.7% | 62,227 | 34.7% | 4,372 | 7.0% | ||
Corporate and Other | 73 | 0.0% | 121 | 0.1% | (48) | -39.7% | ||
Total Net Sales | $ 172,139 | 100.0% | $ 179,530 | 100.0% | (7,391) | -4.1% | ||
Quarter Ended February | Nine Months Ended February | |||||||||||||||
FY 2002 | FY 2001 | % Change | FY 2002 | FY 2001 | % Change | First Quarter | First Quarter | |||||||||
Net Sales | ||||||||||||||||
EBIT | FY 2003 | FY 2002 | Change | |||||||||||||
Oxford Shirt Group | $40,158 | $51,895 | -22.6% | $139,373 | $174,174 | -20.0% | $ 1,254 | 2.7% | $ 1,427 | 2.6% | $ (173) | -12.1% | ||||
Lanier Clothes | 34,503 | 40,212 | -14.2% | 113,678 | 130,450 | -12.9% | 4,896 | 13.3% | 4,407 | 10.8% | 489 | 11.1% | ||||
Oxford Slacks | 19,060 | 22,959 | -17.0% | 59,522 | 75,895 | -21.6% | 1,349 | 6.3% | 1,095 | 5.0% | 254 | 23.2% | ||||
Womenswear Group | 55,674 | 82,271 | -32.3% | 172,641 | 215,866 | -20.0% | ||||||||||
Oxford Womenswear Group | 3,541 | 5.3% | 4,036 | 6.5% | (495) | -12.3% | ||||||||||
Corporate and Other | 100 | 67 | 49.3% | 339 | 256 | 32.4% | (3,546) | Na | (5,848) | Na | 2,302 | -39.4% | ||||
Total Net Sales | $149,495 | $197,404 | -24.3% | $485,553 | $596,641 | -18.6% | ||||||||||
Total EBIT | $ 7,494 | 4.4% | $ 5,117 | 2.9% | $ 2,377 | 46.5% | ||||||||||
As a Percentage of Net Sales | ||||||||||||||||
Oxford Shirt Group | 26.9% | 26.3% | 28.7% | 29.2% | ||||||||||||
Lanier Clothes | 23.1% | 20.4% | 23.4% | 21.9% | ||||||||||||
Oxford Slacks | 12.7% | 11.6% | 12.3% | 12.7% | ||||||||||||
Womenswear Group | 37.2% | 41.7% | 35.6% | 36.2% | ||||||||||||
Corporate and Other | 0.1% | 0.0% | 0.1% | 0.0% | ||||||||||||
Total Net Sales | 100.0% | 100.0% | 100.0% | |||||||||||||
Oxford Shirt Group
The Oxford Shirt Group posted a first quarter sales decline of 13.4% to $47,173. The majority of the sales decline was attributable to the exit of the DKNY Kids business. Excluding the DKNY Kids business, sales declined 6.4% as the average selling price per unit declined 8.6% partially offset by a 2.4% increase in the number of units shipped. EBIT declined 12.1%, slightly less than the sales decline.
Lanier Clothes
The Lanier Clothes Group posted a 9.3% sales decline to $36,940. A 5.9% decline in the average selling price per unit was compounded by a 3.5% decrease in units shipped. The unit sales decline was driven by lower demand from the department store distribution channel. Despite the sales decline, EBIT increased 11.1% over last year to $4,896 due to lower markdowns and improved manufacturing performance.
Oxford Slacks
The Oxford Slacks Group reported a 2.9% sales decline to $21,354. The average selling price per unit decline of 7.3% was partially offset by a unit sales increase of 4.6%. Sales declines to chain stores were offset by gains in the specialty catalog distribution channel. EBIT increased 23.2% to $1,349 in the current year due primarily to improved manufacturing performance and sourcing cost effectiveness.
Oxford Womenswear Group
The Oxford Womenswear Group posted first quarter sales of $66,599, a 7.0% increase over the prior year. The unit sales increase of 13.9% was partially offset by the 7.0% decline in the average selling price per unit. Growth in the group's mass merchant distribution channel was responsible for most of the sales increase. EBIT declined 12.3% to $3,541 due to gross margin pressures.
Corporate and Other
The Corporate and Other improvement in EBIT was primarily due to LIFO inventory accounting and $551 of securitization interest classified as S, G & A in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Changes in operating activity are generally due to changes in working capital which is monitored primarily by analysis of the Company's investment in accounts receivable and inventory and by the amount of accounts payable. The following table sets forth an analysis of the primary components of working capital as adjusted to return the off-balance securitization program at August 31, 2001 to the balance sheet for comparison purposes.
Aug. 30, 2002 | May 31, 2002 | Aug. 31, 2001 | ||||||
As Reported | Securitization Adjustment | Adjusted for Securitization | ||||||
Current Assets | $ 227,417 | $ 215,084 | $ 204,882 | $ 53,000 | $ 257,882 | |||
Current Liabilities | 78,498 | 70,155 | 69,585 | 53,000 | 122,585 | |||
Working Capital | $ 148,919 | $ 144,929 | $ 135,297 | $ 0 | $ 135,297 | |||
Current Ratio | 2.9 | 3.1 | 2.1 | |||||
Accounts Receivable | $ 121,011 | $ 103,198 | $ 59,387 | $ 53,000 | $ 112,387 | |||
Days Sales Outstanding | 56.8 | 54.9 | 54.7 | |||||
Inventory | $ 90,020 | $ 84,541 | $ 127,715 | $ 0 | $ 127,715 | |||
Days Supply on Hand | 69.6 | 76.7 | 87.4 | |||||
Accounts Payable | $ 45,666 | $ 43,320 | $ 35,928 | $ 0 | $ 35,928 |
Operating Activities used $11,971 in the first quarter of the current year and $3,792 in the first quarter of the prior year. The change in receivables was due to the timing of sales within the quarter and the increase of days sales outstanding due to the extension of payment terms. The inventory reduction from the prior year was driven by improved asset management, while the increase since the beginning of the year is due to planned increased sales.
Investing Activities
Investing activities used $290 in the first quarter of the current year and $272 in the first quarter of the prior year.
Financing Activities
Financing activities generated $923 in the first quarter of the current year and $209 in the first quarter of the prior year. The primary difference was increased short-term borrowings offset by the reduction in proceeds from the issuance of common stock due to the exercise of employee stock options.
The Company established a $90,000 accounts receivable securitization program on May 3, 2001, under which the Company sells a defined pool of its accounts receivable to a securitization conduit. The Company used the proceeds from the receivables securitization to eliminate bank borrowings. At August 31, 2001, $53,000 was outstanding under the securitization agreement. The Company amended its trade receivables securitization agreement on January 31, 2002, and discontinued the off-balance sheet treatment of the program. The facility amount was also reduced to $65,000. There was no debt outstanding under the securitization agreement at May 31, 2002. There was $2,500 outstanding under the securitization agreement at August 30, 2002.
If the securitization agreement had not been treated as off-balance sheet at August 31, 2001, the accounts receivable balance at August 31, 2001 would have increased $53,000 to $112,387 and the balance of short-term debt would have been $53,000. Net cash used by operations for the quarter ended August 31, 2001 would have declined by $3,000 from $3,792 to $792 and net cash provided by financing activities would have decreased by $3,000 from $209 cash provided to $2,791 cash used.
On October 7, 2002, the Company's Board of Director's declared a cash dividend of $0.21 per share payable on November 30, 2002 to shareholders of record on November 15, 2002.
Market Risk Sensitivity
Inflation Risk
The consumer price index indicates deflation in apparel prices for at least the last three years. This deflation has resulted in the decline in the average selling price per unit for the Company as a whole and for each operating segment. In order to maintain gross margins and operating profit, the Company constantly seeks more cost effective product sourcing, productivity improvements and cost containment initiatives, in addition to efforts to increase unit sales.
There were no other material changes in Market Risk Sensitivity since the filing of the Annual report on Form 10-K for the fiscal year ended May 31, 2002.
NEW ACCOUNTING STATEMENTS
A discussion of the effects of recently issued accounting standards appears in Note 5 to the Notes to the Consolidated Financial Statements in Item 1 above.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations is the Company's primary source of liquidity. The Company supplements operating cash with its $65,000 committed trade receivables securitization program and uncommitted bank lines of credit. On August 30, 2002, $56,323 was available under the securitization program and there was $2,500 outstanding under the securitization agreement. The Company has $164,500 in uncommitted lines of credit, of which $128,500 is reserved exclusively for letters of credit. The Company pays no commitment fees for these available lines of credit. At August 30, 2002 there were no direct borrowings and approximately $83,255 in trade letters of credit outstanding under these lines. The Company anticipates use and availability of uncommitted resources as working capital needs may require.
The uses of funds primarily includes working capital requirements, capital expenditures, acquisitions, stock repurchases, dividends and repayment of short-term debt. 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.
EBIT | Quarter Ended February | EBIT Margin | |||||
FY 2002 | FY 2001 | % Change | FY 2002 | FY 2001 | |||
Oxford Shirt Group | $(599) | $(1,710) | -65.0% | -1.5% | -3.3% | ||
Lanier Clothes | 2,947 | 2,985 | -1.3% | 8.5% | 7.4% | ||
Oxford Slacks | 883 | 501 | 76.2% | 4.6% | 2.2% | ||
Oxford Womenswear Group | 588 | 5,457 | -89.2% | 1.1% | 6.6% | ||
Corporate and Other | (1,604) | 348 | -560.9% | N/A | N/A | ||
Total Operating Income | $2,215 | $7,581 | -70.8% | 1.5% | 3.8% | ||
EBIT | Nine Months Ended February | EBIT Margin | |||||
FY 2002 | FY 2001 | % Change | FY 2002 | FY 2001 | |||
Oxford Shirt Group | $(1,721) | $(445) | 286.7% | -1.2% | -0.3% | ||
Lanier Clothes | 9,015 | 9,062 | -0.5% | 7.9% | 6.9% | ||
Oxford Slacks | 2,377 | 3,801 | -37.5% | 4.0% | 5.0% | ||
Oxford Womenswear Group | 4,905 | 9,887 | -50.4% | 2.8% | 4.6% | ||
Corporate and Other | (6,523) | (2,400) | 171.8% | N/A | N/A | ||
Total Operating Income | $8,053 | $19,905 | -59.5% | 1.7% | 3.3% | ||
Oxford Shirt Group
The Oxford Shirt Group reported a 22.6% sales decline from $51,895 in the third quarter of the prior year to $40,158 in the current year. A unit sales decline of 15.9% was exacerbated by an 8.0% decline in the average selling price per unit. The bulk of the sales decline occurred in the specialty store distribution channel. The discontinuation of the DKNY Kids business also contributed to the decline. A more favorable product mix resulted in an improvement in EBIT to a loss of $599 in the current quarter from a loss of $1,710 in the prior year.
For the nine months, net sales declined 20.0% from $174,174 in the prior year to $139,373 in the current year. A 16.2% decline in unit sales was further impacted by a 4.4% decline in the average selling price per unit. EBIT declined from a loss of $445 in the prior year to a loss of $1,721 in the current year.
Lanier Clothes
Lanier Clothes reported sales of $34,503, a decline of 14.2% from the prior year. A unit sales decline of 8.0% was compounded by a 6.7% decline in the average selling price per unit. Weak demand from the group's department store customers was primarily responsible for the sales decline. EBIT declined slightly to $2,947 in the current quarter from $2,985 in the prior year.
For the nine months, Lanier Clothes sales declined 12.9% from $130,450 in the prior year to $113,678 in the current year. A 6.7% decline unit sales was compounded by a 6.6% decline in the average selling price per unit. EBIT declined 0.5% from $9,062 in the prior year to $9,015 in the current year.
Oxford Slacks Group
Oxford Slacks reported third quarter sales of $19,060, down 17.0% from $22,959 in the prior year. The unit sales decline of 7.3% was further impacted by a 10.5% decline in the average selling price per unit. The sales decline was primarily in the group's direct mail distribution channel. Lower operating expenses and favorable costing variances resulted in an improvement in EBIT to $883 in the current quarter from $501 in the prior year.
For the nine months, net sales declined 21.6% from $75,895 in the prior year to $59,522 in the current year. A 14.8% decline in unit sales was compounded by a 7.9% decline in the average selling price per unit. EBIT declined from $3,801 in the prior year to $2,377 in the current year.
Oxford Womenswear Group
The Womenswear Group reported a sales decline in the third quarter of 32.3% from $82,271 in the prior year to $55,674 in the current year. A unit sales decline of 28.1% was further impacted by a decline of 5.9% in the average selling price per unit. The sales decline was driven primarily by lower shipments to major mass merchant retailers and lower replenishment take-outs. Lower sales and $1,726 in bad debt expenses associated with the Kmart bankruptcy reduced EBIT to $588 from $5,457 last year.
For the nine months, the Womenswear Group sales declined 20.0% from $215,866 in the prior year to $172,641 in the current year. A 19.4% decline in unit sales was compounded by a slight 0.6% decline in the average selling price per unit. EBIT declined from $9,887 in the prior year to $4,905 in the current year primarily due to the loss in sales volume and the bad debt write off.
Corporate and Other
The Corporate and Other change in EBIT was primarily due to underabsorbed sourcing costs in the Hong Kong sourcing office and LIFO accounting adjustments in the third quarter and for the nine months.
FUTURE OPERATING RESULTS
WhileThe business climate remains quite challenging. Comparatively lower wholesale and retail inventories should provide the Company has observedwith the opportunity to replenish a somewhat depleted supply chain. The rollout of selected Lands' End apparel products to Sears stores this fall and next spring should have a favorable impact on the Company's sales and earnings. Sourcing and manufacturing initiatives implemented last year should continue to drive improvements in gross margin.
In September, the Pacific Maritime Association (PMA) locked out workers of the International Longshore and Warehouse Union (ILWU). The lockout resulted in the shut down of all major west coast ports. The shut down of the ports resulted in disruption of the entire inbound international freight system as ships backed up at west coast ports and demand for east coast bound ships, empty shipping containers and air freight exceeded capacity. On October 8, acting pursuant to the Taft-Hartley Act, President Bush ordered an end to the lockout for an 80 day "cooling off" period. As of the date of this report, freight congestion is beginning to clear. In anticipation of the work stoppage, the Company took numerous steps to try to avoid any delays in its inbound shipments including shipping early where possible, shipping to east coast ports and in some preliminary signscases by air. However, due to the extent of the disruption to the entire international inbound freight system caused by the lockout, the Company expects to experience some delays in the receipt and ultimate shipment of goods during the second quarter but does not expect such delays to be greater than those experienced by most other major apparel producers. If the PMA and the ILWU are unable to reach agreement on a new contract during the cooling off period, further disruptions could occur in the future.
For the second quarter, the Company expects a material improvement in a number of its segments,sales and earnings compared to last year's depressed levels. For the full year, the Company is maintainingexpects a conservative outlook for the fourth quarter. The Company's focus will remainsignificant rebound in earnings on prudent planning and aggressive asset management. The Company's financial position remains quite strong and is well positioned to capitalize on opportunities when economic activity begins to accelerate.
Fourth quartera moderate sales and diluted earnings per share are expected to decline by approximately 20% from last year's fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Operating Activities used $28,395 through the third quarter of the current year and used $35,541 through the third quarter of the prior year. The difference was primarily due to decreased inventory offset by decreased net earnings, a greater increase in accounts receivable and a greater decline in trade accounts payable.
Investing Activities
Investing Activities used $757 through the third quarter of the current year and used $2,501 through the third quarter of the prior year. The primary difference was decreased capital expenditures.
Financing Activities
Financing Activities generated $23,577 through the third quarter of the current year and $35,567 through the third quarter of the prior year. The primary difference was a smaller increase in short-term borrowings offset by the decrease in the purchase and retirement of the Company's common stock.
The Company established a $90,000 accounts receivables securitization program on May 3, 2001, under which the Company sells a defined pool of its accounts receivable to a securitization conduit. The Company had approximately 64 million available under the securitization program on March 1,2002. The Company used the proceeds from receivables securitization to eliminate outstanding bank borrowings. In an effort to provide greater clarity, the Company amended its trade receivables securitization agreement on January 31, 2002 and, as a result, discontinued the off balance sheet treatment of the program. Total debt at the current quarter-end stood at $26,993, down $77,679 or 74.2% from $104,672 last year.
On April 1, 2002, the Company's Board of Director's declared a cash dividend of $0.21 per share payable on June 1, 2002 to shareholders of record on May 15, 2002. The Company did not purchase any shares of its common stock during the third quarter of the current year.
Working Capital
Working Capital ($ in Thousands) | Third Quarter FY 2002 | Fourth Quarter FY 2001 | Third Quarter FY 2001 | ||
Current Assets | $ 229,527 | $ 219,670 | $ 321,162 | ||
Current Liabilities | 92,988 | 89,392 | 156,710 | ||
Working Capital | $ 136,539 | $ 130,278 | $ 164,452 | ||
Current Ratio | 2.5 | 2.5 | 2.0 |
FUTURE LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations is the Company's primary source of liquidity. The Company supplements operating cash with its $90,000 accounts receivable securitization program and uncommitted bank lines of credit. On March 1, 2002, $25,000 was outstanding under the securitization program. The Company has $154,500 in uncommitted lines of credit, of which $118,500 is reserved exclusively for letters of credit. The Company pays no commitment fees for these available lines of credit. At March 1, 2002, direct borrowings of $1,500 and approximately $61,803 in trade letters of credit were outstanding under these lines. The Company anticipates use and availability of both committed and uncommitted resources as working capital needs may require.
The uses of funds primarily include working capital requirements, capital expenditures, acquisitions, stock repurchases, dividends and repayment of short-term debt. 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.increase.
Critical Accounting Policies
The Company's critical accounting policies, including the assumptions and judgmentsjudgements underlying them, are disclosed in the NotesCompany's Annual Report to the Consolidated Financial Statements.Shareholders for fiscal year ended May 31, 2002. These policies have been consistently applied in all material respects and address such matters as concentrations of credit risk, accounts receivable securitization, accounts receivable valuation, inventory management and revenue recognition. While the estimates and judgements associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgmentsjudgements associated with the reported amounts are appropriate in the circumstances.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. These statements, which include statements regarding our future liquidity and capital resource requirements as well as our future operating results, are based on the Company's current beliefs or expectations regarding anticipated future results of the Company.expectations. These statements are based on numerous assumptions and are subject to risks and uncertainties. Although the Company feels that the beliefs and expectations in the forward-looking statements are reasonable, it does not and cannot give any assurance that the beliefs and expectations will prove to be correct. Many factors could significantly affect the Company's operations and cause the Company's actual results to be substantially differentdiffer materially from the Company's expectations.our forward looking statements. Those factors include, but are not limited to: (i)(I) general economic and apparel business conditions; (ii) continued retailer and consumer acceptance of the Company's products; (iii) global manufacturing costs; (iv) the financialfinanci al condition of customers or suppliers; (v) changes in capital market conditions; (vi) governmental and business conditions in countries where the Company's produ ctsproducts are manufactured; (vii) changes in trade regulations; (viii) the impact of acquisition activity; (ix) changes in the Company's plans, strategies, objectives, expectations or intentions, which may happen at any time atin the discretion of the Company; and (x) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of the future events or otherwise.
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 to shareholders for the fiscal year ended June 1, 2001.May 31, 2002.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the section entitled "Liquidity and Capital Resources" in Item 2 above, which sections are incorporated herein by reference.
Item 4. EVALUATION OF DISLCOSURE CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of an evaluation date within 90 days before the filing date of this quarterly report, have concluded that as of the evaluation date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.
(b) Changes in internal controls.
There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our disclosure controls and procedures subsequent to the evaluation date.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10(m) Omnibus Amendment No. 1. Amendment3a Articles of Incorporation of the Company.
99.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the accounts receivable sale and accounts receivable loan agreements (exhibits 10(j) and 10(k)). Dated January 31,Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter ended March 2,August 30, 2002.
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/ J. Hicks Lanier | ||
Dated October 11, 2002 | J. Hicks Lanier | |
Chief Executive Officer | ||
/s/Ben B. Blount, Jr. | ||
Date: | Ben B. Blount, Jr | |
| ||
| ||
/s/K. Scott Grassmyer | ||
K. Scott Grassmyer | ||
Controller and | ||
Chief Accounting Officer |
CERTIFICATIONS
I, J. Hicks Lanier, certify that:
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: October 11, 2002
By: /s/ J. Hicks Lanier
___________________
J. Hicks Lanier
Chief Executive Officer
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I, Ben B. Blount, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Oxford Industries;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: October 11, 2002
By: /s/ Ben B. Blount, Jr.
___________________
Ben B. Blount, Jr.
Chief Financial Officer