SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

[ X ] Quarterly Report Pursuant To Section 13 or 15(d) of


xQuarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period endedAUGUST 27, NOVEMBER 26, 2004

OR

[  ] Transition Report Pursuant To Section 13 or 15(d) of
The Securities Exchange Act of 1934OR

¨Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from_________ to________fromto

Commission File Number 1-4365


OXFORD INDUSTRIES, INC.


(Exact name of registrant as specified in its charter)


Georgia 58-0831862
Georgia

(State or other jurisdiction of

incorporation or
organization)

 58-0831862

(I.R.S. Employer

Identification number)

222 Piedmont Avenue, N.E., Atlanta, Georgia 30308


(Address of principal executive offices)
(Zip Code)

offices, including 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 ]x    No  [  ]
¨

Indicate by check mark whether the registrant is an accelerated filer (asas defined in rule 12b-2 of the Exchange Act Rule 12b-2).
Act.    Yes  [ X ]x    No  [  ]
¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of each class


Number of shares outstanding

    as of January 3, 2005    


Common Stock, $1 par value

16,831,818



Table of contents

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For quarter ended November 26, 2004

   Page

PART I.FINANCIAL INFORMATION

   
Number of shares outstanding
Title of each classas of October 1, 2004


Common Stock, $1 par value16,757,001

Item 1.Condensed Consolidated Financial Statements


Table of contents

OXFORD INDUSTRIES, INC.
INDEX TO FORM 10-Q
August 27, 2004

   
Page

  3

  4

  5

  6

  1922

  2933

  3135

PART II.OTHER INFORMATION

   

Item 6. Exhibits and Reports on Form 8-K1.Legal Proceedings

  35
32

Item 2.Unregistered Sale of Equity Securities and Use of Proceeds

  
LONG TERM INCENTIVE PLAN35

Item 3.EMPLOYEE STOCK PURCHASE PLANDefaults Upon Senior Securities

35

Item 4.SECTION 302 CERTIFICATION OF THE CEOSubmission of Matters to a Vote of Security Holders

36

Item 5.SECTION 302 CERTIFICATION OF THE CFOOther Information

36

Item 6.SECTION 906 CERTIFICATION OF THE CEOExhibits

36

SECTION 906 CERTIFICATION OF THE CFOSignatures

37

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.STATEMENTS

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

         
  Quarters Ended
  August 27, 2004 August 29, 2003
  ($ in thousands except share and per share amounts)
Net sales
 $264,790  $242,105 
Cost of goods sold  179,868   171,214 
   
 
   
 
 
Gross profit
  84,922   70,891 
Selling, general and administrative  67,554   53,612 
Amortization of intangible assets  1,712   1,678 
   
 
   
 
 
   69,266   55,290 
Royalties and other operating income  1,753   1,180 
   
 
   
 
 
Operating income
  17,409   16,781 
Interest expense, net  7,921   5,746 
   
 
   
 
 
Earnings before income taxes
  9,488   11,035 
Income taxes  3,320   4,193 
   
 
   
 
 
Net earnings
 $6,168  $6,842 
   
 
   
 
 
Basic earnings per common share $0.37  $0.44 
Diluted earnings per common share $0.36  $0.42 
Basic shares outstanding  16,712,800   15,819,780 
Diluted shares outstanding  17,203,323   16,219,846 
Dividends per share $0.12  $0.105 

   Quarters Ended

  Six Months Ended

   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


   ($ in thousands except per share amounts)

Net Sales

  $312,869  $253,883  $577,659  $495,988

Cost of goods sold

   212,766   177,051   392,634   348,265
   

  

  

  

Gross Profit

   100,103   76,832   185,025   147,723

Selling, general and administrative

   80,169   59,249   147,723   112,861

Amortization of intangibles

   2,424   1,677   4,136   3,355
   

  

  

  

    82,593   60,926   151,859   116,216

Royalties and other operating income

   3,301   1,140   5,054   2,320
   

  

  

  

Operating Income

   20,811   17,046   38,220   33,827

Interest expense, net

   6,855   6,098   14,776   11,844
   

  

  

  

Earnings Before Income Taxes

   13,956   10,948   23,444   21,983

Income taxes

   4,884   4,108   8,204   8,301
   

  

  

  

Net Earnings

  $9,072  $6,840  $15,240  $13,682
   

  

  

  

Basic Earnings Per Share

  $0.54  $0.43  $0.91  $0.86

Diluted Earnings Per Share

  $0.53  $0.41  $0.89  $0.83

Basic Weighted Average Shares Outstanding

   16,761,159   16,170,814   16,736,873   15,994,443
   

  

  

  

Diluted Weighted Average Shares Outstanding

   17,215,771   16,605,400   17,216,546   16,452,738
   

  

  

  

Dividends Declared Per Share

  $0.12  $0.105  $0.24  $0.21
   

  

  

  

See notes to consolidated financial statements.

3


OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED EXCEPT FOR MAY 28, 2004)

             
  August 27, 2004
 May 28, 2004
 August 29, 2003
  ($ in thousands)
Assets
            
Current Assets:            
Cash and cash equivalents $11,526  $47,569  $17,370 
Receivables  160,485   176,367   134,445 
Inventories  143,142   116,410   117,846 
Prepaid expenses  19,093   16,475   19,346 
   
 
   
 
   
 
 
Total Current Assets  334,246   356,821   289,007 
Property, plant and equipment, net  54,745   51,826   50,677 
Goodwill  158,304   115,426   88,095 
Intangible assets, net  242,120   147,333   152,365 
Other assets, net  24,845   23,411   21,940 
   
 
   
 
   
 
 
Total Assets
 $814,260  $694,817  $602,084 
   
 
   
 
   
 
 
Liabilities and Shareholders’ Equity
            
Current Liabilities:            
Notes payable $111,924  $  $10,000 
Trade accounts payable  84,811   100,813   66,265 
Accrued compensation  18,787   33,113   15,182 
Additional acquisition cost payable     22,779    
Other accrued expenses  37,646   30,440   31,234 
Dividends payable  1,950   1,946   1,694 
Income taxes payable  5,318   4,294   5,181 
Current maturities of long-term debt  126   98   214 
   
 
   
 
   
 
 
Total Current Liabilities  260,562   193,483   129,770 
Notes payable  198,804   198,760   198,626 
Other long-term debt, less current maturities  91   54   117 
Noncurrent liabilities  12,798   11,124   9,573 
Deferred income taxes  80,663   52,419   53,680 
Shareholders’ Equity:            
Common stock  16,756   16,215   16,152 
Additional paid-in capital  42,266   23,673   22,360 
Retained earnings  202,320   199,089   171,806 
   
 
   
 
   
 
 
Total Shareholders’ Equity  261,342   238,977   210,318 
   
 
   
 
   
 
 
Total Liabilities and Shareholders’ Equity
 $814,260  $694,817  $602,084 
   
 
   
 
   
 
 

   November 26,
2004


  May 28,
2004


  November 28,
2003


   ($ in thousands)

Assets

            

Current Assets:

            

Cash and cash equivalents

  $19,414  $47,569  $5,499

Receivables

   175,053   176,367   135,794

Inventories

   161,832   116,410   127,437

Prepaid expenses

   17,817   16,475   19,978
   

  

  

Total current assets

   374,116   356,821   288,708

Property, plant and equipment, net

   55,431   51,826   51,421

Goodwill

   165,650   115,426   92,761

Intangibles, net

   239,698   147,333   150,687

Other noncurrent assets, net

   24,657   23,411   22,025
   

  

  

Total Assets

  $859,552  $694,817  $605,602
   

  

  

Liabilities and Shareholders’ Equity

            

Current Liabilities:

            

Trade accounts payable

  $96,595  $100,813  $72,184

Accrued compensation

   22,027   33,113   19,648

Additional acquisition cost payable

   —     22,779   —  

Other accrued expenses

   45,495   30,440   34,007

Dividends payable

   2,013   1,946   1,700

Income taxes payable

   1,555   4,294   99

Short-term debt

   6,973   98   97
   

  

  

Total current liabilities

   174,658   193,483   127,735

Long-term debt, less current maturities

   315,608   198,814   198,764

Other noncurrent liabilities

   13,665   11,124   10,177

Deferred income taxes

   79,754   52,419   52,676

Shareholders’ Equity:

            

Common stock

   16,778   16,215   16,190

Additional paid-in capital

   42,709   23,673   23,115

Retained earnings

   216,380   199,089   176,945
   

  

  

Total Shareholders’ Equity

   275,867   238,977   216,250
   

  

  

Total Liabilities and Shareholders’ Equity

  $859,552  $694,817  $605,602
   

  

  

See notes to consolidated financial statements.

4


OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

         
  Quarters Ended
  August 27, 2004 August 29, 2003
  ($ in thousands)
Cash Flows from Operating Activities
        
Net earnings $6,168  $6,842 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:        
Depreciation  3,037   2,357 
Amortization of intangible assets  1,712   1,678 
Amortization of deferred financing costs and bond discount  2,459   619 
Loss (gain) on the sale of assets  348   (115)
Equity income  (323)  (105)
Deferred income taxes  (2,175)  (843)
Changes in working capital:        
Receivables  40,659   5,453 
Inventories  (823)  14,857 
Prepaid expenses  1,669   (777)
Trade accounts payable  (21,022)  (16,320)
Accrued expenses and other current liabilities  (21,488)  (12,726)
Stock options income tax benefit  587   1,328 
Income taxes payable  1,020   1,766 
Other noncurrent assets  (1,410)  (2,351)
Other noncurrent liabilities  1,674   3,949 
   
 
   
 
 
Net cash provided by operating activities
  12,092   5,612 
Cash Flows from Investing Activities
        
Acquisition, net of cash acquired  (139,626)  (218,429)
Decrease in restricted cash     204,986 
Investment in deferred compensation plan  391   (1,356)
Purchases of property, plant and equipment  (2,488)  (3,171)
Proceeds from sale of property, plant and equipment  10   105 
   
 
   
 
 
Net cash used in investing activities
  (141,713)  (17,865)
Cash Flows from Financing Activities
        
Proceeds from short-term debt  97,592   10,000 
Payments of long-term debt  65   (31)
Payments of debt issuance costs  (2,766)  (7,335)
Proceeds from issuance of common stock  666   4,477 
Dividends on common stock  (1,946)  (1,579)
   
 
   
 
 
Net cash provided by financing activities
  93,611   5,532 
   
 
   
 
 
Effect of foreign currency translation on cash and cash equivalents  (33)   
Net change in cash and cash equivalents  (36,010)  (6,721)
Cash and cash equivalents at the beginning of year  47,569   24,091 
   
 
   
 
 
Cash and cash equivalents at the end of period $11,526  $17,370 
   
 
   
 
 

   Six Months Ended

 
   November 26,
2004


  November 28,
2003


 
   ($ in thousands) 

Cash Flows from Operating Activities

         

Net earnings

  $15,240  $13,682 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

         

Depreciation

   6,305   5,183 

Amortization of intangible assets

   4,136   3,355 

Amortization of deferred financing costs and bond discount

   3,118   1,289 

Gain on the sale of assets

   (106)  (207)

Equity income

   (323)  (105)

Deferred income taxes

   (3,333)  (964)

Changes in working capital:

         

Receivables

   25,241   4,105 

Inventories

   (18,703)  5,266 

Prepaid expenses

   1,900   (2,091)

Trade accounts payable

   (9,352)  (10,401)

Accrued expenses and other current liabilities

   (8,888)  (5,487)

Stock options income tax benefit

   965   1,641 

Income taxes payable

   (2,852)  (3,316)

Other noncurrent assets

   (1,181)  (3,215)

Other noncurrent liabilities

   2,541   4,553 
   


 


Net cash provided by operating activities

   14,708   13,288 

Cash Flows from Investing Activities

         

Acquisition, net of cash acquired

   (139,814)  (222,370)

Decrease in restricted cash

   —     204,986 

Investment in deferred compensation plan

   (593)  (1,439)

Purchases of property, plant and equipment

   (6,508)  (7,266)

Proceeds from sale of property, plant and equipment

   413   72 
   


 


Net cash used in investing activities

   (146,502)  (26,017)

Cash Flows from Financing Activities

         

Payments of short-term debt

   (7,555)  —   

Proceeds from (payments of) long-term debt

   116,693   (172)

Payments of debt issuance costs

   (2,766)  (7,374)

Proceeds from issuance of common shares

   752   4,956 

Dividends paid on common shares

   (3,896)  (3,273)
   


 


Net cash provided by (used in) financing activities

   103,228   (5,863)

Net change in cash and cash equivalents

   (28,566)  (18,592)

Effect of foreign currency translation on cash and cash equivalents

   411   —   

Cash and cash equivalents at the beginning of period

   47,569   24,091 
   


 


Cash and cash equivalents at the end of period

  $19,414  $5,499 
   


 


Supplemental schedule of noncash investing and financing activities:

As of November 26, 2004, approximately $6.9 million of the Ben Sherman acquisition has been financed through the Seller Notes, as discussed in Note 5.

See notes to consolidated financial statements.

5


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

1.IntroductionBasis of Presentation:: We prepared the accompanying unaudited, consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission.Commission including the instructions to Form 10-Q and Article 10 of Regulation S-X. Such rules and regulations allow us to condense and omit certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted accounting principles in the United States. We believe these consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations for the periods presented. Results of operations for the three months ended August 27, 2004interim periods presented are not necessarily indicative of results to be expected for the year. All dollars are expressed in thousands except share and per share amounts. The balance sheet at May 28, 2004 has been derived from the audited financial statements at that date. For more information regarding our results of operations and financial position, refer to the footnotesnotes accompanying our audited financial statements for our fiscal year ended May 28, 2004 (“Fiscal 2004”) contained in our Annual Report on Form 10-K. Any material facts that have changed from those footnotes are discussed herein, or are a normal result of transactions duringFor the interim period.fiscal year ended May 28, 2004. As used in this report, “our,” “us,” “we” and similar phrases refer to Oxford Industries, Inc. and its consolidated subsidiaries.subsidiaries; and “fiscal 2004,” “fiscal 2005” and “fiscal 2006” refer to our fiscal years ended or ending on May 28, 2004, June 3, 2005 and June 2, 2006, respectively.

Our accounting policies applied during the interim periods presented are consistent with the accounting policies as described in our Fiscal 2004 Form 10-K.

Certain amounts in the prior periods’ financial statements have been reclassified to conform to the current year’s presentation.

2.Accounting Policies: The summary of our significant accounting policies in our Fiscal 2004 Form 10-K describes our accounting policies. Our accounting policies are consistent with those of our Fiscal 2004 policies.
3.Contingencies: We are involved in certain legal proceedings and claims primarily arising in the normal course of business. In our opinion, the liability under any of these matters would not materially affect our financial condition or results of operations.
4.Inventories:The components of inventories are summarized as follows:
         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands)
Finished goods $116,108  $89,335 
Work in process  7,690   8,905 
Fabric, trim and supplies  19,344   19,606 
   
 
   
 
 
Total $143,142  $117,846 
   
 
   
 
 

   Nov. 26, 2004

  May 28, 2004

  Nov. 28, 2003

   ($ in thousands)

Finished goods

  $128,680  $85,492  $91,979

Work in process

   9,539   9,925   11,645

Fabric, trim and supplies

   23,613   20,993   23,813
   

 ��

  

Total

  $161,832  $116,410  $127,437
   

  

  

5.3.Goodwill and Intangible Assets:Intangible assets primarily representby category at November 26, 2004 are summarized below:

   Intangibles at cost

  Accumulated
amortization


  Intangibles, net

   ($ in thousands)

Trademarks

  $210,378  $349  $210,029

License agreements

   20,683   5,092   15,591

Customer relationships

   19,500   5,708   13,792

Covenant not to compete

   460   174   286
   

  

  

Total

  $251,021  $11,323  $239,698
   

  

  

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

4.Acquisitions:On July 30, 2004, we acquired 100% of the capital stock of Ben Sherman Limited (“Ben Sherman”), which we operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses of approximately $3.0 million. The transaction was financed with cash on hand and borrowings under our senior revolving credit facility and unsecured notes payable to the management shareholders of Ben Sherman, both as described in Note 5.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition for Ben Sherman. The purchase price allocation will be finalized upon finalization of certain preliminary estimates.

   ($ in thousands) 

Total purchase price

  $148,882 

Cash

  $7,656 

Accounts receivable

   25,637 

Inventories

   26,053 

Other current assets

   2,841 

Goodwill

   44,982 

Intangibles

   96,500 

Property, plant and equipment

   3,765 

Current liabilities

   (29,602)

Deferred taxes

   (28,950)
   


Fair value of net assets acquired

  $148,882 
   


The components of the Intangibles listed in the above table are as follows:

   Amount

  Life

   ($ in thousands)   

Trademarks

  $82,000  Indefinite

License agreements

   11,700  4-8 years

Customer relationships

   2,800  15 years
   

   

Total

  $96,500   
   

   

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

4.Acquisitions (continued):

On June 13, 2003, we acquired all of the capital stock of Viewpoint International, Inc., which we operate as the Tommy Bahama Group. The purchase price for the Tommy Bahama Group could be up to $325 million, consisting of $240 million in cash at closing, $10 million in our common stock (776,400 shares), approximately $3.4 million in transaction costs, and up to $75 million in contingent payments, subject to the Tommy Bahama Group achieving certain performance targets. Such performance targets are based on earnings before interest and taxes after deduction of a capital charge based on net tangible assets.

For each of the four years following the acquisition, the selling stockholders of the Tommy Bahama Group will receive an annual basic contingent payment if the Tommy Bahama Group’s earnings are greater than 90% of the applicable target and will receive the maximum annual basic contingent payment of $12.5 million if the Tommy Bahama Group’s earnings are 100% or greater than the applicable target. If the Tommy Bahama Group’s earnings are between 90% and 100% of the applicable target, the annual basic contingent payment will be calculated on a straight line basis from $0 to $12.5 million. Up to 50% of any annual basic contingent payment may be paid in shares of our common stock at our option, and in the case of payments in the first two years, at the option of the selling stockholders of the Tommy Bahama Group. Shares of our common stock issued at our option will be valued at the average price on the New York Stock Exchange (or other applicable exchange) for the ten full trading days prior to the applicable payment date. Shares of our common stock issued at the option of the selling stockholders will be valued at $12.88 per share.

All earnout payments to be paid to selling stockholders will be treated as additional purchase price and recorded as goodwill. Approximately 5% of the total value of all consideration that becomes due and payable under the earnout agreement has been designated to be paid toward an Employee Cash Bonus Plan to be distributed to employees of the Tommy Bahama Group under the terms of the plan. The earnout payments designated toward the Employee Cash Bonus Plan are charged to selling, general and administrative expense.

Additionally, if, at the end of the four year period, cumulative earnings exceed the cumulative targets, the selling stockholders will receive 33.33% of the cumulative excess up to a maximum cumulative additional contingent payment of $25.0 million. Any cumulative additional contingent payment will be paid in cash.

The Year 1 contingent payment was earned in full and was paid during the first quarter of fiscal 2005 in the form of approximately $6.2 million in cash and the remainder in our common stock valued at $12.88 per share for total consideration of approximately $24.6 million. Of this amount approximately $23.4 million was recognized as goodwill with the remainder recognized as selling, general and administrative expense.

OXFORD INDUSTRIES, INC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

4.Acquisitions (continued):

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition for the Tommy Bahama Group.

   ($ in thousands) 

Total purchase price

  $278,419 

Cash

  $22,145 

Accounts receivable

   29,521 

Inventories

   27,697 

Other current assets

   6,015 

Goodwill

   110,164 

Intangibles

   153,360 

Property, plant and equipment

   28,087 

Other assets

   2,470 

Current liabilities

   (45,626)

Noncurrent liabilities

   (1,253)

Deferred taxes

   (54,161)
   


Fair value of net assets acquired

  $278,419 
   


These acquisitions helped us achieve one of our key strategic objectives of owning major lifestyle brands. The acquisitions provide strategic benefits through growth opportunities and further diversification of our business over distribution channels, price points, product categories and target customers. The results of operations of Ben Sherman and the Tommy Bahama Group are included in our consolidated statements of earnings from the respective dates of the acquisition.

Pro-Forma financial information:

The pro forma financial information presented below gives effect to the Ben Sherman acquisition as if it had occurred as of the beginning of fiscal 2005 and fiscal 2004 and the Tommy Bahama acquisition as if it had occurred as of the beginning of fiscal 2004. The information presented below is for illustrative purposes only and is not indicative of results that would have been achieved if the acquisitions had occurred as of the beginning of fiscal 2005 and 2004 or results which may be achieved in the future.

   Quarters Ended

  Six Months Ended

   Nov. 26, 2004

  Nov. 28, 2003

  Nov. 26, 2004

  Nov. 28, 2003

   ($ in thousands except per share amounts)

Net sales

  $312,869  $297,161  $608,139  $587,881

Net earnings

  $9,072  $9,267  $18,024  $18,687

Net earnings per share

                

Basic

  $0.54  $0.58  $1.08  $1.16

Diluted

  $0.53  $0.56  $1.05  $1.13

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

5.Debt:The following table details our debt as of the dates specified:

   November 26,
2004


  May 28,
2004


  November 28,
2003


   ($ in thousands)

$280 million U.S. Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest and letter of credit fees based upon a pricing grid which is tied to certain debt ratios (4.27% at November 26, 2004), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the Company and Guarantor Subsidiaries (1)

  $116,700  $—    $—  

12 million Pounds Sterling Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the lender’s prime rate plus 1.2%, requires interest payments monthly with principal payable on demand, and is collateralized by substantially all the United Kingdom assets of Ben Sherman (2)

   —     —     —  

$200 million Senior Unsecured Notes (“Senior Unsecured Notes”), which accrue interest at 8.875% and require interest payments semiannually with principal due at maturity (June 2011) (3)

   198,849   198,760   198,671

Unsecured Seller Notes (“Seller Notes”), which accrue interest at LIBOR plus 1.2% (6.55% at November 26, 2004), and require interest payments quarterly with principal payable on demand after January 30, 2005 (2)

   6,887   —     —  

Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets

   145   152   190

Total Debt

   322,581   198,912   198,861

Short-term Debt

   6,973   98   97

Total Long-term Debt

   315,608   198,814   198,764

(1)On July 28, 2004, the U.S. Revolver was amended to increase the amount of the line of credit from $275 million to $280 million and to adjust the amounts that certain lenders were committed to loan along with other changes. At the time of this amendment, approximately $1.8 million of unamortized deferred financing costs capitalizedwere expensed, which have been included in interest expense in the consolidated statement of earnings. Additionally, the terms and conditions of certain related agreements were modified in November 2004, including a change to a springing lock-box agreement, which results in amounts outstanding under the facility requiring classification as long-term debt subsequent to the modification.
(2)The U.K. Revolver and Seller Notes, both denominated in pounds sterling, were entered into on July 30, 2004, in conjunction with the Ben Sherman acquisition.
(3)The Senior Unsecured Notes were sold on May 16, 2003 at a discount of 0.713% ($1.4 million) in connection with acquisitions. We account for goodwill and other intangible assets under the Statement of Financial Accounting Standards Board No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Goodwill and identifiable intangible assets with an indefinite useful life are not amortized but are tested for impairment annually. We tested our goodwill asacquisition of the endTommy Bahama Group to yield an effective interest rate of the first quarter of our fiscal year ending on June 3, 2005 (“Fiscal 2005”) and determined that no impairment was indicated. The fair value of our goodwill is determined using a discounted cash flow methodology. Goodwill in the accompanying balance sheet is net of accumulated amortization of $7.9 million.9.0%.

6The U.S. Revolver, the U.K. Revolver and the Senior Unsecured Notes each include certain debt covenant restrictions that require us or our subsidiaries to maintain certain financial ratios that are customary for similar facilities. On and as of November 26, 2004 we were compliant with all debt covenant restrictions related to all debt agreements.


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

5.6.Goodwill and Intangible Assets (continued):

     Intangible assets by category are summarized below:

             
      Accumulated  
Intangibles
 Intangibles at cost
 amortization
 Intangibles, net
      ($ in thousands)    
Trademarks $210,233  $666  $209,567 
License agreements  20,349   2,638   17,711 
Customer relationships  19,500   4,939   14,561 
Covenant not to compete  460   179   281 
   
 
   
 
   
 
 
Total $250,542  $8,422  $242,120 
   
 
   
 
   
 
 

6.Stock-Based Compensation:Shareholders’ Equity:We have chosen to account for stock-based compensation to employees using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock-Based Compensation.” Certain pro forma and other disclosures related to stock-based compensation plans are presented below as if compensation cost of options granted had been determined in accordance with the fair value provisions of the Statement of Financial Accounting Standards Board Statement No. 123, “Accounting for Stock-Based Compensation.”

         
  Quarters Ended
  August 27, 2004
 August. 29, 2003
  ($ in thousands except per share amounts)
Net earnings as reported $6,168  $6,842 
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects  (209)  (91)
   
 
   
 
 
Pro forma net earnings $5,959  $6,751 
Basic earnings per common share as reported $0.37  $0.44 
Pro forma basic earnings per common share $0.36  $0.43 
Diluted earnings per common share as reported $0.36  $0.42 
Pro forma diluted earnings per common share $0.35  $0.42 
   
 
   
 
 

   Quarters Ended

  Six Months Ended

 
   Nov. 26,
2004


  Nov. 28,
2003


  Nov. 26,
2004


  Nov 28.
2003


 
   ($ in thousands) 

Net earnings as reported

  $9,072  $6,840  $15,240  $13,682 
   


 


 


 


Deduct: Employee compensation expense, net of related tax effects

   (209)  (137)  (418)  (228)
   


 


 


 


Pro forma net earnings

  $8,863  $6,703  $14,822  $13,454 
   


 


 


 


Basic earnings per share as reported

  $0.54  $0.43  $0.91  $0.86 

Pro forma basic earnings per share

  $0.53  $0.41  $0.89  $0.84 

Diluted earnings per share as reported

  $0.53  $0.41  $0.89  $0.83 

Pro forma diluted earnings per share

  $0.51  $0.40  $0.86  $0.82 

   Quarters Ended

  Six Months Ended

   

Nov. 26,

2004


  

Nov. 28,

2003


  

Nov. 26,

2004


  

Nov. 28,

2003


   ($ in thousands)

Basic and diluted earnings available to shareholders (numerator):

  $9,072  $6,840  $15,240  $13,682
   

  

  

  

Shares (denominator):

                

Weighted average shares outstanding

   16,761,159   16,170,814   16,736,873   15,994,443

Dilutive securities:

                

Options

   454,612   434,586   479,673   458,295
   

  

  

  

Total assuming conversion

   17,215,771   16,605,400   17,216,546   16,452,738
   

  

  

  

Per share amounts:

                

Basic earnings per common share

  $0.54  $0.43  $0.91  $0.86

Diluted earnings per common share

  $0.53  $0.41  $0.89  $0.83

7

During the first six months and the second quarter of fiscal 2005 and fiscal 2004, all options to purchase shares of our common stock were included in the computation of diluted earnings per share.


We effected a two-for-one share split in the form of a 100% stock dividend, payable December 1, 2003, to shareholders of record on November 17, 2003. All share and per share data appearing in the consolidated financial statements and related notes reflect this stock split.

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

7.6.Shareholders’ Equity (continued):

Accumulated other comprehensive income of $7.0 million and $6.0 million for the quarter and six months ended November 26, 2004 is comprised of the effects of foreign currency translation gains (loss), net of income taxes of $2.1 million and $1.8 million respectively which is included as a component of retained earnings in the condensed consolidated balance sheet. Comprehensive income for the quarter and six months ended November 26, 2004 was $16.1 million and $21.3 million, respectively. Net earnings and comprehensive income were equivalent for all other periods.

7.Segment Information:We organize the components of our business for purposes of allocating resources and assessing performance. Our reportable segments are the Menswear Group, the Womenswear Group and the Tommy Bahama Group. The Menswear Group produces a variety of branded and private label sportswear, tailored clothing, dress shirts, sport shirts, dress slacks, casual slacks, suits, sportscoats, suit separates, walkshorts, golf apparel, jeans, swimwear, footwear and golf apparel. The Menswear Group alsoheadwear, operates one Ben Sherman retail store and licenses the Ben Sherman brand for other product categories. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outer wear,outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses the Tommy Bahama brand for other product categories. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, last-in first-out (“LIFO”)LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis, which do not necessarily correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Total assets for Corporate and other include the LIFO inventory reserve of $37.1 million, $35.5 million and $35.5 million at November 26, 2004, May 28, 2004 and November 28, 2003. respectively. Segment results are as follows:
         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands)
Net Sales
        
Menswear Group $118,705  $115,754 
Womenswear Group  52,458   62,953 
Tommy Bahama Group  93,462   63,278 
Corporate and Other  165   120 
   
 
   
 
 
Total
 $264,790  $242,105 
   
 
   
 
 
         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands)
Depreciation and intangible amortization
        
Menswear Group $1,137  $912 
Womenswear Group  65   199 
Tommy Bahama Group  3,444   2,778 
Corporate and Other  102   146 
   
 
   
 
 
Total
 $4,748  $4,035 
Operating Income
        
Menswear Group $8,921  $9,475 
Womenswear Group  (966)  3,224 
Tommy Bahama Group  11,916   6,959 
Corporate and Other  (2,462)  (2,877)
   
 
   
 
 
Total
 $17,409  $16,781 
Interest expense, net  7,921   5,746 
   
 
   
 
 
Earnings before taxes $9,488  $11,035 

   Quarters Ended

  Six Months Ended

   ($ in thousands)
   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


Net Sales

                

Menswear Group

  $181,088  $115,353  $299,793  $231,107

Womenswear Group

   45,097   61,841   97,555   124,794

Tommy Bahama Group

   86,490   76,389   179,952   139,667

Corporate and Other

   194   300   359   420
   

  

  

  

Total

  $312,869  $253,883  $577,659  $495,988
   

  

  

  

8


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

7.Segment Information (continued):
         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands)
Assets
        
Menswear Group $380,858  $191,203 
Womenswear Group  63,632   66,812 
Tommy Bahama Group  376,254   330,044 
Corporate and Other  (6,484)  14,025 
   
 
   
 
 
Total
 $814,260  $602,084 
Purchase of property, plant and equipment
        
Menswear Group $276  $739 
Womenswear Group  10   9 
Tommy Bahama Group  2,147   2,413 
Corporate and Other  55   10 
   
 
   
 
 
Total
 $2,488  $3,171 

   Quarters Ended

  Six Months Ended

 
   ($ in thousands) 
   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


 

Depreciation and amortization

                 

Menswear Group

  $1,892  $899  $3,029  $1,811 

Womenswear Group

   65   83   130   282 

Tommy Bahama Group

   3,646   3,402   7,090   6,180 

Corporate and Other

   90   789   192   265 
   


 


 


 


Total

  $5,693  $5,173  $10,441  $8,538 

Operating Income

                 

Menswear Group

  $18,048  $10,221  $26,969  $19,696 

Womenswear Group

   208   1,893   (758)  5,117 

Tommy Bahama Group

   5,895   7,550   17,811   14,509 

Corporate and Other

   (3,340)  (2,618)  (5,802)  (5,495)
   


 


 


 


Total

  $20,811  $17,046  $38,220  $33,827 

Interest expense, net

   6,855   6,098   14,776   11,844 
   


 


 


 


Earnings before taxes

  $13,956  $10,948  $23,444  $21,983 
      November 26,
2004


  

 

May 28,

2004


  November 28,
2003


 
      ($ in thousands) 

Assets

                 

Menswear Group

      $405,010  $171,718  $177,109 

Womenswear Group

       71,170   95,866   73,072 

Tommy Bahama Group

       386,396   390,961   349,293 

Corporate and Other

       (3,024)  36,272   6,128 
       


 


 


Total

      $859,552  $694,817  $605,602 

8.Earnings Per Share:

         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands except share and per share amounts)
Basic and diluted earnings available to stockholders (numerator): $6,168  $6,842 
   
 
   
 
 
Shares (denominator):        
Weighted average shares outstanding  16,712,800   15,819,780 
Dilutive securities:        
Options  490,523   399,866 
   
 
   
 
 
Total assuming exercise  17,203,323   16,219,646 
   
 
   
 
 
Per share amounts:        
Basic earnings per common share $0.37  $0.44 
Diluted earnings per common share $0.36  $0.42 

During the first quarter of Fiscal 2005, all options to purchase shares of our common stock were included in the computation of diluted earnings per share. During the first quarter of Fiscal 2004, options to purchase 232,500 shares of our common stock at $26.4375 per share were outstanding but were not included in the computation of diluted earnings per share because the inclusion of such shares would have had an antidilutive effect.

9


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

9.8.New Accounting Standards:In November 2004, the Financial Accounting Standards Board, or FASB issued FASB Statement No. 151 “Inventory Costs, an Amendment of ARB No. 43 Chapter 4” (“FAS 151”). FAS 151 is applicable for inventory costs incurred during fiscal years beginning after June 15, 2005. FAS 151 requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling be recognized as current-period charges rather than being included in inventory regardless of whether the costs meet the criterion of abnormal as defined in ARB 43. We do not believe the adoption of the standard will have a material impact on us upon adoption in fiscal 2006 as we have historically expensed such costs as incurred.

In December 2004, the FASB issued FASB Statement No. 123 (Revised 2004) “Share-Based Payment: an Amendment of FASB Statements No. 123 and 95” (“FAS 123R”). FAS 123R is applicable for all interim and fiscal periods beginning after June 15, 2005. Therefore, we will adopt it during fiscal 2006. FAS 123R sets accounting requirements for “share-based” compensation to employees, requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees and disallows the use of the intrinsic value method of accounting for stock compensation. We are currently evaluating the impact that this statement will have on our results of operations.

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

9.AcquisitionsConsolidating Financial Data of Subsidiary Guarantors:: On July 30, 2004, we acquired Ben Sherman Limited (“Ben Sherman”), which we operate as partThe $200 million Senior Unsecured Notes were issued by Oxford Industries, Inc. but not all of our Menswear Group. Ben Shermansubsidiaries guarantee the notes. Each subsidiary guarantor is a London-based designer, distributorwholly owned by Oxford Industries, Inc. and marketeris organized in the U.S. All guarantees are full and unconditional. Non-guarantors consist of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The transaction was financed with cash on hand, borrowings under our senior revolving credit facility (“U.S. Revolver”), the termssubsidiaries of Oxford Industries, Inc. which are describedorganized outside the U.S. Set forth below are the condensed consolidated financial statements for the six months and unsecured notes payable to the management shareholders of Ben Sherman (“Seller Notes”).
In association with the Ben Sherman acquisition, our U.S. Revolver was amended and restated on Julyquarters ended November 26, 2004, May 28, 2004, and increasedNovember 28, 2003. We have used the equity method with respect to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. Under the amended U.S. Revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of our total debt to our earnings before interest, taxes, depreciation and amortization, calculated as applicable on a pro forma basis. The credit agreement also requires us to maintain certain financial ratios including a ratio of total debt to earnings before interest, taxes, depreciation and amortization (EBITDA), a ratio of senior debt to EBITDA, a fixed charge coverage ratio and an interest coverage ratio. Our borrowings under the amended U.S. Revolver are no longer subject to a borrowing base calculation based on our accounts receivable, inventories and real property.
The Seller Notes total £3.5 million (or approximately $6.3 million) and are payable on demand beginning six months after July 30, 2004. The notes bear interest at the annual rate of London Interbank Offering Rate (“LIBOR”) plus 1.2% and such interest is payable on the last day of September, December, March and June, respectively, until the principal has been paid.
On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million senior secured revolving credit facility (“U.K. Revolver”) to provide for seasonal working capital requirements and general corporate purposes. The facility is secured by substantially all of the United Kingdom assets of Ben Sherman and bears interest at the lender’s prime or base rate plus 1.2%. The facility is payable on demand and requires us to maintain certain financial ratios including a minimum interest coverage ratio, a minimum asset coverage ratio and a minimum level of EBITDA.investment in subsidiaries.

10

Oxford Industries, Inc.


Unaudited Condensed Consolidated Balance Sheet

November 26, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $7,918  $2,396  $9,099  $1  $19,414

Receivables

   89,604   60,794   66,712   (42,057)  175,053

Inventories

   87,550   57,218   17,411   (347)  161,832

Prepaid expenses

   7,891   6,157   3,769   —     17,817
   


 


 

  


 

Total current assets

   192,963   126,565   96,991   (42,403)  374,116

Property, plant and equipment, net

   12,822   34,895   7,714   —     55,431

Goodwill

   1,847   114,156   49,647   —     165,650

Intangibles, net

   230   144,176   95,292   —     239,698

Other assets net

   557,418   149,833   1,369   (683,963)  24,657
   


 


 

  


 

Total Assets

  $765,280  $569,625  $251,013  $(726,366) $859,552
   


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

  $86,544  $34,636  $14,945  $(39,530) $96,595

Accrued compensation

   11,017   6,720   4,290   —     22,027

Other accrued expenses

   19,793   12,494   15,907   (2,699)  45,495

Dividends payable

   2,013   —     —     —     2,013

Income taxes payable

   (14,813)  12,298   4,070   —     1,555

Short-terrm debt

   28   58   6,887   —     6,973
   


 


 

  


 

Total current liabilities

   104,582   66,206   46,099   (42,229)  174,658

Long term debt, less current maturities

   315,578   30   —     —     315,608

Noncurrent liabilities

   87,380   (70,305)  113,620   (117,030)  13,665

Deferred income taxes

   3,879   46,899   28,985   (9)  79,754

Total Shareholders’/invested equity

   253,861   526,795   62,309   (567,098)  275,867
   


 


 

  


 

Total Liabilities and Shareholders’ Equity

  $765,280  $569,625  $251,013  $(726,366) $859,552
   


 


 

  


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

9.9. AcquisitionsConsolidating Financial Data of Subsidiary Guarantors (continued):
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition for Ben Sherman. The purchase price allocation will be finalized upon resolution of a working capital adjustment to the purchase price and refinement of certain preliminary estimates.
     
  ($ in thousands)
Cash consideration paid $139,017 
Seller notes payable  6,312 
Direct acquisition costs  2,790 
   
 
 
Total purchase price $148,119 
Cash $7,656 
Accounts receivable  25,637 
Inventories  26,053 
Other current assets  2,841 
Goodwill  42,899 
Intangibles  96,500 
Property, plant and equipment  3,765 
Current liabilities  (28,282)
Deferred taxes  (28,950)
   
 
 
Fair value of net assets acquired $148,119 
   
 
 

The components of the Intangibles listed in the above table are as follows:

         
  Amount
 Life
  ($ in thousands)
Trademarks $82,000  Indefinite
License agreements  11,700  4-8 years
Customer relationships  2,800  15 years
   
 
     
Total $96,500     
   
 
     
Oxford Industries, Inc

11

Condensed Consolidated Balance Sheet


May 28, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $45,405  $1,438  $724  $2  $47,569

Receivables

   110,092   69,989   36,192   (39,906)  176,367

Inventories

   75,699   38,412   2,299   —     116,410

Prepaid expenses

   10,377   5,716   382   —     16,475
   


 


 

  


 

Total current assets

   241,573   115,555   39,597   (39,904)  356,821

Property, plant and equipment, net

   13,839   33,186   4,801   —     51,826

Goodwill

   1,847   113,579   —         115,426

Intangibles, net

   249   147,084   —         147,333

Other assets net

   382,738   7,053   1,604   (367,984)  23,411
   


 


 

  


 

Total Assets

  $640,246  $416,457  $46,002  $(407,888) $694,817
   


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

  $92,517  $34,647  $13,562  $(39,913) $100,813

Accrued compensation

   19,339   11,357   2,417   —     33,113

Additional acquisition cost payable

   22,779   —     —     —     22,779

Other accrued expenses

   20,056   10,028   356   —     30,440

Dividends payable

   1,946   —     —     —     1,946

Income taxes payable

   (16,847)  19,533   1,607   1   4,294

Short-term debt

   —     98   —     —     98
   


 


 

  


 

Total current liabilities

   139,790   75,663   17,942   (39,912)  193,483

Long term debt, less current maturities

   198,760   54   —     —     198,814

Noncurrent liabilities

   82,943   (74,847)  3,031   (3)  11,124

Deferred income taxes

   4,130   48,249   40   —     52,419

Total Shareholders’/invested equity

   214,623   367,338   24,989   (367,973)  238,977
   


 


 

  


 

Total Liabilities and Shareholders’ Equity

  $640,246  $416,457  $46,002  $(407,888) $694,817
   


 


 

  


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

9.9.AcquisitionsConsolidating Financial Data of Subsidiary Guarantors (continued):
On June 13, 2003, we acquired all of the capital stock of Viewpoint International, Inc., which we operate as the Tommy Bahama Group. The transaction purchase price for the Tommy Bahama Group could be up to $325 million, consisting of $240 million in cash at closing, $10 million in our common stock (776,400 shares), and up to $75 million in contingent payments, subject to the Tommy Bahama Group achieving certain performance targets. Such performance targets are based on earnings before interest and taxes after deduction of a capital charge based on net tangible assets and are as follows:

Year 1 - $42.3 million, which was prorated to $40.8 million based on the closing of the acquisition 13 days into the fiscal year;
Year 2 - $50.0 million;
Year 3 - $58.1 million; and
Year 4 - $69.7 million.
Oxford Industries, Inc.

For each of the four years following the acquisition, the selling stockholders of the Tommy Bahama Group will receive an annual basic contingent payment if the Tommy Bahama Group’s earnings are greater than 90% of the applicable target described above and will receive the maximum annual basic contingent payment of $12.5 million if the Tommy Bahama Group’s earnings are 100% or greater than the applicable target. If the Tommy Bahama Group’s earnings are between 90% and 100% of the applicable target, the annual basic contingent payment will be calculated on a straight line basis from $0 to $12.5 million. Up to 50% of any annual basic contingent payment may be paid in shares of our common stock at our option, and in the case of payments in the first two years, at the option of the selling stockholders of the Tommy Bahama Group. Shares of our common stock issued at our option will be valued at the average price on the New York Stock Exchange (or other applicable exchange) for the ten full trading days prior to the applicable payment date. Shares of our common stock issued at the option of the selling stockholders will be valued at $12.88 per share. All earnout payments to be paid to selling stockholders will be treated as additional purchase price and recorded as goodwill. The Year 1 contingent payment was earned in full and was paid during the first quarter of Fiscal 2005; 50% in cash and 50% in Common Stock valued at $12.88 per share.
Additionally, if, at the end of the four year period, cumulative earnings exceed the cumulative targets, the selling stockholders will receive 33.33% of the cumulative excess up to a maximum cumulative additional contingent payment of $25.0 million. Any cumulative additional contingent payment will be paid in cash.
Approximately 5% of the total value of all consideration that becomes due and payable under the earnout agreement has been designated to be paid toward an Employee Cash Bonus Plan to be distributed to employees of the Tommy Bahama group under the terms of the plan. The earnout payments designated toward the Employee Cash Bonus Plan are charged to selling, general and administrative expense.
Unaudited Condensed Consolidated Balance Sheet

12

November 28, 2003


   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $2,659  $883  $1,936  $21  $5,499

Receivables

   88,043   43,804   32,827   (28,880)  135,794

Inventories

   84,296   40,555   2,586   —     127,437

Prepaid expenses

   10,337   9,129   512   —     19,978
   


 


 

  


 

Total current assets

   185,335   94,371   37,861   (28,859)  288,708

Property, plant and equipment, net

   15,049   31,058   5,314   —     51,421

Goodwill

   1,847   90,914   —     —     92,761

Intangibles, net

   268   150,419   —     —     150,687

Other assets, net

   332,095   5,163   1,570   (316,803)  22,025
   


 


 

  


 

Total Assets

  $534,594  $371,925   44,745  $(345,662) $605,602
   


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

  $57,214  $29,393  $14,343  $(28,766) $72,184

Accrued compensation

   11,743   4,676   3,229   —     19,648

Other accrued expenses

   24,313   9,424   381   (111)  34,007

Dividends payable

   1,700   —     —     —     1,700

Income taxes payable

   (11,634)  10,601   1,132   —     99

Short-term debt

   —     97   —     —     97
   


 


 

  


 

Total current liabilities

   83,336   54,191   19,085   (28,877)  127,735

Long term debt, less current maturities

   198,676   88   —     —     198,764

Noncurrent liabilities

   58,125   (52,554)  4,589   17   10,177

Deferred taxes

   2,403   50,232   41       52,676

Total Shareholders’/invested equity

   192,054   319,968   21,030   (316,802)  216,250
   


 


 

  


 

Total Liabilities and Shareholders’ Equity

  $534,594  $371,925  $44,745  $(345,662) $605,602
   


 


 

  


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

9.9.AcquisitionsConsolidating Financial Data of Subsidiary Guarantors (continued):
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition for the Tommy Bahama Group.
     
  ($ in thousands)
Market value of stock issued $27,881 
Cash consideration paid  247,172 
Direct acquisition costs  3,366 
   
 
 
Total purchase price $278,419 
Cash $22,145 
Accounts receivable  29,521 
Inventories  27,697 
Other current assets  6,015 
Goodwill  110,164 
Intangibles  153,360 
Property, plant and equipment  28,087 
Other assets  2,470 
Current liabilities  (45,626)
Noncurrent liabilities  (1,253)
Deferred taxes  (54,161)
   
 
 
Fair value of net assets acquired $278,419 
   
 
 

The components of the Intangibles listed in the above table are as follows:

         
  Amount
 Life
  ($ in thousands)
Trademarks $127,800  Indefinite
License agreements  8,400  5 years
Customer relationships  16,700  15 years
Covenant not to compete  460  4 years
   
 
     
Total $153,360     
   
 
     
Oxford Industries, Inc.

These acquisitions helped us achieve one of our key strategic objectives of owning major lifestyle brands. The acquisitions provide strategic benefits through growth opportunities and further diversification of our business over distribution channels, price points, product categories and target customers. Ben Sherman’s results of operations from July 31, 2004 through August 27, 2004 are included in our consolidated statement of earnings in the Consolidated Financial Statements for the first quarter of Fiscal 2005. The Tommy Bahama Group’s results of operations from June 14, 2003 through August 29, 2003 are included in our consolidated statement of earnings in the Consolidated Financial Statements for the first quarter of Fiscal 2004.
Unaudited Condensed Consolidated Statement of Earnings

13

Quarter Ended November 26, 2004


   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Net Sales

  $163,529  $112,522  $55,897  $(19,079) $312,869

Cost of goods sold

   128,798   59,431   27,784   (3,247)  212,766
   


 


 

  


 

Gross Profit

   34,731   53,091   28,113   (15,832)  100,103

Selling, general and administrative

   33,035   46,461   21,042   (17,945)  82,593

Royalties and other income

   —     1,960   1,341   —     3,301
   


 


 

  


 

Operating Income

   1,696   8,590   8,412   2,113   20,811

Interest expense (income), net

   4,895   (2,443)  2,087   2,316   6,855

Income from equity investment

   10,787   (1)  —     (10,786)  —  
   


 


 

  


 

Earnings Before Income Taxes

   7,588   11,032   6,325   (10,989)  13,956

Income taxes

   (1,688)  4,590   1,982   —     4,884
   


 


 

  


 

Net Earnings

  $9,276  $6,442  $4,343  $(10,989) $9,072
   


 


 

  


 

Oxford Industries, Inc.

Unaudited Condensed Consolidated Statement of Earnings

Quarter Ended November 28, 2003

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Net Sales

  $167,116  $90,314  $9,810  $(13,357) $253,883

Cost of goods sold

   129,962   46,422   264   403   177,051
   

  


 


 


 

Gross Profit

   37,154   43,892   9,546   (13,760)  76,832

Selling, general and administrative

   32,418   36,362   8,035   (15,889)  60,926

Royalties and other income

   —     1,140   —     —     1,140
   

  


 


 


 

Operating Income

   4,736   8,670   1,511   2,129   17,046

Interest (income) expense, net

   4,351   (360)  (24)  2,131   6,098

Income from equity investment

   6,749   5   —     (6,754)  —  
   

  


 


 


 

Earnings Before Income Taxes

   7,134   9,035   1,535   (6,756)  10,948

Income taxes

   293   3,360   455   —     4,108
   

  


 


 


 

Net Earnings

  $6,841  $5,675  $1,080  $(6,756) $6,840
   

  


 


 


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

10.9.Pro FormaConsolidating Financial Information:The pro forma financial information presented below gives effect to the Ben Sherman acquisition as if it occurred asData of the beginning of Fiscal 2005 and 2004 and the Tommy Bahama Group acquisition as if it had occurred as of the beginning of Fiscal 2004. The information presented below is for illustrative purposes only and is not indicative of results that would have been achieved if the acquisitions had occurred as of the beginning of Fiscal 2005 and 2004 or results which may be achieved in the future.Subsidiary Guarantors (continued):
         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands except per share amounts)
Net Sales $295,270  $290,720 
Net Earnings $8,952  $9,420 
Net Earnings Per Share        
Basic $0.54  $0.59 
Diluted $0.52  $0.58 

11.Stock Split:We effected a two-for-one stock split in the form of a 100% stock dividend, payable December 1, 2003, to shareholders of record on November 17, 2003. All share and per share data appearing in the consolidated financial statements and related notes have been retroactively adjusted for this stock split.
Oxford Industries, Inc.

14

Unaudited Condensed Consolidated Statement of Earnings


Six Months Ended November 26, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)
Net Sales  $310,507  $221,225  $80,410  $(34,483) $577,659

Cost of goods sold

   246,593   113,747   37,913   (5,619)  392,634
   


 


 

  


 

Gross Profit   63,914   107,478   42,497   (28,864)  185,025

Selling, general and administrative

   61,420   88,909   32,111   (30,581)  151,859

Royalties and other income

   —     3,329   1,725   —     5,054
   


 


 

  


 

Operating Income   2,494   21,898   12,111   1,717   38,220

Interest expense (income), net

   13,417   (3,530)  2,824   2,065   14,776

Income from equity investment

   23,560   43   —     (23,603)  —  
   


 


 

  


 

Earnings Before Income Taxes   12,637   25,471   9,287   (23,951)  23,444

Income taxes

   (2,952)  8,400   2,756   —     8,204
   


 


 

  


 

Net Earnings  $15,589  $17,071  $6,531  $(23,951) $15,240
   


 


 

  


 

Oxford Industries, Inc.

Unaudited Condensed Consolidated Statement of Earnings

Six Months Ended November 28, 2003

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)
Net Sales  $335,462  $168,262  $18,511  $(26,247) $495,988

Cost of goods sold

   261,763   85,681   (132)  953   348,265
   

  


 


 


 

Gross Profit   73,699   82,581   18,643   (27,200)  147,723

Selling, general and administrative

   61,582   67,201   16,342   (28,909)  116,216

Royalties and other income

   —     2,320   —     —     2,320
   

  


 


 


 

Operating Income   12,117   17,700   2,301   1,709   33,827

Interest (income) expense, net

   10,866   (687)  (47)  1,712   11,844

Income from equity investment

   14,520   19   —     (14,539)  —  
   

  


 


 


 

Earnings Before Income Taxes   15,771   18,406   2,348   (14,542)  21,983

Income taxes

   2,088   5,513   700   —     8,301
   

  


 


 


 

Net Earnings  $13,683  $12,893  $1,648  $(14,542) $13,682
   

  


 


 


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

12.9.Notes Payable:Consolidating Financial Data of Subsidiary Guarantors (continued):

The following table details our notes payable as of August 27, 2004, which are classified as current obligations.

     
  August 27, 2004
  ($ in thousands)
U.S. Revolver $98,300 
U.K. Revolver  7,312 
Seller Notes  6,312 
   
 
 
Total notes payable $111,924 
   
 
 
Oxford Industries, Inc.

Under the U.S. Revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of our total debt to our earnings before interest, taxes, depreciation and amortization, calculated as applicable on a pro forma basis. This facility contains provisions that may allow the lenders to accelerate payments under the facility under conditions that are not objectively determinable. The facility also has a lockbox arrangement, whereby remittances from the customers reduce the current outstanding borrowings. Accordingly, pursuant to Emerging Issues Task Force 95-22, we have classified borrowings under the facility as current debt.
The U.K. Revolver provides for seasonal working capital requirements and general corporate purposes for our Ben Sherman United Kingdom operations. The facility is secured by substantially all of the United Kingdom assets of Ben Sherman and bears interest at the lender’s prime or base rate plus 1.2%. The facility is payable on demand.
The Seller Notes are payable on demand beginning six months after July 30, 2004. The notes bear interest at the annual rate of LIBOR plus 1.2% and such interest is payable on the last day of September, December, March and June, respectively, until the principal has been paid.
Unaudited Condensed Consolidated Statement of Cash Flow

15

Six Months Ended November 26, 2004


   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


 
   ($ in thousands) 
Cash Flows From Operating Activities                     

Net earnings

  $15,589  $17,071  $6,531  $(23,951) $15,240 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

                     

Depreciation and amortization

   4,677   7,193   1,689   —     13,559 

Equity income

   —     (323)  —     —     (323)

Loss (gain) on sale of assets

   84   (594)  404       (106)

Deferred income taxes

   (252)  (1,349)  (1,532)  (200)  (3,333)

Changes in working capital

   (442)  (19,500)  (67)  8,320   (11,689)

Income for equity investment in subsidiaries

   (23,560)  (43)  —     23,603   —   

Other noncurrent assets

   (1,001)  13   (192)  (1)  (1,181)

Other noncurrent liabilities

   1,299   1,242   —     —     2,541 
   


 


 


 


 


Net cash (used in) provided by operating activities

   (3,606)  3,710   6,833   7,771   14,708 
Cash Flows from Investing Activities                     

Acquisitions net of cash acquired

   (5,475)  4   (134,343)�� —     (139,814)

Investment in subsidiaries

   (141,807)  (32,616)  —     174,423   —   

Investment in deferred comp plan

   —     (593)  —     —     (593)

Purchases of property, plant and equipment

   (618)  (5,804)  (86)  —     (6,508)

Proceeds from sale of property, plant and equipment

   7   406   —     —     413 
   


 


 


 


 


Net cash (used in) provided by investing activities

   (147,893)  (38,603)  (134,429)  174,423   (146,502)
Cash Flows from Financing Activities                     

Payments of short-term debt

   —     —     (7,555)  —     (7,555)

Proceeds (payments) of long-term debt

   116,757   (64)          116,693 

Equity contribution received

   —     141,807   32,616   (174,423)  —   

(Payments) proceeds of loan to subsidiaries

   —     (109,191)  109,191   —     —   

Proceeds from issuance of common stock

   752   —     —     —     752 

Debt issue costs

   (2,766)  —     —     —     (2,766)

Change in intercompany payable

   (4,855)  3,299   9,301   (7,745)  —   

Dividends on common stock

   4,124   —     (7,993)  (27)  (3,896)
   


 


 


 


 


Net cash provided by (used in) financing activities

   114,012   35,851   135,560   (182,195)  103,228 
Net change in Cash and Cash Equivalents   (37,487)  958   7,964   (1)  (28,566)

Effect of foreign currency translation on cash and cash equivalents

   —     —     411   —     411 

Cash and cash equivalents at the beginning of period

   45,405   1,438   724   2   47,569 
   


 


 


 


 


Cash and cash equivalents at the end of period

  $7,918  $2,396  $9,099  $1  $19,414 
   


 


 


 


 


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27,

QUARTER ENDED NOVEMBER 26, 2004

13.Consolidating Financial Data of Subsidiary Guarantors:The notes issued for the Tommy Bahama acquisition were issued by

9.Consolidating Financial Data of Subsidiary Guarantors (continued):

Oxford Industries, Inc. Not all

Unaudited Condensed Consolidated Statement of our subsidiaries guarantee the notes. Each subsidiary guarantor is wholly owned by Oxford Industries, Inc. and is organized in the U.S. All guarantees are full and unconditional. Non-guarantors consist of subsidiaries of Oxford Industries, Inc which are organized outside the U.S. Set forth below is the consolidated financial statements for the three months ended August 27, 2004 and August 29, 2003. We have used the equity method with respect to investment in subsidiaries.

                     
  Oxford Industries, Inc.
  Consolidated Balance Sheet
  August 27, 2004
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Assets
                    
Current Assets:                    
Cash and cash equivalents $4,926  $1,976  $4,597  $27  $11,526 
Receivables  92,992   47,290   61,524   (41,321)  160,485 
Inventories  72,682   48,933   21,669   (142)  143,142 
Prepaid expenses  8,176   7,360   3,557      19,093 
   
 
   
 
   
 
   
 
   
 
 
Total current assets  178,776   105,559   91,347   (41,436)  334,246 
Property, plant and equipment, net  13,403   33,441   7,901      54,745 
Goodwill  1,847   114,156   42,301      158,304 
Intangibles, net  239   145,683   96,198      242,120 
Other assets net  546,809   150,148   1,590   (673,702)  24,845 
   
 
   
 
   
 
   
 
   
 
 
Total Assets
 $741,074  $548,987  $239,337  $(715,138) $814,260 
   
 
   
 
   
 
   
 
   
 
 
Liabilities and Shareholders’Equity
                    
Current Liabilities:                    
Notes payable $98,300  $  $13,624  $  $111,924 
Trade accounts payable  77,876   32,760   15,508   (41,333)  84,811 
Accrued compensation  8,241   8,083   2,463      18,787 
Other accrued expenses  15,935   11,729   10,690   (708)  37,646 
Dividends payable  1,950            1,950 
Income taxes payable  (11,789)  12,548   4,559      5,318 
Current maturities of long-term debt  28   98         126 
   
 
   
 
   
 
   
 
   
 
 
Total current liabilities  190,541   65,218   46,844   (42,041)  260,562 
Long term debt, less current portion  198,841   54         198,895 
Noncurrent liabilities  101,640   (84,403)  112,703   (117,142)  12,798 
Deferred income taxes  3,916   47,766   28,991   (10)  80,663 
Total Shareholders’/invested equity  246,136   520,352   50,799   (555,945)  261,342 
   
 
   
 
   
 
   
 
   
 
 
Total Liabilities and Shareholders’ Equity
 $741,074  $548,987  $239,337  $(715,138) $814,260 
   
 
   
 
   
 
   
 
   
 
 
Cash Flow

16


OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27, 2004

13.Consolidating Financial Data of Subsidiary Guarantors (continued):

                     
  Oxford Industries, Inc.
  Consolidated Balance Sheet
  August 29, 2003
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Assets
                    
Current Assets:                    
Cash and cash equivalents $9,759  $6,084  $819  $708  $17,370 
Receivables  98,202   32,895   41,879   (38,531)  134,445 
Inventories  84,162   31,910   1,774      117,846 
Prepaid expenses  11,010   7,790   546      19,346 
   
 
   
 
   
 
   
 
   
 
 
Total current assets  203,133   78,679   45,018   (37,823)  289,007 
Property, plant and equipment, net  15,481   29,820   5,376      50,677 
Goodwill  1,847   86,248         88,095 
Intangibles, net  278   152,087         152,365 
Other assets, net  317,919   4,665   1,714   (302,358)  21,940 
   
 
   
 
   
 
   
 
   
 
 
Total Assets
 $538,658  $351,499   52,108  $(340,181) $602,084 
   
 
   
 
   
 
   
 
   
 
 
Liabilities and Shareholders’ Equity
                    
Current Liabilities:                    
Notes payable $10,000  $  $  $  $10,000 
Trade accounts payable  52,744   27,253   23,998   (37,730)  66,265 
Accrued compensation  8,738   3,857   2,587      15,182 
Other accrued expenses  20,467   10,447   431   (111)  31,234 
Dividends payable  1,694            1,694 
Income taxes payable  (8,180)  12,243   1,118      5,181 
Current maturities of long-term debt  116   98         214 
   
 
   
 
   
 
   
 
   
 
 
Total current liabilities  85,579   53,898   28,134   (37,841)  129,770 
Long term debt, less current portion  198,631   112         198,743 
Noncurrent liabilities  65,688   (63,885)  4,019   3,751   9,573 
Deferred taxes  2,639   51,026   15       53,680 
Total Shareholders’/invested equity  186,121   310,348   19,940   (306,091)  210,318 
   
 
   
 
   
 
   
 
   
 
 
Total Liabilities and Shareholders’ Equity
 $538,658  $351,499  $52,108  $(340,181) $602,084 
   
 
   
 
   
 
   
 
   
 
 

17


OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27, 2004

13.Consolidating Financial Data of Subsidiary Guarantors (continued):

                     
  Oxford Industries, Inc.
  Consolidated Statement of Earnings
  Three Months ended August 27, 2004
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Net Sales
 $146,978  $108,703  $24,513  $(15,404) $264,790 
Cost of goods sold:  117,795   54,316   10,129   (2,372)  179,868 
   
 
   
 
   
 
   
 
   
 
 
Gross Profit
  29,183   54,387   14,384   (13,032)  84,922 
Selling, general and administrative  28,385   42,448   11,069   (12,636)  69,266 
Royalties and other income     1,369   384      1,753 
   
 
   
 
   
 
   
 
   
 
 
Operating Income
  798   13,308   3,699   (396)  17,409 
Interest expense (income), net  8,522   (1,087)  737   (251)  7,921 
Income from equity investment  12,773   44      (12,817)   
   
 
   
 
   
 
   
 
   
 
 
Earnings Before Income Taxes
  5,049   14,439   2,962   (12,962)  9,488 
Income Taxes  (1,264)  3,810   774      3,320 
   
 
   
 
   
 
   
 
   
 
 
Net Earnings
 $6,313  $10,629  $2,188  $(12,962) $6,168 
   
 
   
 
   
 
   
 
   
 
 
                     
  Oxford Industries, Inc.
  Consolidated Statement of Earnings
  Three Months ended August 29, 2003
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Net Sales
 $168,346  $77,948  $8,701  $(12,890) $242,105 
Cost of goods sold:  131,801   39,259   (396)  550   171,214 
   
 
   
 
   
 
   
 
   
 
 
Gross Profit
  36,545   38,689   9,097   (13,440)  70,891 
Selling, general and administrative  29,164   30,839   8,307   (13,020)  55,290 
Royalties and other income     1,180         1,180 
   
 
   
 
   
 
   
 
   
 
 
Operating Income
  7,381   9,030   790   (420)  16,781 
Interest (income) expense, net  6,515   (327)  (23)  (419)  5,746 
Income from equity investment  7,771   14      (7,785)   
   
 
   
 
   
 
   
 
   
 
 
Earnings Before Income Taxes
  8,637   9,371   813   (7,786)  11,035 
Income Taxes  1,795   2,153   245      4,193 
   
 
   
 
   
 
   
 
   
 
 
Net Earnings
 $6,842  $7,218  $568  $(7,786) $6,842 
   
 
   
 
   
 
   
 
   
 
 

18


OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27, 2004
Six Months Ended November 28, 2003

 13. Consolidating Financial Data of Subsidiary Guarantors (continued):

                     
  Oxford Industries, Inc.
  Consolidated Statement of Cash Flow
  August 27, 2004
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Cash Flows From Operating Activities
                    
Net earnings $6,313  $10,629  $2,188  $(12,962) $6,168 
Adjustments to reconcile net earnings to net cash used in operating activities:                    
Depreciation and amortization  3,246   3,487   475      7,208 
Equity income     (323)        (323)
(gain) loss on sale of assets  (43)  98   291   2   348 
Deferred income taxes  (214)  (246)  (343)  (1,372)  (2,175)
Changes in working capital:  (1,900)  61   (6,185)  8,626   602 
Income for equity investment in subsidiaries  (12,773)  (44)     12,817    
Other noncurrent assets  (563)  (1,570)  16   707   (1,410)
Other noncurrent liabilities  1,190   483      1   1,674 
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by operating activities
  (4,744)  12,575   (3,558)  7,819   12,092 
Cash Flows from Investing Activities
                    
Acquisitions net of cash acquired  (5,475)  4   (134,155)     (139,626)
Investment in subsidiaries  (141,807)  (32,616)     174,423    
Investment in deferred comp plan     391         391 
Purchases of property, plant and equipment  (304)  (2,158)  (27)  1   (2,488)
Proceeds from sale of property, plant and equipment  5   5         10 
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by investing activities
  (147,581)  (34,374)  (134,182)  174,424   (141,713)
Cash Flows from Financing Activities
                    
Proceeds (payments) of short-term debt  98,300      (708)     97,592 
Equity contribution received     141,807   32,616   (174,423)   
(Payments) proceeds of loan to subsidiaries     (109,191)  109,191       
Principal payments of long-term debt  64   (1)      2   65 
Proceeds from issuance of common stock  666            666 
Debt issue costs  (2,766)           (2,766)
Change in intercompany payable  9,508   (10,278)  8,540   (7,770)   
Dividends on common stock  6,074      (7,993)  (27)  (1,946)
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by financing activities
  111,846   22,337   141,646   (182,218)  93,611 
Effect of foreign currency translation on cash and cash equivalents        (33)     (33)
Net change in Cash and Cash Equivalents
  (40,479)  538   3,906   25   (36,010)
Cash and Cash Equivalents at the Beginning of Period  45,405   1,438   724   2   47,569 
   
 
   
 
   
 
   
 
   
 
 
Cash and Cash Equivalents at the End of Period $4,926  $1,976  $4,597  $27  $11,526 
   
 
   
 
   
 
   
 
   
 
 

19
   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


 
   ($ in thousands) 
Cash Flows From Operating Activities                     

Net earnings

  $13,683  $12,893  $1,648  $(14,542) $13,682 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

                     

Depreciation and amortization

   3,204   6,376   247   —     9,827 

Equity income

   —     (105)  —     —     (105)

Loss (gain) on sale of assets

   12   (213)  (6)  —     (207)

Deferred income taxes

   (676)  (1,266)  26   952   (964)

Changes in working capital

   (103,853)  95,813   (1,387)  (856)  (10,283)

Income for equity investment in subsidiaries

   (14,520)  (19)  —     14,539   —   

Other noncurrent assets

   (2,331)  (984)  300   (200)  (3,215)

Other noncurrent liabilities

   2,505   2,048   —     —     4,553 
   


 


 


 


 


Net cash (used in) provided by operating activities

   (101,976)  114,543   828   (107)  13,288 
Cash Flows from Investing Activities                     

Acquisitions

   (244,695)  22,325   —     —     (222,370)

Decrease in restricted cash

   204,986   —     —     —     204,986 

Investment in deferred comp plan

   —     (1,439)  —     —     (1,439)

Purchases of property, plant and equipment

   (1,212)  (6,025)  (29)  —     (7,266)

Proceeds from sale of property, plant and equipment

   21   63   (12)  —     72 
   


 


 


 


 


Net cash (used in) provided by investing activities

   (40,900)  14,924   (41)  —     (26,017)
Cash Flows from Financing Activities                     

Principal payments of long-term debt

   (124)  (48)  —     —     (172)

Proceeds from issuance of common stock

   4,956   —     —     —     4,956 

Debt issue costs

   (7,374)  —     —     —     (7,374)

Change in intercompany payable

   128,328   (128,754)  429   (3)  —   

Dividends on common stock

   (3,273)  —     —     —     (3,273)
   


 


 


 


 


Net cash provided by (used in) financing activities

   122,513   (128,802)  429   (3)  (5,863)
Net change in Cash and Cash Equivalents   (20,363)  665   1,216   (110)  (18,592)

Cash and cash equivalents at the beginning of period

   23,022   218   720   131   24,091 
   


 


 


 


 


Cash and cash equivalents at the end of period

  $2,659  $883  $1,936  $21  $5,499 
   


 


 


 


 



OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27, 2004

13.Consolidating Financial Data of Subsidiary Guarantors (continued):

                     
  Oxford Industries, Inc.
  Consolidated Statement of Cash Flow
  Three months ended August 29, 2003
  Oxford Industries Subsidiary Subsidiary Non- Consolidating Consolidated
  (Parent)
 Guarantors
 Guarantors
 Adjustments
 Total
  ($ in thousands)
Cash Flows From Operating Activities
                    
Net earnings $6,842  $7,218  $568  $(7,786) $6,842 
Adjustments to reconcile net earnings to net cash used in operating activities:                    
Depreciation and amortization  1,592   2,940   122      4,654 
Equity income     (105)        (105)
Loss (gain) on sale of assets  (22)  (86)  (7)     (115)
Deferred income taxes  (438)  (472)  (611)  678   (843)
Changes in working capital:  (122,730)  116,410      (99)  (6,419)
Income for equity investment in subsidiaries  (7,771)  (15)     7,786    
Other noncurrent assets  1,759   (521)  157   (3,746)  (2,351)
Other noncurrent liabilities  2,361   1,588         3,949 
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by operating activities
  (118,407)  126,957   229   (3,167)  5,612 
Cash Flows from Investing Activities
                    
Acquisitions  (240,754)  22,325         (218,429)
Decrease in restricted cash  204,986            204,986 
Investment in deferred comp plan     (1,356)        (1,356)
Purchases of property, plant and equipment  (741)  (2,423)  (7)     (3,171)
Proceeds from sale of property, plant and equipment  64   11   30      105 
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by investing activities
  (36,445)  18,557   23      (17,865)
Cash Flows from Financing Activities
                    
Proceeds from short term borrowing  10,000            10,000 
Principal payments of long-term debt  (8)  (23)        (31)
Proceeds from issuance of common stock  4,476         1   4,477 
Debt issue costs  (7,335)           (7,335)
Change in intercompany payable  136,035   (139,625)  (153)  3,743    
Dividends on common stock  (1,579)           (1,579)
   
 
   
 
   
 
   
 
   
 
 
Net cash (used in) provided by financing activities
  141,589   (139,648)  (153)  3,744   5,532 
Net change in Cash and Cash Equivalents
  (13,263)  5,866   99   577   (6,721)
Cash and Cash Equivalents at the Beginning of Period  23,022   218   720   131   24,091 
   
 
   
 
   
 
   
 
   
 
 
Cash and Cash Equivalents at the End of Period $9,759  $6,084  $819  $708  $17,370 
   
 
   
 
   
 
   
 
   
 
 

20


OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 27, 2004

14.Other Comprehensive loss.Accumulated other comprehensive loss is comprised of the effects of foreign currency translation and is disclosed as a component of retained earnings in our consolidated balance sheet.

         
  Quarters Ended
  August 27, 2004
 August 29, 2003
  ($ in thousands)
Foreign currency translation loss, net of tax of $300 $(988) $ 
   
 
   
 
 
Accumulated other comprehensive loss $(988) $ 
   
 
   
 
 

21


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with ourUnaudited Condensed Consolidated Financial Statements”Statementsand theUnaudited Notes to Condensed Consolidated Financial Statements” contained in this report and the Consolidated Financial Statements,” “Notes to Consolidated Financial Statements”Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operationscontained in this report.our fiscal 2004 Form 10-K.

OVERVIEW

We are engaged in the design, production and sale of consumer apparel for men, women and children. Our principal markets and customers are located primarily in the United States. We source these products from third party producers, our owned manufacturing facilities and through our joint venture partners. We distribute our products primarily through our wholesale customers and through our own retail stores.

The most significant factor impacting our results of operations for the current year was the completion of the acquisition of Ben Sherman, which we operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear.

In conjunction with the acquisition of Ben Sherman, our U.S. Revolver was amended and restated on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutionsinstitutions.

RESULTS OF OPERATIONS

The following table sets forthtables set forth: (1) the line items in the Unaudited Condensed Consolidated Statements of Earnings, data both in dollarsthe dollar amounts of each for the periods indicated and the percentage change relative to the comparable period of the prior year, and (2) as a percentage of net sales. The table also sets forth the percentage change of the data as compared to the prior year. We have calculated all percentages set forth below based on actual data, but percentage columns may not add due to rounding. Fiscal 2004Individual line items of our“Unaudited Condensed Consolidated Statements of Earnings” may not be directly comparable to those of our competitors, as income statement classification of certain expenses may vary by company. The results includeof operations of Ben Sherman and the Tommy Bahama Group are included in our consolidated statements of earnings from June 13, 2003 through August 29, 2003. Fiscal 2005 results include Ben Sherman from July 31, 2004 through August 27, 2004.

                         
  Quarters Ended  
  August 27, 2004
 August 29, 2003
 Change ‘04-‘05
  ($ in thousands)
Net sales $264,790   100.0% $242,105   100.0% $22,685   9.4%
Cost of goods sold  179,868   67.9%  171,214   70.7%  8,654   5.1%
   
 
   
 
   
 
   
 
   
 
   
 
 
Gross profit  84,922   32.1%  70,891   29.3%  14,031   19.8%
Selling, general & administrative  67,554   25.5%  53,612   22.1%  13,942   26.0%
Amortization of intangibles  1,712   0.6%  1,678   0.7%  34   2.0%
Royalties & other operating income  1,753   0.7%  1,180   0.5%  573   48.6%
   
 
   
 
   
 
   
 
   
 
   
 
 
Operating income  17,409   6.6%  16,781   6.9%  628   3.7%
Interest expense, net  7,921   3.0%  5,746   2.4%  2,175   37.9%
   
 
   
 
   
 
   
 
   
 
   
 
 
Earnings before income taxes  9,488   3.6%  11,035   4.6%  (1,547)  (14.0%)
Income taxes  3,320   1.3%  4,193   1.7%  (873)  (20.8%)
   
 
   
 
   
 
   
 
   
 
   
 
 
Net earnings $6,168   2.3% $6,842   2.8% $(674)  (9.9%)
   
 
   
 
   
 
   
 
   
 
   
 
 
the respective dates of the acquisition.

ACQUISITION
   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  % Change

  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 
   ($ in thousands) 

Net sales

  $312,869  $253,883  23.2% $577,659  $495,988  16.5%

Cost of goods sold

   212,766   177,051  20.2%  392,634   348,265  12.7%
   

  

  

 

  

  

Gross profit

   100,103   76,832  30.3%  185,025   147,723  25.3%

Selling, general and administrative

   80,169   59,249  35.3%  147,723   112,861  30.9%

Amortization of intangibles

   2,424   1,677  44.5%  4,136   3,355  23.3%

Royalties and other operating income

   3,301   1,140  189.6%  5,054   2,320  117.8%
   

  

  

 

  

  

Operating income

   20,811   17,046  22.1%  38,220   33,827  13.0%

Interest expense, net

   6,855   6,098  12.4%  14,776   11,844  24.8%
   

  

  

 

  

  

Earnings before income taxes

   13,956   10,948  27.5%  23,444   21,983  6.6%

Income taxes

   4,884   4,108  18.9%  8,204   8,301  (1.2)%
   

  

  

 

  

  

Net earnings

  $9,072  $6,840  32.6% $15,240  $13,682  11.4%
   

  

  

 

  

  

   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  Nov. 26, 2004

  Nov. 28, 2003

 
   (As a percentage of net sales) 

Net sales

  100.0% 100.0% 100.0% 100.0%

Cost of goods sold

  68.0% 69.7% 68.0% 70.2%
   

 

 

 

Gross profit

  32.0% 30.3% 32.0% 29.8%

Selling, general and administrative

  25.6% 23.3% 25.6% 22.8%

Amortization of intangibles

  0.8% 0.7% 0.7% 0.7%

Royalties and other operating income

  1.1% 0.4% 0.9% 0.5%
   

 

 

 

Operating income

  6.7% 6.7% 6.6% 6.8%

Interest expense, net

  2.2% 2.4% 2.6% 2.4%
   

 

 

 

Earnings before income taxes

  4.5% 4.3% 4.1% 4.4%

Income taxes

  1.6% 1.6% 1.4% 1.7%
   

 

 

 

Net earnings

  2.9% 2.7% 2.6% 2.8%
   

 

 

 

22

ACQUISITION


On July 30, 2004, we acquired Ben Sherman. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The transaction was financed with cash on hand and borrowings under our U.S. Revolver and Seller Notes payable to the management shareholders of Ben Sherman.

In conjunction with the acquisition of Ben Sherman, our U.S. Revolver was amended and restated on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009.

On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million U.K. Revolver to provide for seasonal working capital requirements and general corporate purposes.

For further discussion of the acquisition, see Note 94 of “Unaudited Notes to Condensed Consolidated Financial StatementsStatements.””. For further discussion of financing arrangements, see the section below titled “Financing Arrangements and Note 5 of “Unaudited Notes to Condensed Consolidated Financial Statements.

TOTAL COMPANY

Second Quarter

Net salesincreased 9.4%23.2% from $242.1$253.9 million in the firstsecond quarter of Fiscalfiscal 2004 to $264.8$312.9 million in the firstsecond quarter of Fiscalfiscal 2005. We generatedThe increase was primarily due to:

A unit sales increase of 7.0%, primarily attributable to the addition of Ben Sherman and increased sales of the Tommy Bahama Group partially offset by a 21.5% increasedecline in the Womenswear Group.

An average selling price per unit increase of 15.2%, primarily attributable to the shift in product mix due to an increase in Menswear sales and an increase in Tommy Bahama sales, both of which have higher average selling prices per unit, and a 10.7% decline in unit sales. The increase in theWomenswear sales, which have a lower average selling price per unit was due to the higher average selling price per unit of Tommy Bahama and Ben Sherman merchandise and the relatively higher proportion of these brands’ sales in the current year. The decline in unit sales was primarily due to the Womenswear Group. Our pre-acquisition businesses (excluding Tommy Bahama and Ben Sherman) experienced an 18.8% decline in unit sales and a 6.1% increase in the average selling price per unit.

Cost of goods soldfor the firstsecond quarter of Fiscalfiscal 2005 was $179.9$212.8 million or 67.9%68.0% of net sales, compared to $171.2$177.0 million or 70.7%69.7% of net sales in the firstsecond quarter of Fiscalfiscal 2004. ExpressedThe decline in cost of goods sold, as a percentage of net sales, the decline in cost of goods sold was primarily due to theto:

The increased shipmentssales of the Tommy Bahama Group, and the additionwhich has higher gross margins.

The acquisition of Ben Sherman, both of which havehas higher gross margins. Our

The decreased sales of the Womenswear Group, which has lower gross margins may not be directly comparable to those of our competitors, as income statement classifications of certain expenses may vary by company.margins.

Selling, general and administrative expenses(“SG&A”) increased from $53.6$59.2 million or 22.1%23.3% of net sales in the firstsecond quarter of Fiscalfiscal 2004 to $67.6$80.2 million or 25.5%25.6% of net sales in the firstsecond quarter of Fiscalfiscal 2005. The increase in SG&A was primarily due toto:

The continued growth in the Tommy Bahama Group, and thewhich has a higher SG&A expense structure.

The acquisition of Ben Sherman.Sherman, which also has a higher SG&A expense structure.

Amortization of intangibleswas unchanged atincreased from $1.7 million in both the firstsecond quarter of Fiscalfiscal 2004 andto $2.4 million in the firstsecond quarter of Fiscalfiscal 2005. Fiscal 2005 includes $1.4The increase was primarily due to $0.9 million for Tommy Bahama and $0.3 million for Ben Sherman. While the purchase price valuation is preliminary, we anticipate theof amortization of intangible assets related tointangibles acquired as part of the Ben Sherman to be $0.9 million per quarter for the balance of Fiscal 2005. Total amortization of intangible assets is expected to be $2.3 million per quarter for the balance of Fiscal 2005.acquisition.

Royalties and other operating incomeincreased from $1.2$1.1 million in the firstsecond quarter of Fiscalfiscal 2004 to $1.8$3.3 million in the firstsecond quarter of Fiscalfiscal 2005 and is primarily licensingdue to:

Licensing income from licensingadditional licenses for the Tommy Bahama andbrand.

Higher revenues from existing licenses for the Tommy Bahama brand.

Licensing income associated with the Ben Sherman brands.brand.

23


Interest expense, netincreased from $5.7$6.1 million in the firstsecond quarter of Fiscalfiscal 2004 to $7.9$6.9 million in the firstsecond quarter of Fiscalfiscal 2005. The increase in interest expense was primarily due to the interest on debt incurred to finance the acquisition of Ben Sherman and the non-cash write-off of $1.8 million of deferred financing costs. The non-cash write-off of the deferred financing cost was due to the amendment of our U.S. Revolver.Sherman.

Income taxes.The effective tax rate was approximately 38.0%37.5% in the firstsecond quarter of Fiscalfiscal 2004 and 35.0% in the firstsecond quarter of Fiscalfiscal 2005. Variations in the effective tax rate arewere primarily attributable to theto:

The acquisition of Ben Sherman, andwhich is subject to lower statutory income tax rates in the United Kingdom.

The relative distribution of pre-tax earnings among the various taxing jurisdictions in which we operate.

SEGMENT DEFINITION

First Half

Net salesincreased 16.5% from $496.0 million in the first half of fiscal 2004 to $577.7 million in the first half of fiscal 2005. The increase was primarily due to:

An average selling price per unit increase of 18.2% for the reasons stated above for the second quarter.

A unit sales decline of 1.8% due to the decline in Womenswear, partially offset by the sales of Ben Sherman and the growth in Tommy Bahama.

Cost of goods soldfor the first half of fiscal 2005 was $392.6 million or 68.0% of net sales, compared to $348.3 million or 70.2% of net sales in the first half of fiscal 2004. The decline in cost of goods sold, as a percentage of net sales, was primarily due to the reasons stated above for the second quarter.

SG&A increased from $112.9 million or 22.8% of net sales in the first half of fiscal 2004 to $147.7 million or 25.6% of net sales in the first half of fiscal 2005. The increase in SG&A was primarily due to the reasons stated above for the second quarter.

Amortization of intangiblesincreased from $3.4 million in the first half of fiscal 2004 to $4.1 million in the first half of fiscal 2005 primarily as a result of the amortization of intangibles acquired as part of the Ben Sherman acquisition.

Royalties and other operating incomeincreased from $2.3 million in the first half of fiscal 2004 to $5.1 million in the first half of fiscal 2005 primarily due to the reasons stated above for the second quarter.

Interest expense, netincreased from $11.8 million in the first half of fiscal 2004 to $14.8 million in the first half of fiscal 2005. The increase in interest expense was due to:

The interest on debt incurred to finance the acquisition of Ben Sherman.

A non-cash write-off of $1.8 million of deferred financing costs resulting from the modification of our U.S. Revolver in the first quarter of fiscal 2005.

Income taxes.The effective tax rate was approximately 37.8% in the first half of fiscal 2004 and 35.0% in the first half of fiscal 2005. Variations in the effective tax rate were primarily due to the reasons stated above for the second quarter.

OUR SEGMENTS

We organize the components of our business for purposes of allocating resources and assessing performance. Our reportable segments are the Menswear Group, the Womenswear Group and the Tommy Bahama Group. The Menswear Group produces a variety of branded and private label sportswear, tailored clothing, dress shirts and golf apparel. The Menswear Group also operates one Ben Sherman retail store and licenses the Ben Sherman brand for other product categories. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses the Tommy Bahama brand for other product categories. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, LIFO inventory accounting adjustments and other costs that are

not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis, which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Segment results are as follows:

                         
  Quarters Ended  
  August 27, 2004
 August 29, 2003
 Change ‘04-‘05
  ($ in thousands)
Net Sales
                        
Menswear Group $118,705   44.8% $115,754   47.8% $2,951   2.5%
Womenswear Group  52,458   19.8%  62,953   26.0%  (10,495)  (16.7%)
Tommy Bahama Group  93,462   35.3%  63,278   26.1%  30,184   47.7%
Corporate and Other  165   0.1%  120   0.0%  45   37.5%
   
 
   
 
   
 
   
 
   
 
   
 
 
Total
 $264,790   100.0% $242,105   100.0% $22,685   9.4%
   
 
   
 
   
 
   
 
   
 
   
 
 
                         
  Quarters Ended  
  August 27, 2004
 August 29, 2003
 Change ‘04-‘05
  ($ in thousands)
Operating Income
                        
Menswear Group $8,921   7.5% $9,475   8.2% $(554)  (5.8%)
Womenswear Group  (966)  (1.8%)  3,224   5.1%  (4,190)  (130.0%)
Tommy Bahama Group  11,916   12.7%  6,959   11.0%  4,957   71.2%
Corporate and Other  (2,462)  N/A   (2,877)  N/A   415   (14.4%)
   
 
   
 
   
 
   
 
   
 
   
 
 
Total
 $17,409   6.6% $16,781   6.9% $628   3.7%
   
 
   
 
   
 
   
 
   
 
   
 
 

* For further information regarding our segments, see Note 7 of “Notes to Consolidated Financial Statements”.

   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  % Change

  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 
   ($ in thousands) 

Net Sales

                       

Menswear Group

  $181,088  $115,353  57.0% $299,793  $231,107  29.7%

Womenswear Group

   45,097   61,841  (27.1)%  97,555   124,794  (21.8)%

Tommy Bahama Group

   86,490   76,389  13.2%  179,952   139,667  28.8%

Corporate and Other

   194   300  (35.3)%  359   420  (14.5)%
   

  

  

 

  

  

Total Net Sales

  $312,869  $253,883  23.2% $577,659  $495,988  16.5%
   

  

  

 

  

  

   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  % Change

  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 
   ($ in thousands) 

Operating Income

                       

Menswear Group

  $18,048  $10,221  76.6% $26,969  $19,696  36.9%

Womenswear Group

   208   1,893  (89.0)%  (758)  5,117  (114.8)%

Tommy Bahama Group

   5,895   7,550  (21.9)%  17,811   14,509  22.8%

Corporate and Other

   (3,340)  (2,618) (27.6)%  (5,802)  (5,495) (5.6)%
   


 


 

 


 


 

Total Operating Income

  $20,811  $17,046  22.1% $38,220  $33,827  13.0%
   


 


 

 


 


 


*For further information regarding our segments, see Note 7 of “Unaudited Notes to Condensed Consolidated Financial Statements.”

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SEGMENT RESULTS

Menswear Group

Second Quarter

The Menswear Group reported a 2.5%57.0% increase in net sales from $115.8$115.3 million in the second quarter of fiscal 2004 to $181.1 million in the second quarter of fiscal 2005. The increase was primarily due to:

$52.7 million of Ben Sherman sales during the period.

A unit sales increase of 53.0% for the segment, primarily due to the Ben Sherman operations and 14.7% from increases in other menswear business, which was primarily in the chain, direct mail and discount distribution channels.

An average selling price per unit increase of 2.3% due to the acquisition of Ben Sherman which has a higher average selling price per unit than other lines.

The Menswear Group reported a 76.6% increase in operating income from $10.2 million in the second quarter of fiscal 2004 to $18.0 million in the second quarter of fiscal 2005. The increase in operating income was primarily due to the higher gross margins in our Ben Sherman business.

First Half

The Menswear Group reported a 29.7% increase in net sales from $231.1 million in the first quarterhalf of Fiscalfiscal 2004 to $118.7$299.8 million in the first quarterhalf of Fiscalfiscal 2005. The change was primarily due to:

$69.2 million of Ben Sherman sales during the period.

A unit sales increase of 0.3% for the segment without considering Ben Sherman, and 25.3% overall.

An average selling price per unit increase of 3.4%, primarily due to the acquisition of Ben Sherman which has a higher average price per unit than other lines.

The Menswear Group reported a 36.9% increase in operating income from $19.7 million in the first half of fiscal 2004 to $27.0 million in the first half of fiscal 2005. The increase resultedin operating income was primarily due to the higher gross margins in our Ben Sherman business.

Womenswear Group

Second Quarter

The Womenswear Group reported a 27.1% decline in net sales from $61.8 million in the second quarter of fiscal 2004 to $45.1 million in the second quarter of fiscal 2005. The change was primarily due to the unit sales decline of 28.7%, primarily in the discount distribution channel, notably with Wal-Mart which has narrowed its womenswear assortment, reduced rack space devoted to women’s apparel and placed greater emphasis on direct sourcing. The decline in unit sales was partially offset by an increase of 1.3% in the average selling price per unit, primarily due to product mix within the discount distribution channel.

The Womenswear Group reported an 89.0% decline in operating profit from $1.9 million in the second quarter of fiscal 2004 to $0.2 million in the second quarter of fiscal 2005. The change was primarily due to the significant decrease in sales, which was slightly offset by operating expense reductions.

First Half

The Womenswear Group reported a 6.1%21.8% decline in net sales from $124.8 million in the first half of fiscal 2004 to $97.6 million in the first half of fiscal 2005. The change was primarily due to the unit sales decline of 25.0% due to the same reasons as described above for the second quarter. The decline in unit sales was partially offset by an increase of 2.6% in the average selling price per unit. The reasons for the increase in the average selling price per unit partially offset bywere the same as described above for the second quarter.

The Womenswear Group reported a 3.2%114.8% decline in unit sales. Ben Sherman contributed $16.6operating income from a profit of $5.1 million in sales. Our other Menswear businesses experienced declinesthe first half of $13.6fiscal 2004 to a loss of $0.8 million including declinesin the first half of $7.3 million with Sears/Lands’ End and $3.4 million of Izod Club Golf sales.fiscal 2005. The Sears/Lands’ End reductiondecrease was primarily due to the prior year benefit of initial fixture load of Lands’ End shopsto:

The reduction in Sears’s stores that did not recursales.

Gross margin pressures.

Tommy Bahama Group

Second Quarter

The Tommy Bahama Group reported a 13.2% increase in the current period. We discontinued our Izod Club Golf business in Fiscal 2004. Operating income declinednet sales from $9.5$76.4 million in the prior periodsecond quarter of fiscal 2004 to $8.9$86.5 million in the current period.second quarter of fiscal 2005. The increase was primarily due to:

A unit sales increase of 7.1%.

An average selling price per unit increase of 4.8% primarily due to product and channel mix.

An increase in the number of retail stores from 39 at the end of the second quarter of fiscal 2004 to 48 at the end of the second quarter of fiscal 2005.

The Tommy Bahama Group reported a 21.9% decline in operating income from $7.6 million in the second quarter of fiscal 2004 to $5.9 million in the second quarter of fiscal 2005. The decline in operating income was primarily due to:

Increased marketing expenses including $2.2 million related to our title sponsorship of the PGA sanctioned “Tommy Bahama Challenge Golf Tournament.”

Increased operating expenses related to the decrease in sales excluding Ben Sherman, partially offset by the operating income of Ben Sherman.opening new retail stores.

Womenswear GroupFirst Half

The Womenswear Group reported a 16.7% decline in net sales from $63.0 million in the first quarter of Fiscal 2004 to $52.5 million in the first quarter of Fiscal 2005. The decline in net sales resulted from a 22.0% decline in unit sales partially offset by a 5.5% increase in the average selling price per unit. The decline in sales was primarily due to decreased sales to Wal-Mart. These sales declines were partially offset by increased sales to other customers in the department store and direct mail distribution channels. Operating income declined from $3.2 million in the first quarter of Fiscal 2004 to an operating loss of $1.0 million in the first quarter of Fiscal 2005. The decline in operating income was the result of the sales decline and margin pressures due to competitive market conditions and the continuing emphasis on direct sourcing by our key customers.

Tommy Bahama Group

Tommy Bahama was acquired on June 13, 2003. Tommy Bahama was included for 11 of 13 weeks in the first quarter of Fiscal 2004 and the entire first quarter of Fiscal 2005. Sales of Tommy Bahama for the two weeks immediately prior to the acquisition were $11.7 million and operating income for that period was $1.2 million.

The Tommy Bahama Group reported a 47.7%28.8% increase in net sales from $63.3 million for the first quarter of Fiscal 2004 to $93.5$139.7 million in the first quarterhalf of Fiscalfiscal 2004 to $180.0 million in the first half of fiscal 2005. The increase in sales was primarily due to increased wholesale sales with existing customers, increased retail sales from eleven more retail storesto:

Ownership of Tommy Bahama for 24 of 26 weeks in operation, and the additional two weeksfirst half of sales in Fiscal 2005fiscal 2004 as compared to Fiscal 2004. Overall, Tommy Bahama experienced a 33.9% increase inthe entire first half of fiscal 2005.

A unit sales and a 10.0% increase in the average selling price per unit. The increase in theof 21.2%.

An average selling price per unit wasincrease of 5.8% primarily due to product and channel mix. The

An increase in the number of total retail operation grewstores from 34 retail locations39 at the end of the first quarterhalf of Fiscal 2004 to 45 retail locations48 at the end of the first quarterhalf of Fiscal 2005. Operating

The Tommy Bahama Group reported a 22.8% increase in operating income increased from $7.0$14.5 million in the first quarterhalf of Fiscalfiscal 2004 to $11.9$17.8 million in the first quartersecond half of Fiscalfiscal 2005. The increase in operating income was due tobenefit of the increase in sales increased leveraging ofresulting from owning Tommy Bahama for the entire period noted above was partially offset by the increase in operating expenses anddescribed above for the inclusion of two additional weeks in the first quarter of Fiscal 2005 as compared to the first quarter of Fiscal 2004.second quarter.

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Corporate and Other

Second Quarter

The Corporate and Other operating loss declinedincreased from $2.9$2.6 million in the second quarter of fiscal 2004 to $3.3 million in the second quarter of fiscal 2005. The increase in the operating loss was primarily due to increased employment costs.

First Half

The Corporate and Other operating loss increased from $5.5 million in the first quarterhalf of Fiscalfiscal 2004 to $2.5$5.8 million in the first quarterhalf of Fiscal 2005fiscal 2005. The increase in the operating loss was primarily due to the favorable impact ofincreased employment costs partially offset by LIFO accounting in the first quarter of Fiscal 2005 as compared to the first quarter of Fiscal 2004.inventory accounting.

LIQUIDITY AND CAPITAL RESOURCES

Financing Arrangements

On May 16, 2003, we completed a $200 million private placement of senior unsecured notes to finance the acquisition of Tommy Bahama. The notes bear interest at 8.875%, have an 8-year life and were sold at a discount of 0.713%, or $1.4 million, to yield an effective interest rate of 9.0%. Interest is payable semi-annually with the principal amount due at maturity on June 1, 2011. The notes are guaranteed by all existing and future direct and indirect domestic wholly owned restricted subsidiaries of Oxford Industries, Inc. The senior notes indenture restricts our ability to incur additional indebtedness or liens, to enter into lease or hedging arrangements, to make investments and acquisitions, to sell assets, to pay dividends and to pay amounts due under the earnout agreement with the selling shareholders of the Tommy Bahama Group. The indenture also requires us to maintain a minimum consolidated fixed charge coverage ratio which is defined as the sum of consolidated net income, consolidated interest expense and non-cash charges to consolidated interest expense, calculated as applicable on a pro forma basis. We are in compliance with these covenants as of August 27, 2004.

U.S. Revolver

In associationconnection with the Ben Sherman acquisition on July 30, 2004, our U.S. Revolver was amended on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. Under the amended U.S. Revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of total debt to EBITDA, calculated as applicable on a pro forma basis. The credit agreement also requires us to maintain certain financial ratios including the ratio of total debt to EBITDA, the ratio of senior debt to EBITDA, a fixed charge coverage ratio and an interest coverage ratio.ratios. Our borrowings under the amended U.S. Revolver are no longer subject to a borrowing base calculation based on our accounts receivable, inventories and real property. The amendment of our U.S. Revolver resulted in a write-off of deferred financing costs of $1.8 million in the first quarter of Fiscalfiscal 2005. We are in compliance with thesethe covenants as of August 27,November 26, 2004. At August 27,November 26, 2004, gross availability under the U.S. Revolver totaled $280.0 million, against which approximately $112.9$129.8 million in letters of credit and $98.3$116.7 million in direct borrowings were outstanding.

In conjunction with our acquisition of Ben Sherman on July 30,

On November 19, 2004, we entered into Seller Notesamended the agreements governing our lockbox activities associated with the management shareholdersU.S. Revolver. In accordance with accounting principles generally accepted in the United States, the terms of Ben Sherman. The Seller Notes total £3.5the new agreements resulted in the reclassification of all debt outstanding under our $280 million (or approximately $6.3 million)U.S. Revolver from a current liability to a non-current obligation on our balance sheet as of November 26, 2004. As a result of these agreements and are payable on demand beginning six months after July 30, 2004. The notes bear interest at the annual rateresulting reclassification, certain of LIBOR plus 1.2%our financial ratios, including but not limited to the current ratio, in current and is payable on the last day of September, December, March and June, until the principal has been paid.future periods may not necessarily be comparable to prior periods.

U.K. Revolver

On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million U.K. Revolver to provide for seasonal working capital requirements and general corporate purposes. The facility is secured by substantially all of the United Kingdom assets of Ben Sherman and bears interest at the lender’s prime or base rate plus 1.2%. The facility is payable on demand and requires the borrower to maintain certain financial ratiosratios. Ben Sherman is in compliance with these covenants as of November 26, 2004.

26


Senior Unsecured Notes

includingOn May 16, 2003, we completed a minimum$200 million private placement of our Senior Unsecured Notes to finance the acquisition of the Tommy Bahama Group. The notes bear interest coverage ratio,at 8.875%, have an 8-year life and were sold at a minimum asset coverage ratiodiscount of 0.713%, or $1.4 million, to yield an effective interest rate of 9.0%. Interest is payable semi-annually with the principal amount due at maturity on June 1, 2011. The notes are guaranteed by all of our existing and a minimum levelfuture direct and indirect domestic wholly owned restricted subsidiaries. Among other restrictions, the indenture restricts our ability to incur additional indebtedness or liens, to enter into lease or hedging arrangements, to make investments and acquisitions, to sell assets, to pay dividends and to pay amounts due under the earnout agreement with the selling shareholders of earnings before interest, taxesthe Tommy Bahama Group. The indenture also requires us to maintain certain financial ratios and intangible asset amortization.covenants. We are in compliance with these covenants as of August 27,November 26, 2004.

Seller Notes

In conjunction with our acquisition of Ben Sherman on July 30, 2004, we entered into Seller Notes with the management shareholders of Ben Sherman. The Seller Notes total approximately $6.9 million and are payable on demand beginning six months after July 30, 2004. The Seller Notes bear interest at the annual rate of LIBOR plus 1.2% payable on the last day of September, December, March and June until the principal has been paid in full.

Operating Activities

The cash flow from operating activities is primarily due to net earnings and changes in working capital. Changes in working capital are primarily monitored by analysis of the investment in accounts receivable and inventories and by the amount of accounts payable.

During the first quarterhalf of Fiscalfiscal 2005, we generated cash from operating activities of $12.1$14.7 million primarily from net earnings and non-cash charges andoffset by a slightnet increase in working capital after giving effect to the acquisition of Ben Sherman. Working capital changes included increased inventories, decreased trade payables and decreased accrued expenses offset by decreased accounts receivable. The inventory increase occurred in our Tommy Bahama businesses to support increased sales. Trade payables decreased primarily due to the decline in inventory purchases during the first quarter of Fiscal 2005 compared to the fourth quarter of Fiscal 2004. The decline in accrued expenses was primarily due to incentive compensation and interest accrued at the end of Fiscal 2004 and paid in the first quarter of Fiscal 2005. The accounts receivable decline was due to the decline in sales in the last two months of the first quarter of Fiscal 2005 compared to the last two months of the fourth quarter of Fiscal 2004.

During the first quarterhalf of Fiscalfiscal 2004, we generated cash from operating activities of $5.6$13.3 million primarily from net earnings and non-cash charges andoffset by a slightnet increase in working capital after giving effect to the acquisition of Tommy Bahama. Working capital changes included decreased accounts payable and accrued expenses partially offset by decreased inventory and decreased receivables. The decreased trade payables was primarily due to the decline in inventory purchases. The decline in accrued expenses was primarily due to incentive compensation accrued at the end of Fiscal 2003 and paid in the first quarter of Fiscal 2004. The decline in inventory occurred primarily in our preacquisition business. The decline in accounts receivable was the same as described above for the current year.

Investing Activities

During the first quarterhalf of Fiscalfiscal 2005, investing activities used $141.7$146.5 million in cash, principally for the acquisition of Ben Sherman as well as payments related to the Tommy Bahama earn-out agreement. Capital expenditures of $6.5 million were primarily related to new Tommy Bahama retail stores as well as leasehold improvements and office equipment associated with the Tommy Bahama corporate offices.

During the first half of fiscal 2004, investing activities used $26.0 million in cash, principally for the acquisition of the Ben Sherman.Tommy Bahama Group net of the reduction in restricted proceeds from the sale of the Senior Unsecured Notes. Capital expenditures of $2.5$7.3 million were primarily related to new Tommy Bahama retail stores, computer equipment and software.

During the first quarter of Fiscal 2004, investing activities used $17.8 million in cash and principally for the acquisition of the Tommy Bahama net of the reduction in restricted proceeds from the sale of the senior unsecured notes. Capital expenditures of $3.2 million were primarily related to new Tommy Bahama retail stores, computer equipment and software.

Financing Activities

During the first quarterhalf of Fiscalfiscal 2005, financing activities generated $93.6$103.2 million in cash. This represents the amount ofproceeds from increased U.S. Revolver debt, issuance of Seller Notes to finance the acquisition of Ben Sherman and proceeds from the issuance of common stock upon the exercise of employee stock options, partially offset by payments of deferred financing cost to amend our U.S. Revolver and payment of dividends on our common stock.

27


During the first quarter of Fiscal 2004, financing activities generated $5.5 million in cash. This represents an increase in revolver debt and proceeds from the issuance of common stock upon the exercise of employee stock options, partially offset by payments ofon the U.K. Revolver during the period, deferred financing costpaid to amend our U.S. Revolver and payment of dividends on our common stock.shares.

During the first half of fiscal 2004, financing activities used $5.9 million in cash. This represents payments on debt issuance costs related to the issuance of our Senior Unsecured Notes and dividends partially offset by proceeds from the issuance of common shares upon the exercise of employee stock options.

We have no off-balance sheet financing arrangements.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon ourUnaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgementsjudgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, contingencies and litigation and certain other

accrued expenses. We base our estimates on historical experience and on various other assumptions that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Securities and Exchange Commission’s Financial Reporting Release No. 60 requires all companies to include a discussion of the significant estimates, assumptions and judgments that underlie their critical accounting policies or methods used in the preparation of financial statements. The detailed See the “Summary of SignificantCritical Accounting Policies is included in theNotes to Consolidated Financial Statementscontained in this report. The following is a brief discussion of the moreour fiscal 2004 Form 10-K. There have been no significant changes in our critical accounting policies and methods we use.as disclosed in our fiscal 2004 Form 10-K.

Revenue Recognition and Accounts Receivable

We consider revenue realized or realizable and earned when the following criteria are met:SEASONALITY

persuasive evidence of an agreement exists,
delivery has occurred,
our price to the buyer is fixed and determinable, and
collectibility is reasonably assured.

Sales are recorded net of discounts, as well as provisions for estimated returns and allowances. We estimate returns and allowances on an ongoing basis considering historical and current trends and projected seasonal results. We record these costs as a reduction to net revenue. Our historical estimates of these sales reductions have not differed materially from actual results. For accounts receivable, we estimate the net collectibility, considering both historical and anticipated trends of trade discounts and co-op advertising deductions taken by our customers, allowances we provide to our retail customers for a variety of reasons, and the possibility of non-collection due to the financial position of our customers. Credit losses are charged to SG&A.

Inventories

For segment reporting, inventory is carried at the lower of first-in first-out (“FIFO”) cost or market. For wholesale inventory, we estimate the amount of goods that we will not be able to sell in the

28


normal course of business and write down the value of these goods to the recovery value expected to be realized through off-price channels yielding a normal gross margin when shipped. For Tommy Bahama retail inventory, we provide an allowance for shrinkage and goods expected to be sold below cost. If we incorrectly anticipate these trends or unexpected events occur, the results of operations could be materially affected. For consolidated financial reporting, significant portions of our inventory are valued at the lower of LIFO cost or market. LIFO inventory calculations are made on a legal entity basis, which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. As part of our LIFO accounting, markdowns for inventory valued at LIFO cost are deferred until the period in which the goods are sold. However, in non-routine circumstances, such as discontinuance of a product line, markdowns below the allocated LIFO reserve are not deferred. Both the LIFO reserve and the markdown deferral are reflected in Corporate and Other.

Goodwill

The evaluation of the recoverability of goodwill under SFAS 142 requires valuations of each applicable underlying business using fair value techniques and market comparable. These valuations can be significantly affected by estimates of future performance and discount rates over a relatively long period of time, market price valuation multiples and transactions in related markets. These estimates will likely change over time. Goodwill is required to be evaluated annually, or more frequently if events or changes in circumstances indicate that the carrying amount may exceed fair value. If this review indicates an impairment of goodwill balances, the amount of impairment will be recorded immediately and reported as a component of current operations. The business valuation reviews required by SFAS 142 were performed as of the end of the first quarter of fiscal 2005 and indicated that no reduction of the carrying value of goodwill for our business units was required.

Intangible Assets Other than Goodwill

Intangible assets with finite lives are amortized while intangible assets with indefinite useful lives are not amortized, but tested at least annually for impairment. The valuation of the recoverability of indefinite lived intangibles can be significantly impacted by estimates of future cash flows and discount rates over a relatively long period of time, which will likely change over time. Intangible assets whose useful lives are finite are amortized over their useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized.

Legal and Tax Contingencies

We are involved in tax and legal proceedings, claims and litigation arising in the ordinary course of business. We periodically assess our liabilities and contingencies in connection with these matters, based upon the latest information available. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we have recorded reserves in the consolidated financial statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, we are unable to make a reasonable estimate of a liability, if any. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

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Cost of Goods Sold

We include in cost of goods sold all manufacturing and sourcing costs and expenses incurred prior to receipt of finished goods at our distribution facilities. These costs principally include product cost, inbound freight charges, purchasing costs, internal transfer costs, as well as insurance, duty, brokers’ fees and consolidators’ fees. Our gross margins may not be directly comparable to those of our competitors, as income statement classifications of certain expenses may vary by company.

Selling, General and Administrative Expenses

We include in SG&A, costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of warehousing, picking, packing, shipping and handling goods for delivery to customers. In addition, SG&A includes product design costs, selling costs, royalty costs, advertising, promoting and marketing expenses and general and administrative expenses.

Distribution Network Costs, Including Shipping and Handling

Distribution network costs, including shipping and handling, are included as a component of SG&A. Revenues received from customers for shipping and handling are included in net revenue.

Advertising

All costs associated with advertising, promoting and marketing of our products are expensed during the periods when the activities take place. Costs associated with cooperative advertising programs under which we agree to share costs of customers’ advertising and promotion expenditures are expensed when the related revenues are recognized. Advertising, promotion and marketing expenses are included in SG&A.

Seasonality

Although our various product lines are sold on a year-round basis, the demand for specific products or styles may be highly seasonal. For example, the demand for golf and Tommy Bahama products is higher in the spring and summer seasons. Products are sold prior to each of our retail selling seasons, including spring, summer, fall and holiday. AsBecause the timing of product shipments and other events affecting the retail business may vary, results for any particular quarter may not be indicative of results for the full year. The percentage of net sales distribution by quarter for Fiscalfiscal 2004 were 22%, 23%, 25% and 30%, respectively, and the percentage of net earnings by quarter for Fiscalfiscal 2004 were 17%, 17%, 24% and 42%, respectively.

FUTURE LIQUIDITY, AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS

Cash flow from operations is our primary source of liquidity. Our projected capital expenditures for all of Fiscalfiscal 2005 are approximately $20$18 million. We anticipate that cash flows from operations supplemented with borrowings as necessary under our amended U.S. Revolver and U.K. Revolver will be sufficient to fund our future liquidity requirements for Fiscalthe remainder of fiscal 2005.

We have no off-balance sheet arrangements.

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FORWARD OUTLOOK

We anticipate Fiscal 2005 sales in the range of $1.285 billion to $1.325$1.310 billion and earnings per diluted share in the range of $2.70$2.60 to $2.85.$2.75. For the secondthird quarter of Fiscal 2005, we anticipate sales in the range of $305$350 million to $315$365 million and earnings per diluted share in the range of $0.48$0.65 to $0.52.$0.71. For the fourth quarter of Fiscal 2005, we anticipate sales in the range of $355 million to $370 million and earnings per diluted share in the range of $1.06 to $1.15.

UNITED STATES SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Forward-lookingThe statements reflect our current expectationsin this section are forward-looking statements subject to the risks and are not guarantees of performance. Theseuncertainties described below in “Cautionary Statements Regarding Forward-Looking Statements.”

CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS

Our Securities and Exchange Commission filings and public announcements often include forward-looking statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information.about future events. Important assumptions relating to these forward looking statements include, among others, assumptions regarding demand for our products, expected pricing levels, raw material costs, the timing and cost of planned capital expenditures, expected outcomes of pending litigation, competitive conditions, general economic conditions and expected synergies in connection with acquisitions and joint ventures, including the acquisition of Ben Sherman. Forward-looking statements reflect our current expectations and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. These beliefs and assumptions could prove inaccurate. Forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these risks are beyond our ability to control or predict. Such risks include, but are not limited to, all of the risks discussed under “Risk Factors” and the following:

general economic cycles;
competitive conditions in our industry;
price deflation in the worldwide apparel industry;
our ability to identify and respond to rapidly changing fashion trends and to offer innovative and upgraded products;
changes in trade quotas or other trade regulations;
significant changes in expected weather patterns (e.g., an unseasonably warm autumn) or natural disasters such as hurricanes, fires or flooding;
the price and availability of raw materials;
our dependence on and relationships with key customers;
the ability of our third party producers to deliver quality products in a timely manner;
potential disruptions in the operation of our distribution facilities;
the integration of Ben Sherman into our company;
economic and political conditions in the foreign countries in which we operate or source our products;

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increased competition from direct sourcing;
our ability to maintain our licenses;
our ability to protect our intellectual property and prevent our trademarks, service marks and goodwill from being harmed by competitors’ products;
our ability to successfully implement our growth plans for the acquired businesses;
our reliance on key management;
risks associated with changes in global currency exchange rates;
the impact of labor disputes and wars or acts of terrorism on our business;
the effectiveness of our disclosure controls and procedures related to financial reporting;
our inability to retain current pricing on our products due to competitive or other factors;
the impact of reduced travel to resort locations on our sales;
risks related to our operation of restaurants under theTommy Bahamaname;
the expansion of our business through the acquisition of new businesses;
our ability to open new retail stores; and
unforeseen liabilities associated with our acquisitions of the Tommy Bahama Group and Ben Sherman.

Other risks or uncertainties may be detailed from time to time in our future Securities and Exchange Commission filings.uncertainties. Should one or more of

these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Many of these risks and uncertainties are beyond our ability to control or predict. Such risks and uncertainties include, but are not limited to, all of the risks discussed under “Risk Factors” in our fiscal 2004 Form 10-K, including the following:

general economic cycles;

competitive conditions in our industry;

price deflation in the worldwide apparel industry;

our ability to identify and respond to rapidly changing fashion trends and to offer innovative and upgraded products;

changes in trade quotas or other trade regulations;

our ability to continue to finance our working capital and growth on acceptable terms;

significant changes in weather patterns (e.g., an unseasonably warm autumn) or natural disasters such as hurricanes, fires or flooding;

the price and availability of raw materials;

our dependence on and relationships with key customers;

the ability of our third party producers to deliver quality products in a timely manner;

potential disruptions in the operation of our distribution facilities;

Any disruption or failure of our computer systems or data network.

the integration of Ben Sherman into our company;

our ability to successfully implement our growth plans for the acquired businesses;

unforeseen liabilities associated with our acquisitions of the Tommy Bahama Group and Ben Sherman;

economic and political conditions in the foreign countries in which we operate or source our products;

increased competition from direct sourcing;

our ability to maintain our licenses;

our ability to protect our intellectual property and prevent our trademarks, service marks and goodwill from being harmed by competitors’ products;

our reliance on key management;

risks associated with changes in global currency exchange rates;

the impact of labor disputes and wars or acts of terrorism on our business;

the effectiveness of our disclosure controls and procedures related to financial reporting;

our inability to retain current pricing on our products due to competitive or other factors;

the expansion of our business through the acquisition of new businesses; and

our ability to open new retail stores.

Other risks or uncertainties may be detailed from time to time in our future Securities and Exchange Commission filings.

We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.otherwise, except as required by law.

ADDITIONAL INFORMATION

For additional information concerning our operations, cash flows, liquidity and capital resources, this analysis should be read in conjunction with theConsolidated Financial Statementsand theNotes to Consolidated Financial Statementscontained in our Fiscal 2004 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

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Interest rate risk is managed through the maintenance of a portfolio of variable and fixed rate debt composed of short and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. We generally do not engage in hedging activities with respect to such risk.risk and do not enter into such transactions on a speculative basis.

We finance our capital needs through available cash, operating cash flow, letters of credit and bank revolving credit facilities.

At August 27,November 26, 2004, we had variable rate debt of $111.9$123.6 million. Our average variable rate borrowings for the threesix months ended August 27,November 26, 2004 were $48.2$78.5 million, with an average interest rate of 4.7%4.4%. If the three-monthsix-month average interest rate increased by 10%, our interest expense would have changed by $41,000.$163,711.

FOREIGN CURRENCY RISK

We receive United States dollars for substantially all of our product sales except Ben Sherman. Sales generated by Ben Sherman’s U.K. operations are denominated in pounds sterling and euros. Substantially all inventory purchases from contract manufacturers throughout the world are also denominated in United States dollars. However, purchase prices for our products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies of the contract manufacturers, which may have the effect of increasing our cost of goods sold in the future. Exchange rate fluctuations have not had a material impact on our inventory costs; however, due to the number of currencies involved and the fact that not all foreign currencies react in the same manner against the United States dollar, we cannot quantify in any meaningful way the potential effect of such fluctuations on future income.

In connection with the acquisition of Ben Sherman, we entered into foreign exchange forward contracts to fix the currency exchange rate between the United States dollar and the pound sterling from the agreement date until the closing and funding of the acquisition. The contracts totaled £76 million at an average exchange rate of $1.8118 per £1.00.

Ben Sherman engages in forward exchange contracts for the purchase of finished productproducts from production sources in Asia where the currency denomination of choice is the United States dollar. These contracts are marked to market and are not material.

TRADE POLICY RISK

Under the terms of bilateral agreements between most of the major apparel exporting countries and the United States, most categories of our products are subject to quotas limiting the quantity of such products that may be imported into the United States. Utilization of these quotas is typically controlled at origin by an export license or visa system administered by the exporting country and is monitored and enforced by United States Customs and Border Protection at the time of importation. Since we own or directly control only a small portion of the quota we need, we rely on our suppliers and vendors to secure the visas or licenses required to ship our products. If our suppliers and vendors fail to secure the necessary visas or licenses as agreed with us, our supply chain could be disrupted. The requirement for visas or licenses was eliminated effective for goods exported from their country of origin on or after January 1, 2005. Thus, the requirement only applies to goods exported on or before December 31, 2004, some of which might still be in transit.

If an exporting country fails to properly administer its quota and issues visas or export licenses in excess of the quantity permitted under the terms of its bilateral agreement with the United States, entry of the goods covered by such export license or visa could be denieddelayed. The United States has announced that any goods exported during 2004 in excess of the applicable quota limit will not be permitted entry into the United States.States until February 1, 2005 at which time a “staged entry” process will begin. The staged entry process could, depending on the extent of any overshipment, take several months to complete. Such a denialdelay could disrupt our supply chain.

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Since the quotas under the bilateral agreements described above are country-specific, the United States has established detailed country of origin criteria that a product must meet to be eligible to use a particular country’s quota. If we, or our vendors or suppliers, fail to comply with these country of origin requirements or fail to be able to document our compliance with such requirements, our products may be denied entry into the United States. Such a denial could disrupt our supply chain.

The 1994 Agreement on Textiles and Clothing among World Trade Organization (“WTO”) countries mandatesmandated the elimination of textile and apparel product quotas for WTO countries, including the United States, on January 1, 2005. As a result, there will be changes in the international textile and apparel trade is undergoing a significant realignment which may significantly impactis changing our sourcing patterns, could disrupt our supply chain and could put us at a disadvantage to our competitors.

Some of the impact

The elimination of quota elimination may begin incould impact some shipments during the latterfirst part of calendar 2004.2005. Historically, exporting countries have been permitted under the terms of their bilateral agreements with the United States to borrow a limited amount of quota from the following year. Since there will beis no quota in calendar 2005, none iswas available for this type of borrowing in calendar 2004. The unavailability of this type of quota borrowing could lead tomay have created quota shortages in the latter part of calendar 2004, which could have caused exporting countries to ship goods in excess of their 2004 limit. Any such overshipment would be subject to the staged entry process described above which could cause disruption in our supply chain.

In addition, notwithstanding quota elimination, under the terms of China’s WTO accession agreement, the United States and other WTO members may re-impose quotas on specific categories of products in the event it is determined that imports from China have surged or may surge and are threatening to create a market disruption for such categories of products (so called “safeguard quota”). China is a major source of production for us, and the re-imposition of safeguard quotas on China following the elimination of the existing quota regime on January 1, 2005 could cause disruption in our supply chain.

Furthermore, under long-standing statutory authority applicable to imported goods in general, the United States may unilaterally impose additional duties: (i) when imported merchandise is sold at less than fair value and causes material injury, or threatens to cause material injury, to the domestic industry producing a comparable product (generally known as “anti-dumping” duties); or (ii) when foreign producers receive certain types of governmental subsidies, and when the importation of their subsidized goods causes material injury, or threatens to cause material injury, to the domestic industry producing a comparable product (generally known as “countervailing” duties). The imposition of anti-dumping or countervailing duties on products we import would increase the cost of those products to us. We may not be able to pass on any such cost increase to our customers. There are numerous free trade agreements pending, including the United States-Central American Free Trade Agreement that, if adopted, could put us as a disadvantage to some of our competitors.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information that we are required to disclose in our Securities Exchange Act of 1934 (the “Securities Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief

The Company’s Principal Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Our Chief Executive Officer and ChiefPrincipal Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chiefour Principal Executive Officer and the ChiefPrincipal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.effective in ensuring that information required to be disclosed by us in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in the our internal controls over financial reporting (as such term is defined in Rule 13a-1513a-15(f) and 15d-1515d-15(f) under the Securities Exchange Act) during the fiscal quarter ended August 27,November 26, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may become subject to litigation or claims. There are no material pending legal proceedings, proceedings known to be contemplated by governmental authorities or changes in items previously disclosed involving us during the quarter ended November 26, 2004, requiring disclosure under Item 103 of Regulation S-K.

ITEM 6. EXHIBITS2. UNREGISTERED SALES OF EQUITY SECURITIES AND REPORTS ON FORM 8-KUSE OF PROCEEDS

(a) Exhibits.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Company’s Annual Meeting of Shareholders held on October 4, 2004, the shareholders:

10.1a.Elected S. Anthony Margolis, James A. Rubright, Helen B. Weeks and E. Jenner Wood III as Class I nominees to the Board of Directors to serve three year terms as follows:

For

  Oxford Industries, Inc. Long Term Incentive Plan.14,194,959
 
10.2

Withheld:

  854,664

b.Approved the Oxford Industries, Inc. Employee Stock Purchase Plan.Plan as follows:

For:

10,604,632 
31.1

Against:

  Section 302 Certification by Chief Executive Officer.1,308,619
 
31.2

Abstention:

  Section 302 Certification by Chief Financial Officer.14,814
 
32.1

Broker Non-Vote:

  Section 906 Certification by Chief Executive Officer.3,121,558

c.Approved the Oxford Industries, Inc. Long-Term Incentive Plan as follows:

For:

8,882,234 
32.2

Against:

  Section 906 Certification by Chief Financial Officer.3,028,907

Abstention:

16,924

Broker Non-Vote:

3,121,558

d.Approved the ratification of Ernst & Young LLP as the Company’s independent auditors as follows:

For:

14,991,912

Against:

31,464

Abstention:

26,247

(b) Reports on Form 8-K.

We filed a current report on Form 8-K on July 28, 2004 furnishing our year end earnings release.

We filed a current report on Form 8-K on August 2, 2004 furnishing our press release regarding the completion of our Ben Sherman acquisition.

We filed a current report on Form 8-K on August 13, 2004 furnishing certain financial information relating to Ben Sherman prepared in accordance with United Kingdom GAAP.

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SIGNATURESITEM 5. OTHER INFORMATION

 

None

ITEM 6. EXHIBITS

(a) Exhibits.

31.1 Section 302 Certification by Principal Executive Officer.

31.2 Section 302 Certification by Principal Financial Officer.

32.1 Section 906 Certification by Principal Executive Officer.

32.2 Section 906 Certification by Principal Financial Officer.

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.

Dated January 5, 2005

 
Date: October 5, 2004/s/ OXFORD INDUSTRIES, INC.

(Registrant)
  (Registrant)

Date: October 5, 2004/s/ J. Hicks Lanier

J. Hicks Lanier
Chief Executive Officer
  
Date: October 5, 2004

/s/ Ben B. Blount, Jr.
Thomas Caldecot Chubb III


Ben B. Blount, Jr
Chief Financial Officer
  Thomas Caldecot Chubb III
Date: October 5, 2004 /s/ K. Scott Grassmyer

Executive Vice President
 K. Scott Grassmyer
Controller and
Chief Accounting Officer(Principal Financial Officer)

 


OXFORD INDUSTRIES, INC.
EXHIBIT INDEX TO FORM 10-Q
August 27, 2004

Exhibit 10.1 Oxford Industries, Inc. Long Term Incentive Plan.
Exhibit 10.2 Oxford Industries, Inc Employee Stock Purchase Plan.
Exhibit 31.1 Section 302 Certification by Chief Executive Officer.
Exhibit 31.2 Section 302 Certification by Chief Financial Officer.
Exhibit 32.1 Section 906 Certification by the Chief Executive Officer.
Exhibit 32.2 Section 906 Certification by the Chief Financial Officer.

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