UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þQuarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934
þ Quarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934
For the quarterly period endedSEPTEMBER DECEMBER 2, 2005
OR
oTransition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934
o Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934
For the transition period fromtofrom____ to____
Commission File Number 1-4365
OXFORD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
   
Georgia
 
58-0831862
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification number)
222 Piedmont Avenue, N.E., Atlanta, Georgia 30308

(Address of principal executive offices, 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.
YesþNoo
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act. YesþNoo
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yeso    Noþ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
   
  Number of shares outstanding
Title of each class as of October 5, 2005
January 9, 2006
Common Stock, $1 par value 17,060,70117,611,041
 
 

 

OXFORD INDUSTRIES, INC.
INDEX TO FORM 10-Q
For quarter ended SeptemberDecember 2, 2005
   
  Page
PART I. FINANCIAL INFORMATION
  
 
Item 1. Unaudited Condensed Consolidated Financial Statements
  
Condensed Consolidated Statements of Earnings (Unaudited)
 54
Condensed Consolidated Balance Sheets (Unaudited Except for June 3, 2005)(Unaudited)
 65
Condensed Consolidated Statements of Cash Flows (Unaudited)
 76
Notes to Unaudited Condensed Consolidated Financial Statements
 87
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 1617
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 2426
Item 4. Controls and Procedures
 2628
 
PART II. OTHER INFORMATION
  
 
Item 1. Legal Proceedings
 2729
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 2729
Item 3. Defaults Upon Senior Securities
 2729
Item 4. Submission of Matters to a Vote of Security Holders
 2729
Item 5. Other Information
 2729
Item 6. Exhibits
 2729
Signatures
 27
EX-3(A) BYLAWS OF THE COMPANY, AS AMENDED
EX-10.1 FIRST AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN30
 EX-31.1 SECTION 302 CERTIFICATION OF THE PEO
 EX-31.2 SECTION 302 CERTIFICATION OF THE PFO
 EX-32 SECTION 906 CERTIFICATION OF THE PEO &AND PFO

2

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Our Securities and Exchange Commission filings and public announcements often include forward-looking statements about future events. We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. 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 involve risks and 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:
•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, including “safeguard” quotas;
•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 and finished goods;
•the impact of rising energy costs on our costs and consumer spending;
•our dependence on and relationships with key customers;
•consolidation among our customer base;
•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 our acquired businesses;
•our ability to successfully implement our growth plans, including growth by acquisition;
•unforeseen liabilities associated with our acquisitions;
•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;

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•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 and our ability to develop effective succession plans;
•our ability to develop and maintain an effective organizational structure;
•risks associated with changes in global currency exchange rates;
•changes in interest rates on our variable rate debt;
•the impact of labor disputes, wars or acts of terrorism on our business;
•the effectiveness of our disclosure controls and procedures related to financial reporting;
•our ability to maintain current pricing on our products given competitive or other factors; and
• (1) general economic cycles; (2) competitive conditions in our industry; (3) price deflation in the worldwide apparel industry; (4) our ability to identify and respond to rapidly changing fashion trends and to offer innovative and distinctive products; (5) changes in trade quotas or other trade regulations; (6) our ability to continue to finance our working capital and growth on acceptable terms; (7) unseasonable weather or natural disasters; (8) the price and availability of raw materials and finished goods; (9) the impact of rising energy costs on our costs and consumer spending; (10) our dependence on and relationships with key customers; (11) consolidation among our customer base; (12) the ability of our third party producers to deliver quality products in a timely manner; (13) potential disruptions in the operation of our distribution facilities; (14) any disruption or failure of our computer systems or data network; (15) the integration of our acquired businesses; (16) our ability to successfully implement our growth plans, including growth by acquisition; (17) unforeseen liabilities associated with our acquisitions; (18) unforeseen costs associated with entry into and exit from certain lines of business; (19) economic and political conditions in the foreign countries in which we operate or source our products; (20) increased competition from direct sourcing; (21) our ability to maintain our licenses; (22) our ability to protect our intellectual property and prevent our trademarks, service marks and goodwill from being harmed by competitors’ products; (23) our reliance on key management and our ability to develop effective succession plans; (24) our ability to develop and maintain an effective organization structure; (25) risks associated with changes in global currency exchange rates; (26) changes in interest rates on our variable rate debt; (27) the impact of labor disputes, wars or acts of terrorism on our business; (28) the effectiveness of our disclosure controls and procedures related to financial reporting; (29) our ability to maintain current pricing on our products given competitive or other factors; and (30) our ability to expand our retail operations.
You are cautioned not to place undue reliance on forward-looking statements, which speak onlyare current as of the date this report is filed with the Securities and Exchange Commission. 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, except as required by law. Other risks or uncertainties may be detailed from time to time in our future Securities and Exchange Commission filings.

43

PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(in thousands, except per share amounts)
                        
 Quarter Ended  Second Quarter of First Half of 
 September 2, 2005 August 27, 2004  Fiscal 2006 Fiscal 2005 Fiscal 2006 Fiscal 2005 
Net sales $336,478 $264,822  $334,652 $312,988 $671,130 $577,810 
Cost of goods sold 220,446 179,126  223,223 210,647 443,669 389,773 
    
Gross profit 116,032 85,696  111,429 102,341 227,461 188,037 
  
Selling, general and administrative 88,736 68,328 
Selling, general and administrative expense 88,653 82,407 177,389 150,735 
Amortization of intangible assets 1,853 1,712  1,851 2,424 3,704 4,136 
    
 90,589 70,040  90,504 84,831 181,093 154,871 
Royalties and other operating income 3,261 1,753  3,653 3,301 6,914 5,054 
    
Operating income 28,704 17,409  24,578 20,811 53,282 38,220 
  
Interest expense, net 6,883 7,921  7,322 6,855 14,205 14,776 
    
Earnings before income taxes 21,821 9,488  17,256 13,956 39,077 23,444 
  
Income taxes 7,938 3,320  6,248 4,884 14,186 8,204 
    
Net earnings
 $13,883 $6,168  $11,008 $9,072 $24,891 $15,240 
    
 
Earnings per common share:  
Basic $0.80 $0.37  $0.63 $0.54 $1.43 $0.91 
Diluted $0.79 $0.36  $0.62 $0.53 $1.40 $0.89 
  
Weighted average common shares outstanding:  
Basic 17,391 16,713  17,490 16,761 17,440 16,737 
Dilutive impact of options, earn-out shares and restricted shares 275 490  257 455 295 480 
    
Diluted 17,666 17,203  17,747 17,216 17,735 17,217 
  
Dividends per common share $0.135 $0.120  $0.135 $0.120 $0.270 $0.240 
    
See accompanying notes.

54

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED EXCEPT FOR JUNE 3, 2005)

(UNAUDITED)
(in thousands, except per share amounts)
                        
 September 2, 2005 June 3, 2005 August 27, 2004  December 2, 2005 June 3, 2005 November 26, 2004 
Assets
  
Current Assets:  
Cash and cash equivalents $7,024 $6,499 $11,526  $6,848 $6,499 $19,414 
Receivables, net 200,357 197,094 160,485  185,581 197,094 175,053 
Inventories 168,558 169,296 143,142  166,776 169,296 161,832 
Prepaid expenses 24,210 20,506 19,093  27,457 20,506 17,817 
    
Total current assets 400,149 393,395 334,246  386,662 393,395 374,116 
Property, plant and equipment, net 64,903 65,051 54,745  66,050 65,051 55,431 
Goodwill, net 190,751 188,563 158,304  184,144 188,563 165,650 
Intangible assets, net 234,283 234,854 242,120  234,812 234,854 239,698 
Other non-current assets, net 22,789 24,014 24,845  22,949 24,014 24,657 
    
Total Assets
 $912,875 $905,877 $814,260  $894,617 $905,877 $859,552 
  
   
Liabilities and Shareholders’ Equity
  
Current Liabilities:  
Trade accounts payable $85,221 $105,992 $84,811  $91,220 $105,992 $96,595 
Accrued compensation 21,079 31,043 18,787  25,378 31,043 22,027 
Additional acquisition cost payable 20,465 25,754 —  — 25,754 — 
Other accrued expenses 31,022 30,890 37,646  23,097 30,890 45,495 
Dividends payable 2,301 2,278 1,950  2,310 2,278 2,013 
Income taxes payable 10,103 13,085 5,318  3,334 13,085 1,555 
Short-term debt and current maturities of long-term debt 4,624 3,407 112,050  4,886 3,407 6,973 
    
Total current liabilities 174,815 212,449 260,562  150,225 212,449 174,658 
Long-term debt, less current maturities 315,958 289,123 198,895  298,989 289,123 315,608 
Other non-current liabilities 25,737 23,562 12,798  27,503 23,562 13,665 
Deferred income taxes 76,494 77,242 80,663  75,254 77,242 79,754 
Commitments and contingencies 
Shareholders’ Equity: 
Preferred Stock, $1.00 par value; 30,000 authorized and none issued and outstanding at September 2, 2005, June 3, 2005 and August 27, 2005 — — — 
Common stock, $1.00 par value, 60,000 authorized and 17,049 issued and outstanding at September 2, 2005; 60,000 authorized and 16,884 issued and outstanding at June 3, 2005; and 60,000 authorized and 16,756 issued and outstanding at August 27, 2004 17,049 16,884 16,756 
Commitments and contingencies Shareholders’ Equity: 
Preferred Stock, $1.00 par value; 30,000 authorized and none issued and outstanding at December 2, 2005, June 3, 2005 and November 26, 2004 — — — 
Common stock, $1.00 par value, 60,000 authorized and 17,602 issued and outstanding at December 2, 2005; 60,000 authorized and 16,884 issued and outstanding at June 3, 2005; and 60,000 authorized and 16,778 issued and outstanding at November 26, 2004 17,602 16,884 16,778 
Additional paid-in capital 48,931 45,918 42,266  71,166 45,918 42,709 
Retained earnings 252,281 240,401 203,308  260,977 240,401 210,367 
Accumulated other comprehensive income 1,610 298  (988)
Accumulated other comprehensive (loss) income  (7,099) 298 6,013 
    
Total shareholders’ equity 319,871 303,501 261,342  342,646 303,501 275,867 
    
Total Liabilities and Shareholders’ Equity
 $912,875 $905,877 $814,260  $894,617 $905,877 $859,552 
    
See accompanying notes.

65

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
                
 Quarter Ended  First Half of 
 September 2, 2005 August 27, 2004  Fiscal 2006 Fiscal 2005 
Cash Flows from Operating Activities
  
Net earnings $13,883 $6,168  $24,891 $15,240 
Adjustments to reconcile net earnings to net cash provided by operating activities:  
Depreciation 3,537 3,037  7,254 6,305 
Amortization of intangible assets 1,853 1,712  3,704 4,136 
Amortization of deferred financing costs and bond discount 616 2,459  1,232 3,118 
Loss (gain) on the sale of assets 7 348 
(Gain) on the sale of assets  (87)  (106)
Equity income  (164)  (323)  (39)  (323)
Deferred income taxes  (1,820)  (2,175)  (1,353)  (3,333)
Changes in working capital:  
Receivables  (2,983) 40,659  10,505 25,241 
Inventories 945  (823) 2,943  (18,703)
Prepaid expenses  (2,860) 1,669   (5,454) 1,900 
Trade accounts payable  (20,789)  (21,022)  (14,627)  (9,352)
Accrued expenses and other current liabilities  (10,091)  (21,488)  (13,409)  (8,888)
Stock options income tax benefit 1,128 587  1,843 965 
Income taxes payable  (3,010) 1,020   (9,535)  (2,852)
Other non-current assets  (996)  (1,410)  (3,378)  (1,181)
Other non-current liabilities 2,168 1,674  4,446 2,541 
    
Net cash (used in) provided by operating activities
  (18,576) 12,092 
Net cash provided by operating activities
 8,936 14,708 
Cash Flows from Investing Activities
  
Acquisition, net of cash acquired  (6,569)  (139,626)
Acquisitions, net of cash acquired  (11,501)  (139,814)
Distribution from joint venture investment 1,856 —  1,856 — 
Investment in deferred compensation plan  (330) 391   (587)  (593)
Purchases of property, plant and equipment  (3,473)  (2,488)  (8,496)  (6,508)
Proceeds from sale of property, plant and equipment 6 10  6 413 
    
Net cash used in investing activities
  (8,510)  (141,713)
Net cash (used in) investing activities
  (18,722)  (146,502)
Cash Flows from Financing Activities
  
Repayment of financing arrangements  (73,971)  (58,482)  (179,591)  (154,694)
Proceeds from financing arrangements 101,920 156,139  191,059 263,832 
Payments of debt issuance costs —  (2,766) —  (2,766)
Proceeds from issuance of common shares 2,049 666  3,862 752 
Dividends on common shares  (2,278)  (1,946)  (4,579)  (3,896)
    
Net cash provided by financing activities
 27,720 93,611  10,751 103,228 
  
Net change in cash and cash equivalents 634  (36,010) 965  (28,566)
Effect of foreign currency translation on cash and cash equivalents  (109)  (33)  (616) 411 
Cash and cash equivalents at the beginning of period 6,499 47,569  6,499 47,569 
    
Cash and cash equivalents at the end of period $7,024 $11,526  $6,848 $19,414 
    -
  
Supplemental Cash Flow Information:
  
Cash paid for:  
Interest, net $2,574 $9,844  $13,659 $11,238 
Income taxes $11,466 $4,321  $24,499 $10,713 
See accompanying notes.

76

OXFORD INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBERDECEMBER 2, 2005
1. Basis of Presentation:We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission including the instructions to Form 10-Q and Rule 10-01 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 in the United States. We believe these condensed 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 interim periods presented are not necessarily indicative of results to be expected for the year primarily due to the impact of seasonality on our business. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our fiscal 2005 Form 10-K.
As used in this report, “our,” “us,” “we” and similar phrases refer to Oxford Industries, Inc. and its consolidated subsidiaries; and “fiscal 2005,” “fiscal 2006” and “fiscal 2007” refer to our fiscal years ended or ending on June 3, 2005, June 2, 2006 and June 1, 2007, respectively; “first quarter of fiscal 2006,” “first quarter of fiscal 2005,” “second quarter of fiscal 2006,” “second quarter of fiscal 2005,” refer to our fiscal quarters ended on September 2, 2005, August 26, 2004, December 2, 2005, and November 26, 2004, respectively. Additionally, as used in this report, “first half of fiscal 2006” and “first half of fiscal 2005” refer to the six months ended December 2, 2005 and November 26, 2004, respectively.
The accounting policies applied during the interim periods presented are consistent with the accounting policies as described in our fiscal 2005 Form 10-K.
The accounting policies applied during the interim periods presented are consistent with the significant and critical accounting policies as described in our fiscal 2005 Form 10-K.Certain amounts in the prior periods’ financial statements, as previously reported, have been reclassified to conform to the current year’s presentation. These reclassifications primarily relate to certain costs of our Ben Sherman Limited (“Ben Sherman”) operations to provide consistency in classification between net sales, cost of goods sold and selling general and administrative expenses. These reclassifications have been reclassified to conform to the current year’s presentation. These reclassifications primarily relate to certain costs of our Ben Sherman Limited (“Ben Sherman”) operations to provide consistency in classification between net sales, cost of goods sold and selling, general and administrative expenses. These reclassifications had no impact on net earnings as previously reported.Future Accounting StandardsIn October 2004, the American Jobs Creation Act of 2004 (the “Act”) was signed into law by the President. Among other provisions, the Act provides for a special one-time tax deduction of 85 percent of certain foreign earnings that are repatriated in either an enterprise’s last tax year that began before the enactment date or the first tax year that begins during the one-year period beginning on the date of enactment. As a result of the execution of the Act, the accounting treatment of such unremitted earnings that are expected to be repatriated must be considered in evaluating an entity’s tax provision. We are currently evaluating the appropriate action with respect to the repatriation provision. As we have not completed this assessment, no impact of repatriation has been recognized in our tax provision for the second quarter of fiscal 2006. We expect to have this evaluation completed during the third or fourth quarter of fiscal 2006.
2. Inventories:The components of inventories are summarized as follows (in thousands):
                        
 September 2, 2005 June 3, 2005 August 27, 2004  December 2, 2005 June 3, 2005 November 26, 2004 
Finished goods $143,282 $136,686 $116,108  $136,618 $136,686 $128,680 
Work in process 8,915 9,238 7,690  10,117 9,238 9,539 
Fabric, trim and supplies 16,361 23,372 19,344  20,041 23,372 23,613 
    
Total $168,558 $169,296 $143,142  $166,776 $169,296 $161,832 
    

7

3. Significant Acquisitions:On July 30, 2004, we acquired 100% of the capital stock 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 and footwear, licenses its brand for accessories and footwear.other products and operates retail stores. The purchase price for Ben Sherman was £80 million sterling, or approximately $145 million, plus associated expenses of approximately $3.3 million. The transaction was financed with cash on hand, borrowings from our senior revolving credit facilitySenior Secured Revolving Credit Facility and unsecured notes payable to the management shareholders of Ben Sherman, both as described in Note 4.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition for Ben Sherman (in thousands).
This acquisition, along with the acquisition of Tommy Bahama Group on June 13, 2003, is consistent with one of our key strategic objectives to own 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 are included in our consolidated statements of earnings from the date of the acquisition.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition for Ben Sherman (in thousands).

8

     
Total purchase price $149,157 
    
     
Cash $7,656 
Accounts receivable  25,637 
Inventories  24,288 
Prepaid expenses  2,841 
Goodwill  47,243 
Intangible assets  96,500 
Property, plant and equipment  3,765 
Current liabilities  (29,823)
Deferred taxes  (28,950)
    
     
Fair value of net assets acquired $149,157 
    
The pro forma financial information presented below (in thousands) gives effect to the Ben Sherman acquisition (July 30, 2004) as if the acquisition had occurred as of the beginning of fiscal 2005. The information presented below is for illustrative purposes only and is not indicative of results that would have been achieved if the acquisition had occurred as of the beginning of fiscal 2005 or results which may be achieved in the future.
        
 Quarter Ended August 27, 2004 First Half of Fiscal 2005
Net sales $295,302  $608,290 
Net earnings $8,952  $18,024 
Net earnings per share 
Net earnings per share: 
Basic $0.54  $1.08 
Diluted $0.52  $1.05 
Additionally, during the first half of fiscal 2006, we have acquired certain other trademarks, including Solitude® and Arnold Brant® , and related working capital through asset acquisitions for a total purchase price of $5.9 million. Payment of additional contingent consideration of $8.0 million is required in the event certain earnings measures are met in future periods. In connection with these acquisitions, we have also entered into certain arrangements which require that we pay a royalty fee or sales commission, generally based on a specified percentage of net sales in future periods, to the principal of the seller of these trademarks.
These acquisitions, along with the acquisition of Tommy Bahama Group on June 13, 2003, are consistent with one of our key strategic objectives to own major lifestyle brands. The acquisitions provide strategic growth opportunities and further diversification of our business over distribution channels, price points, product categories and target customers. The results of operations of each acquisition are included in our consolidated statements of earnings from the date of the acquisition.

8

4. Debt:The following table details our debt outstanding as of the dates specified (in thousands):
                        
 September 2, June 3, August 27,  December 2, June 3, November 26,
 2005 2005 2004  2005 2005 2004
$280 million U.S. Senior Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to certain financial ratios (6.02% at September 2, 2005), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and its domestic subsidiaries $116,900 $90,100 $98,300 
$280 million U.S. Senior Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to certain financial ratios (6.30% at December 2, 2005), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and its domestic subsidiaries $99,900 $90,100 $116,700 
£12 million Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.2% (5.70% at September 2, 2005), requires interest payments monthly with principal payable on demand or at maturity (July 2006), and is collateralized by substantially all the United Kingdom assets of Ben Sherman 1,192 — 7,312 
£12 million (approximately $21 million) Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.2% (5.70% at December 2, 2005), requires interest payments monthly with principal payable on demand or at maturity (July 2006), and is collateralized by substantially all the United Kingdom assets of Ben Sherman 4,835 — — 
$200 million Senior Unsecured Notes (“Senior Unsecured Notes”), which accrue interest at 8.875% (effective interest rate of 9.0%) and require interest payments semiannually on June 1 and December 1 of each year, with principal due at maturity (June 2011), are subject to certain prepayment penalties and are guaranteed by our domestic subsidiaries 198,982 198,938 198,804  199,027 198,938 198,849 
Unsecured Seller Notes (“Seller Notes”), which accrue interest at LIBOR plus 1.2% (5.73% at September 2, 2005), and require interest payments quarterly with principal payable on demand 3,378 3,342 6,312 
Unsecured Seller Notes (“Seller Notes”), which accrue interest at LIBOR plus 1.2%, and require interest payments quarterly with principal payable on demand which were repaid during February, May and November 2005 funded by draws on the U.K. Revolver — 3,342 6,887 
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets 130 150 217  113 150 145 
Total Debt 320,582 292,530 310,945  303,875 292,530 322,581 
Short-term Debt 4,624 3,407 112,050  4,886 3,407 6,973 
Long-term Debt 315,958 289,123 198,895  $298,989 $289,123 $315,608 
On July 28, 2004, the U.S. Revolver was amended to increase the line of credit from $275 million to $280 million to eliminate the asset borrowing base calculation in determining availability and adjust the amount that certain lenders were committed to loan, among other changes. Approximately $1.8 million of unamortized deferred financing costs were expensed as a result of the amendment, which were included in interest expense in the consolidated statement of earnings during the first quarter of fiscal 2005. Additionally, the terms and conditions of certain related agreements were modified in November 2004, including a change to a springing lock-box agreement, which resulted in amounts outstanding under the facility requiring classification as long-term debt subsequent to the modification. In September 2005, we amended the U.S. Revolver to remove certain items from the definition of Restricted Payments, as defined in the agreement.
The 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. The U.S. Revolver also includes limitations on certain restricted payments such as earn-outs and, prior to the amendment in September 2005, included certain restrictions on payment of dividends and prepayment of debt. As of December 2, 2005, we were compliant with all financial covenants and restricted payment clauses related to our debt agreements.
As of December 2, 2005, approximately $113.7 million and $2.6 million of trade letters of credit and other limitations on availability were outstanding against the U.S. Revolver and the U.K. Revolver, respectively. The net availability under our U.S. Revolver and U.K. Revolver was approximately $66.4 million and $13.3 million, respectively as of December 2, 2005.

9

On July 28, 2004, the U.S. Revolver was amended to increase the line of credit from $275 million to $280 million, to eliminate the asset borrowing base calculation to determine availability and to adjust the amount that certain lenders were committed to loan among other changes. Approximately $1.8 million of unamortized deferred financing costs were expensed as a result of the amendment, which were included in interest expense in the consolidated statement of earnings during the quarter ended August 27, 2004. Additionally, the terms and conditions of certain related agreements were modified in November 2004, including a change to a springing lock-box agreement, which resulted in amounts outstanding under the facility requiring classification as long-term debt subsequent to the modification. In September 2005, we amended the U.S. Revolver to remove certain items from the definition of Restricted Payments, as defined.
The 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. The U.S. Revolver also includes limitations on certain restricted payments such as earn-outs and, prior to the amendment in September 2005, included certain restrictions on payment of dividends and prepayment of debt. As of September 2, 2005, we were compliant with all financial covenants and restricted payment clauses related to our debt agreements.
As of September 2, 2005, approximately $109.4 million and $2.5 million of trade letters of credit and other limitations on availability were outstanding against the U.S. Revolver and the U.K. Revolver, respectively. The net availability under our U.S. Revolver and U.K. Revolver was approximately $53.7 million and $18.4 million, respectively as of September 2, 2005.
5. 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 (in thousands) 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.”
        
 Quarter Ended 
 September 2, August 27, 
 2005 2004                 
 (in thousands)  Second Quarter of First Half of
   Fiscal 2006 Fiscal 2005 Fiscal 2006 Fiscal 2005
Net earnings as reported $13,883 $6,168  $11,008 $9,072 $24,891 $15,240 
    
Add: Stock-based employee compensation recognized in reported net income, net of related tax effects 376 —  357 — 732 — 
Deduct: Employee compensation expense, net of related tax effects  (568)  (209)  (549)  (209)  (1,116)  (418)
    
Pro forma net earnings $13,691 $5,959  $10,816 $8,863 $24,507 $14,822 
Basic earnings per share — as reported $0.80 $0.37  $0.63 $0.54 $1.43 $0.91 
Basic earnings per share — pro forma $0.79 $0.36  $0.62 $0.53 $1.41 $0.89 
Diluted earnings per share — as reported $0.79 $0.36  $0.62 $0.53 $1.40 $0.89 
Diluted earnings per share — pro forma $0.78 $0.35  $0.61 $0.51 $1.39 $0.86 
    
During the quarter ended September 2, 2005, we issued 0.2 million shares related to the exercise of stock options by employees and the issuance of certain restricted shares to employees for the fiscal 2005 performance awards. Additionally, during the quarter ended September 2, 2005, 0.1 million performance based shares were granted to certain employees subject to certain operating performance measures being met for the fiscal year ending June 2, 2006 and the employee being employed by us on June 2, 2009. We did not repurchase any shares during the quarter ended September 2, 2005.
Other comprehensive income (loss) which is comprised of the effects of foreign currency translation adjustments for the quarters ended September 2, 2005 and August 27, 2004 was $1.3 million and ($1.0 million), respectively, net of income taxes of $0.7 million and ($0.3 million), respectively. For the quarters ended September 2, 2005 and August 27, 2004, total comprehensive income consisting of net earnings as reported in our statement of earnings and the effect of foreign currency translation adjustments was $15.2 million and $5.2 million, respectively, net of income taxes.

10

During the first half of fiscal 2006, we issued 0.7 million shares related to the exercise of stock options by employees, the fiscal 2005 Tommy Bahama earn-out payment and restricted shares for the fiscal 2005 performance awards. Additionally, during the first quarter of fiscal 2006, we granted 0.1 million of performance based shares to certain employees subject to certain operating performance measures being met for fiscal 2006 and the individual employee being employed by us on June 2, 2009. We did not repurchase any shares during the first half of fiscal 2006.
Other comprehensive income (loss), which is comprised of the effects of foreign currency translation adjustments, for the second quarter of fiscal 2006 and second quarter of fiscal 2005 was ($8.7 million) and $7.0 million, respectively, net of income taxes of ($4.9 million) and $2.1 million, respectively. For the second quarter of fiscal 2006 and second quarter of fiscal 2005, total comprehensive income consisting of net earnings as reported in our statement of earnings and the effect of foreign currency translation adjustments was $2.3 million and $16.1 million, respectively, net of income taxes.
Other comprehensive income (loss), which is comprised of the effects of foreign currency translation adjustments, for the first half of fiscal 2006 and first half of fiscal 2005, was ($7.4 million) and $6.0 million, respectively, net of income taxes of ($4.2 million) and $1.8 million, respectively. For the first half of fiscal 2006 and first half of fiscal 2005, total comprehensive income (loss) consisting of net earnings as reported in our statement of earnings and the effect of foreign currency translation adjustments was ($17.5 million) and $21.3 million, respectively, net of income taxes.
6. Segment Information:We have three operating segments for purposes of allocating resources and assessing performance which are based on products distributed. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sport coats, suit separates, walk shorts, golf apparel, outerwear, sweaters, jeans, swimwear, footwear and headwear,headwear; licenses its brands for accessories and other productsproducts; and operates retail stores. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual apparel, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture and other products. The head of each operating segment reports to the chief operating decision maker.
 
  Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, LIFO inventory accounting adjustments, certain revenue reserves and costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis which does not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Total assets for corporateCorporate and otherOther includes the LIFO inventory reserve of $37.3$37.7 million, $37.3 million and $35.5$37.1 million at SeptemberDecember 2, 2005, June 3, 2005 and August 27,November 26, 2004, respectively. The information below presents certain information about our segments:segments (in thousands):

10

                        
 Quarter Ended  Second Quarter of First Half of 
 September 2, 2005 August 27, 2004   
 (in thousands)  Fiscal 2006 Fiscal 2005 Fiscal 2006 Fiscal 2005 
Net Sales
 
  
Net Sales:
 
Menswear Group $177,076 $118,737  $187,332 $181,207 $364,408 $299,944 
Womenswear Group 68,003 52,458  56,749 45,097 124,752 97,555 
Tommy Bahama Group 91,544 93,462  90,388 86,490 181,932 179,952 
Corporate and Other  (145) 165  183 194 38 359 
    
Total
 $336,478 $264,822 
Total Net Sales
 $334,652 $312,988 $671,130 $577,810 
   
Depreciation
 
 
Depreciation:
 
Menswear Group $944 $835  $982 $985 $1,926 $1,820 
Womenswear Group 36 56  36 54 72 110 
Tommy Bahama Group 2,456 2,055  2,604 2,147 5,060 4,202 
Corporate and Other 101 91  95 82 196 173 
    
Total
 $3,537 $3,037 
Total Depreciation
 $3,717 $3,268 $7,254 $6,305 
   
Amortization of intangible assets
 
 
Amortization of Intangible Assets:
 
Menswear Group $811 $312  $809 $917 $1,620 $1,229 
Womenswear Group — 9  — 10 — 19 
Tommy Bahama Group 1,042 1,391  1,042 1,497 2,084 2,888 
Corporate and Other — —  — — — — 
    
Total
 $1,853 $1,712 
Total Amortization
 $1,851 $2,424 $3,704 $4,136 
   
Operating Income
 
 
Operating Income:
 
Menswear Group $15,004 $8,921  $15,968 $18,048 $30,972 $26,969 
Womenswear Group 3,905  (966) 1,983 208 5,888  (758)
Tommy Bahama Group 14,357 11,916  10,109 5,895 24,466 17,811 
Corporate and Other  (4,562)  (2,462)  (3,482)  (3,340)  (8,044)  (5,802)
    
Total
 $28,704 $17,409 
Total Operating Income
 $24,578 $20,811 $53,282 $38,220 
Interest expense, net 6,883 7,921  7,322 6,855 14,205 14,776 
    
Earnings before taxes $21,821 $9,488 
Earnings before income taxes $17,256 $13,956 $39,077 $23,444 
  
 
                        
 September 2, 2005 June 3, 2005 August 27, 2004  December 2, 2005 June 3, 2005 November 26, 2004 
 (in thousands)   
Assets
 
Assets:
 
Menswear Group $452,694 $412,461 $380,858  $419,188 $412,461 $405,010 
Womenswear Group 72,898 79,678 63,632  74,669 79,678 71,170 
Tommy Bahama Group 386,977 412,441 376,254  401,890 412,441 386,396 
Corporate and Other 306 1,297  (6,484)  (1,130) 1,297  (3,024)
    
Total
 $912,875 $905,877 $814,260  $894,617 $905,877 $859,552 
  

11

7. Consolidating Financial Data of Subsidiary Guarantors:Our Senior Unsecured Notes are guaranteed by our wholly owned domestic subsidiaries (“Subsidiary Guarantors”). All guarantees are full and unconditional. Non-guarantors consist of our subsidiaries which are organized outside of the United States. Set forth below are our condensed consolidating balance sheets as of SeptemberDecember 2, 2005, June 3, 2005 and August 27,November 26, 2004, as well as our condensed consolidating statements of earnings for the second quarter of fiscal 2006, second quarter of fiscal 2005, first half of fiscal 2006 and first half of fiscal 2005 and our statements of cash flows for the quarters ended September 2,first half of fiscal 2006 and the first half of fiscal 2005 and August 27, 2004 (in thousands).
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
SeptemberDecember 2, 2005
                                        
 Oxford Subsidiary      Oxford Subsidiary     
 Industries Subsidiary Non- Consolidating Consolidated  Industries Subsidiary Non- Consolidating Consolidated 
 (Parent) Guarantors Guarantors Adjustments Total  (Parent) Guarantors Guarantors Adjustments Total 
ASSETS
  
Current Assets:  
Cash and cash equivalents $4,317 $938 $1,768 $1 $7,024  $3,304 $1,411 $2,115 $18 $6,848 
Receivables, net 120,316 61,338 66,097  (47,394) 200,357  103,801 58,618 60,965  (37,803) 185,581 
Inventories 106,813 42,427 19,961  (643) 168,558  107,248 44,181 16,165  (818) 166,776 
Prepaid expenses 11,742 6,170 6,298 — 24,210  11,446 8,293 7,718 — 27,457 
                      
Total current assets 243,188 110,873 94,124  (48,036) 400,149  225,799 112,503 86,963  (38,603) 386,662 
Property, plant and equipment, net 12,037 44,237 8,629 — 64,903  12,204 45,258 8,588 — 66,050 
Goodwill, net 1,847 139,910 48,994 — 190,751  1,847 140,270 42,027 — 184,144 
Intangible assets, net 1,480 140,123 92,680 — 234,283  1,470 141,462 91,880 — 234,812 
Other non-current assets net 647,654 148,327 1,774  (774,966) 22,789 
Other non-current assets, net 651,002 148,565 1,927  (778,545) 22,949 
                      
Total Assets
 $906,206 $583,470 $246,201 $(823,002) $912,875  $892,322 $588,058 $231,385 $(817,148) $894,617 
                      
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Total current liabilities 118,172 54,595 49,205  (47,157) 174,815  88,345 59,979 39,575  (37,674) 150,225 
Long term debt, less current portion 315,939 19 — — 315,958  298,974 15 — — 298,989 
Non-current liabilities 148,122  (120,709) 107,619  (109,295) 25,737  158,840  (131,188) 109,131  (109,280) 27,503 
Deferred income taxes 4,102 43,428 28,964 — 76,494  3,517 42,773 28,964 — 75,254 
Total Shareholders’/invested equity 319,871 606,137 60,413  (666,550) 319,871  342,646 616,479 53,715  (670,194) 342,646 
                      
Total Liabilities and Shareholders’ Equity
 $906,206 $583,470 $246,201 $(823,002) $912,875  $892,322 $588,058 $231,385 $(817,148) $894,617 
                      

12

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
June 3, 2005
                                        
 Oxford Subsidiary      Oxford Subsidiary     
 Industries Subsidiary Non- Consolidating Consolidated  Industries Subsidiary Non- Consolidating Consolidated 
 (Parent) Guarantors Guarantors Adjustments Total  (Parent) Guarantors Guarantors Adjustments Total 
ASSETS
  
Current Assets:  
Cash and cash equivalents $2,713 $1,859 $1,900 $27 $6,499  $2,713 $1,859 $1,900 $27 $6,499 
Receivables, net 114,832 61,635 61,942  (41,315) 197,094  114,832 61,635 61,942  (41,315) 197,094 
Inventories 97,398 51,836 20,522  (460) 169,296  97,398 51,836 20,522  (460) 169,296 
Prepaid expenses 10,895 5,748 3,863 — 20,506  10,895 5,748 3,863 — 20,506 
                      
Total current assets 225,838 121,078 88,227  (41,748) 393,395  225,838 121,078 88,227  (41,748) 393,395 
Property, plant and equipment, net 11,896 44,844 8,311 — 65,051  11,896 44,844 8,311 — 65,051 
Goodwill, net 1,847 139,910 46,806 — 188,563  1,847 139,910 46,806 — 188,563 
Intangible assets, net 210 141,165 93,479 — 234,854  210 141,165 93,479 — 234,854 
Other non-current assets net 631,205 149,640 1,406  (758,237) 24,014 
Other non-current assets, net 631,205 149,640 1,406  (758,237) 24,014 
                       
Total Assets
 $870,996 $596,637 $238,229 $(799,985) $905,877  $870,996 $596,637 $238,229 $(799,985) $905,877 
                      
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Total current liabilities 127,435 76,847 49,198  (41,031) 212,449  127,435 76,847 49,198  (41,031) 212,449 
Long term debt, less current portion 289,100 23 — — 289,123  289,100 23 — — 289,123 
Non-current liabilities 146,922  (118,451) 104,288  (109,197) 23,562  146,922  (118,451) 104,288  (109,197) 23,562 
Deferred income taxes 4,038 44,239 28,965 — 77,242  4,038 44,239 28,965 — 77,242 
Total Shareholders’/invested equity 303,501 593,979 55,778  (649,757) 303,501  303,501 593,979 55,778  (649,757) 303,501 
                       
Total Liabilities and Shareholders’ Equity
 $870,996 $596,637 $238,229 $(799,985) $905,877  $870,996 $596,637 $238,229 $(799,985) $905,877 
                      
CONDENSED CONSOLIDATING BALANCE SHEETS
August 27,November 26, 2004
                                        
 Oxford Subsidiary      Oxford Subsidiary     
 Industries Subsidiary Non- Consolidating Consolidated  Industries Subsidiary Non- Consolidating Consolidated 
 (Parent) Guarantors Guarantors Adjustments Total  (Parent) Guarantors Guarantors Adjustments Total 
ASSETS
  
Current Assets:  
Cash and cash equivalents $4,926 $1,976 $4,597 $27 $11,526  $7,918 $2,396 $9,099 $1 $19,414 
Receivables, net 92,992 47,290 61,524  (41,321) 160,485  89,604 60,794 66,712  (42,057) 175,053 
Inventories 72,682 48,933 21,669  (142) 143,142  87,550 57,218 17,411  (347) 161,832 
Prepaid expenses 8,176 7,360 3,557 — 19,093  7,891 6,157 3,769 — 17,817 
                      
Total current assets 178,776 105,559 91,347  (41,436) 334,246  192,963 126,565 96,991  (42,403) 374,116 
Property, plant and equipment, net 13,403 33,441 7,901 — 54,745  12,822 34,895 7,714 — 55,431 
Goodwill, net 1,847 114,156 42,301 — 158,304  1,847 114,156 49,647 — 165,650 
Intangible assets, net 239 145,683 96,198 — 242,120  230 144,176 95,292 — 239,698 
Other non-current assets net 562,015 150,148 1,590  (688,908) 24,845 
Other non-current assets, net 579,424 149,833 1,369  (705,969) 24,657 
                      
Total Assets
 $756,280 $548,987 $239,337 $(730,344) $814,260  $787,286 $569,625 $251,013 $(748,372) $859,552 
                      
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Total current liabilities 190,541 65,218 46,844  (42,041) 260,562  104,582 66,206 46,099  (42,229) 174,658 
Long term debt, less current portion 198,841 54 — — 198,895  315,578 30 — — 315,608 
Non-current liabilities 101,640  (84,403) 112,703  (117,142) 12,798  87,380  (70,305) 113,620  (117,030) 13,665 
Deferred income taxes 3,916 47,766 28,991  (10) 80,663  3,879 46,899 28,985  (9) 79,754 
Total Shareholders’/invested equity 261,342 520,352 50,799  (571,151) 261,342  275,867 526,795 62,309  (589,104) 275,867 
                      
Total Liabilities and Shareholders’ Equity
 $756,280 $548,987 $239,337 $(730,344) $814,260  $787,286 $569,625 $251,013 $(748,372) $859,552 
                      

13

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
Second Quarter Ended September 2,of Fiscal 2006
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Net Sales
 $184,822  $119,978  $46,630  $(16,778) $334,652 
Cost of goods sold  145,373   58,693   21,905   (2,748)  223,223 
                
Gross Profit
  39,449   61,285   24,725   (14,030)  111,429 
Selling, general and administrative  34,127   50,918   20,160   (14,701)  90,504 
Royalties and other income  (126)  1,865   2,053   (139)  3,653 
                
Operating Income
  5,196   12,232   6,618   532   24,578 
Interest (income) expense, net  7,219   (2,502)  1,896   709   7,322 
Income from equity investment  11,961   29   —   (11,990)  — 
                
Earnings Before Income Taxes
  9,938   14,763   4,722   (12,167)  17,256 
Income Taxes  (1,135)  4,785   2,709   (111)  6,248 
                
Net Earnings
 $11,073  $9,978  $2,013  $(12,056) $11,008 
                
First Half of Fiscal 2006
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Net Sales
 $372,134  $241,099  $93,226  $(35,329) $671,130 
Cost of goods sold  292,250   116,744   43,096   (8,421)  443,669 
                
Gross Profit
  79,884   124,355   50,130   (26,908)  227,461 
Selling, general and administrative  68,380   99,993   40,730   (28,010)  181,093 
Royalties and other income  (276)  3,795   3,534   (139)  6,914 
                
Operating Income
  11,228   28,157   12,934   963   53,282 
Interest (income) expense, net  13,973   (4,977)  3,886   1,323   14,205 
Income from equity investment  27,429   108   —   (27,537)  — 
                
Earnings Before Income Taxes
  24,684   33,242   9,048   (27,897)  39,077 
Income Taxes  (442)  10,939   3,814   (125)  14,186 
                
Net Earnings
 $25,126  $22,303  $5,234  $(27,772) $24,891 
                
Second Quarter of Fiscal 2005
                                        
 Oxford Subsidiary      Oxford Subsidiary     
 Industries Subsidiary Non- Consolidating Consolidated  Industries Subsidiary Non- Consolidating Consolidated 
 (Parent) Guarantors Guarantors Adjustments Total  (Parent) Guarantors Guarantors Adjustments Total 
Net Sales
 $187,312 $121,121 $46,596 $(18,551) $336,478  $163,529 $112,641 $55,897 $(19,079) $312,988 
Cost of goods sold 146,877 58,051 21,191  (5,673) 220,446  128,798 59,431 25,665  (3,247) 210,647 
                      
Gross Profit
 40,435 63,070 25,405  (12,878) 116,032  34,731 53,210 30,232  (15,832) 102,341 
Selling, general and administrative 34,253 49,075 20,570  (13,309) 90,589  33,035 46,580 23,161  (17,945) 84,831 
Royalties and other income  (150) 1,930 1,481 — 3,261  — 1,960 1,341 — 3,301 
                      
Operating Income
 6,032 15,925 6,316 431 28,704  1,696 8,590 8,412 2,113 20,811 
Interest (income) expense, net 6,754  (2,475) 1,990 614 6,883  4,895  (2,443) 2,087 2,316 6,855 
Income from equity investment 15,468 79 —  (15,547) —  10,787  (1) —  (10,786) — 
                      
Earnings Before Income Taxes
 14,746 18,479 4,326  (15,730) 21,821  7,588 11,032 6,325  (10,989) 13,956 
Income Taxes 693 6,154 1,105  (14) 7,938   (1,688) 4,590 1,982 — 4,884 
                      
Net Earnings
 $14,053 $12,325 $3,221 $(15,716) $13,883  $9,276 $6,442 $4,343 $(10,989) $9,072 
                      
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
Quarter Ended September 2,First Half of Fiscal 2005
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Cash Flows From Operating Activities
                    
Net cash (used in) provided by operating activities
 $(17,597) $2,886  $(3,941) $76  $(18,576)
Cash Flows from Investing Activities
                    
Acquisitions  (6,569)  —   —   —   (6,569)
Distribution from joint venture investment  —   1,856   —   —   1,856 
Investment in deferred compensation Plan  —   (330)  —   —   (330)
Purchases of property, plant and equipment  (946)  (1,936)  (591)  —   (3,473)
Proceeds from sale of property, plant and equipment  6   —   —   —   6 
                
Net cash (used in) investing activities
  (7,509)  (410)  (591)  —   (8,510)
Cash Flows from Financing Activities
                    
Change in debt  26,790   (9)  1,168   —   27,949 
Proceeds from issuance of common stock  2,049   —   —   —   2,049 
Change in intercompany payable  149   (3,388)  3,341   (102)  — 
Dividends on common stock  (2,278)  —   —   —   (2,278)
                
Net cash (used in) provided by financing activities
  26,710   (3,397)  4,509   (102)  27,720 
                     
Net change in Cash and Cash Equivalents
  1,604   (921)  (23)  (26)  634 
Effect of foreign currency translation  —   —   (109)  —   (109)
Cash and Cash Equivalents at the Beginning of Period  2,713   1,859   1,900   27   6,499 
                
Cash and Cash Equivalents at the End of Period $4,317  $938  $1,768  $1  $7,024 
                
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Net Sales
 $310,507  $221,376  $80,410  $(34,483) $577,810 
Cost of goods sold  246,593   113,747   35,052   (5,619)  389,773 
                
Gross Profit
  63,914   107,629   45,358   (28,864)  188,037 
Selling, general and administrative  61,420   89,060   34,972   (30,581)  154,871 
Royalties and other income  —   3,329   1,725   —   5,054 
                
Operating Income
  2,494   21,898   12,111   1,717   38,220 
Interest (income) expense, 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 
                

14

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
Quarter Ended August 27, 2004
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Net Sales
 $146,978  $108,735  $24,513  $(15,404) $264,822 
Cost of goods sold  117,795   54,316   9,387   (2,372)  179,126 
                
Gross Profit
  29,183   54,419   15,126   (13,032)  85,696 
Selling, general and administrative  28,385   42,480   11,811   (12,636)  70,040 
Royalties and other income  —   1,369   384   —   1,753 
                
Operating Income
  798   13,308   3,699   (396)  17,409 
Interest (income) expense, 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 
                
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
Quarter Ended August 27, 2004First Half of Fiscal 2006
                                        
 Oxford Subsidiary      Oxford Subsidiary     
 Industries Subsidiary Non- Consolidating Consolidated  Industries Subsidiary Non- Consolidating Consolidated 
 (Parent) Guarantors Guarantors Adjustments Total  (Parent) Guarantors Guarantors Adjustments Total 
Cash Flows From Operating Activities
 
Net cash (used in) provided by operating activities
 $(4,744) $12,575 $(3,558) $7,819 $12,092 
Cash Flows From Operating Activities Net cash (used in) provided by operating activities
 $(5,181) $18,647 $(4,652) $122 $8,936 
Cash Flows from Investing Activities
  
Acquisitions, net of cash acquired  (147,282)  (32,612)  (134,155) 174,423  (139,626)  (11,501) — — — (11,501)
Investment in deferred compensation Plan — 391 — — 391 
Distribution from joint venture investment — 1,856 — — 1,856 
Investment in deferred compensation plan —  (587) — —  (587)
Purchases of property, plant and equipment  (304)  (2,158)  (27) 1  (2,488)  (1,792)  (5,589)  (1,115) —  (8,496)
Proceeds from sale of property, plant and equipment 5 5 — — 10  6 — — — 6 
                      
Net cash (used in) provided by investing activities
  (147,581)  (34,374)  (134,182) 174,424  (141,713)
Net cash (used in) investing activities
  (13,287)  (4,320)  (1,115) —  (18,722)
Cash Flows from Financing Activities
  
Change in debt 98,364  (109,192) 108,483 2 97,657 
Change in financing arrangements, net 9,778  (14) 1,704 — 11,468 
Proceeds from issuance of common stock 666 141,807 32,616  (174,423) 666  3,862 — — — 3,862 
Deferred financing costs  (2,766) — — —  (2,766)
Change in intercompany payable 9,508  (10,278) 8,540  (7,770) —  9,998  (14,761) 4,894  (131) — 
Dividends on common stock 6,074 —  (7,993)  (27)  (1,946)  (4,579) — — —  (4,579)
                      
Net cash (used in) provided by financing activities
 111,846 22,337 141,646  (182,218) 93,611  19,059  (14,775) 6,598  (131) 10,751 
 
Net change in Cash and Cash Equivalents
  (40,479) 538 3,906 25  (36,010) 591  (448) 831  (9) 965 
Effect of foreign currency translation — —  (33) —  (33) — —  (616) —  (616)
Cash and Cash Equivalents at the Beginning of Period 45,405 1,438 724 2 47,569 
Cash and cash equivalents at the beginning of period 2,713 1,859 1,900 27 6,499 
                      
Cash and Cash Equivalents at the End of Period $4,926 $1,976 $4,597 $27 $11,526 
Cash and cash equivalents at the end of period $3,304 $1,411 $2,115 $18 $6,848 
                      

15

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
First Half of Fiscal 2005
                     
  Oxford      Subsidiary       
  Industries  Subsidiary  Non-  Consolidating  Consolidated 
  (Parent)  Guarantors  Guarantors  Adjustments  Total 
Cash Flows From Operating Activities
                    
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  (147,282)  (32,612)  (134,343)  174,423   (139,814)
Investment in deferred compensation 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
                    
Change in financing arrangements, net  116,757   (109,255)  101,636   —   109,138 
Proceeds from issuance of common stock  752   141,807   32,616   (174,423)  752 
Deferred financing 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 (used in) provided by 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  —   —   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 
                

16

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 our“Unaudited Condensed Consolidated Financial Statements”and the“Notes to Unaudited Condensed Consolidated Financial Statements”contained in this report and the “Consolidated Financial Statements,” “Notes to Consolidated Financial Statements”and“Management’s Discussion and Analysis of Financial Condition and Results of Operations”contained in our fiscal 2005 Form 10-K.
OVERVIEW
We generate revenues and cash flow through the design, sale, production distribution and saledistribution of branded and private label consumer apparel and footwear for men, women and children and the licensing of company owned trademarks. Our principal markets and customers are located primarily in the United States. We source more than 95% of our products through third party producers, but also manufacture certain of our products in manufacturing facilities owned directly by us and through joint venture arrangements. We primarily distribute our products through our wholesale customers including chain stores, department stores, specialty stores, mail order, mass merchants and also through our own retail stores for some brands.
We operate in an industry that is highly competitive. Our ability to continuously evaluate and respond to changing consumer demands and tastes across multiple market segments, distribution channels and geographic regions is critical to our success. Although our approach is aimed at diversifying our risks, misjudging shifts in consumer preferences could have a negative effect on future operating results. Other key aspects of competition include quality, brand image, distribution methods, price, customer service and intellectual property protection. Our size and global operating strategies help us to successfully compete by positioning us to take advantage of synergies in product design, development, sourcing and distribution of our products. Our success in the future will depend on our ability to continue to design products that are acceptable to the markets that we serve and to source our products on a competitive basis while still earning appropriate margins.
The most significant event impacting our results for the quarter ended September 2, 2005 as compared to the quarter ended August 27, 2004 is the inclusion of the operationsownership of Ben Sherman, which we operate as part ofby our Menswear Group, for the entire quarter ended September 2,first half of fiscal 2006 as compared to a four month period in fiscal 2005. Ben Sherman was included in the results of operations from the date of acquisition, July 30, 2004, through the end of the quarter ended August 27, 2004 (one month). We acquired Ben Sherman on July 30, 2004, for approximately $145 million, plus associated expenses, as discussed in Note 3 of our unaudited condensed consolidated financial statements contained in this report. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear and footwear, licenses its brand for accessories and footwear.other products and operates retail stores. The transaction was financed with cash on hand, borrowings under our U.S. Revolver and certain Seller Notes (each described in Note 4 of our unaudited condensed consolidated financial statements contained in this report). In connection with this acquisition, our U.S. Revolver was amended and restated to provide the necessary flexibility to finance the acquisition. This acquisition has had, and is expected to continue to have, a positive impact on the amount ofour operating results and cash flows generated from operating activities.
DuringAdditionally, during the second quarter of fiscal 2006 and the first half of fiscal 2006, we have continued to see increasesperformed much better in terms of net sales and operating results.margins compared to the same periods of the prior year. We generated diluted earnings per share of $0.79$0.62 and $0.36$0.53 during the quarters ended SeptemberDecember 2, 2005 and August 27,November 26, 2004, respectively and diluted earnings per share of $1.40 and $0.89 during the first half of fiscal 2006 and the first half of fiscal 2005, respectively. The increases in net sales and earnings per share were primarily a result of the ownership of Ben Sherman for the entire quarter infirst half of fiscal 2006 compared to only one monthfour months in the first half of fiscal 2005, increased operating margins in the Tommy Bahama Group growth in the historical Menswear business,and growth in the Womenswear segment and a higher percentage of our sales being branded rather than private label.historical Menswear businesses.
RESULTS OF OPERATIONS
The following tables set forth the line items in the consolidated statements of earnings data both in dollars (in thousands) and as a percentage of net sales. The tables also set forth the percentage change of the data as compared to the prior year. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding. Individual line items of our consolidated statements of earnings may not be directly comparable to those of our competitors, as statement of earnings classification of certain revenues and expenses may vary by company. The results of operations of Ben Sherman are included in our consolidated statements of earnings from the date of acquisition.

1617

                                    
 Quarter Ended  Second Quarter of First Half of
 September 2, 2005 August 27, 2004 % Change  Fiscal Fiscal % Fiscal Fiscal %
 (in thousands)  2006 2005 Change 2006 2005 Change
Net sales $336,478 $264,822  27.1% $334,652 $312,988  6.9% $671,130 $577,810  16.2%
Cost of goods sold 220,446 179,126  23.1% 223,223 210,647  6.0% 443,669 389,773  13.8%
    
Gross profit 116,032 85,696  35.4% 111,429 102,341  8.9% 227,461 188,037  21.0%
Selling, general and administrative 88,736 68,328  29.9%
Selling, general and administrative expense 88,653 82,407  7.6% 177,389 150,735  17.7%
Amortization of intangible assets 1,853 1,712  8.2% 1,851 2,424  (23.6%) 3,704 4,136  (10.4%)
Royalties and other operating income 3,261 1,753  86.0% 3,653 3,301  10.7% 6,914 5,054  36.8%
    
Operating income 28,704 17,409  64.9% 24,578 20,811  18.1% 53,282 38,220  39.4%
Interest expense, net 6,883 7,921  (13.1%) 7,322 6,855  6.8% 14,205 14,776  (3.9%)
    
Earnings before income taxes 21,821 9,488  130.0% 17,256 13,956  23.6% 39,077 23,444  66.7%
Income taxes 7,938 3,320  139.1% 6,248 4,884  27.9% 14,186 8,204  72.9%
    
Net earnings $13,883 $6,168  125.1% $11,008 $9,072  21.3% $24,891 $15,240  63.3%
    
                                
 Quarter Ended Second Quarter of First Half of
 September 2, 2005 August 27, 2004 Fiscal 2006 Fiscal 2005 Fiscal 2006 Fiscal 2005
 (as a percentage of net sales) (as a percentage of net sales)
Net sales  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
Cost of goods sold  65.5%  67.6%  66.7%  67.3%  66.1%  67.5%
      
Gross profit  34.5%  32.4%  33.3%  32.7%  33.9%  32.5%
Selling, general and administrative  26.4%  25.8%
Amortization of intangibles  0.6%  0.6%
Selling, general and administrative expense  26.5%  26.3%  26.4%  26.1%
Amortization of intangible assets  0.6%  0.8%  0.6%  0.7%
Royalties and other operating income  1.0%  0.7%  1.1%  1.1%  1.0%  0.9%
      
Operating income  8.5%  6.6%  7.3%  6.6%  7.9%  6.6%
Interest expense, net  2.0%  3.0%  2.2%  2.2%  2.1%  2.6%
      
Earnings before income taxes  6.5%  3.6%  5.2%  4.5%  5.8%  4.1%
Income taxes  2.4%  1.3%  1.9%  1.6%  2.1%  1.4%
      
Net earnings  4.1%  2.3%  3.3%  2.9%  3.7%  2.6%
      
TOTAL COMPANY
Second Quarter of Fiscal 2006 vs. Second Quarter of Fiscal 2005
The discussion below compares our results of operations for the quarter ended September 2, 2005 (the firstsecond quarter of fiscal 2006)2006 (the quarter ended December 2, 2005) to the quarter ended August 27, 2004 (the firstsecond quarter of fiscal 2005)2005 (the quarter ended November 26, 2004). Each percentage change provided below reflects the change between these periods unless indicated otherwise.
Net salesincreased by $71.7$21.7 million, or 27.1%6.9%, in the firstsecond quarter of fiscal 2006. The increase was primarily due to:to an increase in unit sales of 10.6% partially offset by a decrease in the average selling price per unit of 3.7%. These changes were a result of the following:
 • Ben Sherman, which provided approximately $44.2 millionThe unit sales increase of net sales3.3% with a relatively flat average selling price per unit in fiscal 2006 compared to $16.6 million during the month of August in fiscal 2005.Menswear Group.
 
 • The unit sales increase of 32.1%, primarily attributable to the increases in dress, knit and woven shirts, new initiatives in the Menswear Group, increases29.3% with a relatively flat average selling price per unit in the Womenswear Group andGroup.
•The average selling price per unit increase of 15.5% partially offset by the inclusionunit sales decline of Ben Sherman for11.1% in the full quarter.Tommy Bahama Group.
These increases were offset in part by an average selling price per unit decline of 3.7%, primarily attributable to the shift in product mix due to the increase in Womenswear sales and lower priced Menswear products (primarily dress shirts sold to the discount channel) and a decrease in wholesale branded sales by the Tommy Bahama Group, which was partially offset by the increase in Ben Sherman sales and the increase in Tommy Bahama retail sales.
Gross profitincreased 35.4%8.9% in the firstsecond quarter of fiscal 2006. The increase was due to higher sales and higher gross margins. Gross margins increased from 32.4%32.7% during the firstsecond quarter of fiscal 2005 to 34.5%33.3% during the firstsecond quarter of fiscal 2006. The increase was primarily due to:
•The increased retail salesto the increased gross margins of the Tommy Bahama Group which has higher gross margins.
•The benefit of the operations of Ben Sherman, which has higher gross margins, for the entire quarter in fiscal 2006.
•Improved product sourcing.
These increases were partially offset by an increasethe sales increases in certainthe lower margin businesses in the Menswear Group related to new replenishment programs (primarily dress shirts sold to the discount channel).and Womenswear Groups.

1718

Gross profit and gross margins for the current period will not necessarily be indicative of future periods as the mix between branded and private label products may vary as a result of recent acquisitions and due to the impact of seasonality on our sales during the year, among other factors.
Selling, general and administrative expenses,expense,or SG&A, increased 29.9%7.6% during the firstsecond quarter of fiscal 2006. SG&A was 26.4%26.5% of net sales in the firstsecond quarter of fiscal 2006 compared to 25.8%26.3% of net sales in the firstsecond quarter of fiscal 2005. The increase in SG&A was primarily due to the higher SG&A expense structure associated with our recently acquired Ben Sherman branded business, additional Tommy Bahama retail stores, and expenses associated with the start-up of new marketing initiatives in the Menswear Group.Group and higher compensation costs.
SG&A and SG&A as a percentage of sales for the current period will not necessarily be indicative of future periods as the mix between branded and private label products may vary and due to the impact of seasonality, among other factors.
Amortization of intangible assetsincreased 8.2%decreased 23.6% in the firstsecond quarter of fiscal 2006. The increasedecrease was due to $0.8 millioncertain intangible assets acquired as part of our acquisitions of Tommy Bahama and Ben Sherman, which have a greater amount of amortization of intangible assets in fiscal 2006 compared to $0.3 million in fiscal 2005 related to the Ben Shermanearlier periods following the acquisition partially offset by $0.3 million less amortization expense related our 2003 acquisition of the Tommy Bahama Group. Wethan later periods. Thus, we expect that amortization of intangible assets will continue to decrease slightly in future periods as some shorter livedyears, absent the acquisition of additional intangible assets related to our acquisitions become fully amortized.assets.
Royalties and other operating incomeincreased 86.0%10.7% in the firstsecond quarter of fiscal 2006. We derive licensingroyalty income through licensing our trademarks across a range of categories that complement our current product offerings. The increase was primarily due to higher royalty income from existing and additional licenses. We anticipate that royalty income will increase in future years as the number of licenses increases and as our brands continue to grow, but will be subject to the impact of seasonality as it relates to the licensed products specifically.
Interest expense, netincreased 6.8% in the second quarter of fiscal 2006. The increase in interest expense was primarily due to the increase in the interest rates on our variable rate debt. Interest expense in future periods will depend upon the interest rate during the period as well as the total amount of debt outstanding during the period.
Income taxeswere at an effective tax rate of 36.2% for the second quarter of fiscal 2006 compared to 35.0% for the second quarter of fiscal 2005. The increase in the effective tax rate was primarily attributable to refunds of prior year taxes and a decrease in certain contingent tax liabilities during fiscal 2005. The effective tax rate for the second quarter of fiscal 2006 is not necessarily indicative of the effective tax rate that would be expected in future periods.
First Half of Fiscal 2006 vs. First Half of Fiscal 2005
The discussion below compares our results of operations for the first half of fiscal 2006 (the six months ended December 2, 2005) to the first half of fiscal 2005 (the six months ended November 26, 2004). Each percentage change provided below reflects the change between these periods unless indicated otherwise.
Net salesincreased by $93.3 million, or 16.2%, in the first half of fiscal 2006. The increase was primarily due to an increase in unit sales of 20.0% partially offset by a decrease in the average selling price per unit of 3.4%. These changes were a result of the following:
•The Menswear Group, which benefited from six months of Ben Sherman operations during the first half of fiscal 2006 versus only four months in the first half of fiscal 2005, experienced a unit sales increase of 23.3%. This was partially offset by the average selling price per unit decrease of 1.5% in the Menswear Group.
•The unit sales increase of 25.8% and the average selling price per unit increase of 5.0% in the Womenswear Group.
•The average selling price per unit increase of 14.4% partially offset by the unit sales decrease of 13.4% in the Tommy Bahama Group.
Gross profitincreased 21.0% in the first half of fiscal 2006. The increase was due to higher sales and higher gross margins. Gross margins increased from 32.5% during the first half of fiscal 2005 to 33.9% during the first half of fiscal 2006. The increase was primarily due to the increased gross margins of the Tommy Bahama Group partially offset by the sales increases in the lower margin businesses in the Menswear and Womenswear Groups.
Selling, general and administrative expenses,or SG&A, increased 17.7% during the first half of fiscal 2006. SG&A was 26.4% of net sales in the first half of fiscal 2006 compared to 26.1% of net sales in the first half of fiscal 2005. The increase in SG&A was primarily due to the higher SG&A expense structure associated with our acquired Ben

19

Sherman branded business, additional Tommy Bahama retail stores, expenses associated with the start-up of new marketing initiatives in the Menswear Group and higher compensation costs.
Amortization of intangible assetsdecreased 10.4% in the first half of fiscal 2006. The decrease was due to certain intangible assets acquired as part of our acquisitions of Tommy Bahama and Ben Sherman, which have a greater amount of amortization in the earlier periods following the acquisition than later periods. This decline was partially offset by recognizing amortization related to the intangible assets acquired in the Ben Sherman transaction for the entire period during the first half of fiscal 2006 compared to only four months in the prior year. We expect that amortization of intangible assets will continue to decrease slightly in future years, absent the acquisition of additional intangible assets.
Royalties and other operating incomeincreased 36.8% in the first half of fiscal 2006. The increase was primarily due to the benefit of licensing related to our Ben Sherman brand for anthe entire quarter infirst half of fiscal 2006 as well as higher licensingroyalty income from existing and additional licenses for the Tommy Bahama brand. Additionally, during the first quarter of fiscal 2006, we recognized a gain of approximately $0.3 million related to the sale of substantially all the assets of Paradise Shoe, a 50% owned joint venture which was the licensee of Tommy Bahama shoes. We anticipate that royalties income will increase in future years as the number of licenses increases, but will be subject to the impact of seasonality as it relates to the licensed products specifically.
Interest expense, netdecreased 13.1%3.9% in the first quarterhalf of fiscal 2006. The decrease in interest expense was primarily due to the non-recurring $1.8 million charge recognized in the first quarter of fiscal 2005 related to the refinancing of our U.S. Revolver in July 2004, partially offset by the higher debt levels outstanding and higher interest rates during the first half of fiscal 2006. Interest expense in future periods will depend upon the interest rate during the period as well as the total amount of debt outstanding during the period.
Income taxeswere at an effective tax rate of 36.4%36.3% for the first quarterhalf of fiscal 2006 compared to 35.0% for the first quarterhalf of fiscal 2005. VariationsThe increase in the effective tax rate werewas primarily attributable to refunds of prior year taxes and a decrease in certain contingent tax liabilities during fiscal 2005. The effective tax rate for the first quarter of fiscal 2006 is not necessarily indicative of the effective tax rate that would be expected in future periods.
SEGMENT RESULTS OF OPERATIONS
We have three operating segments for purposes of allocating resources and assessing performance which are based on products distributed. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sport coats, suit separates, walk shorts, golf apparel, outerwear, sweaters, jeans, swimwear, footwear and headwear,headwear; licenses its brands for accessories and other productsproducts; and operates retail stores. 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 its brands for accessories, footwear, furniture, and other products. The head of each operating segment reports to the chief operating decision maker.
Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, LIFO inventory accounting adjustments, certain revenue reserves 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. The information below presents certain information about our segments:
                         
  Second Quarter ofFirst Half of 
  Fiscal 2006  Fiscal 2005  % Change  Fiscal 2006  Fiscal 2005  % Change 
   
Net Sales:
                        
Menswear Group $187,332  $181,207   3.4% $364,408  $299,944   21.5%
Womenswear Group  56,749   45,097   25.8%  124,752   97,555   27.9%
Tommy Bahama Group  90,388   86,490   4.5%  181,932   179,952   1.1%
Corporate and Other  183   194   (5.7)%  38   359   (89.4)%
   
Total Net Sales
 $334,652  $312,988   6.9% $671,130  $577,810   16.2%
   
                         
Operating Income:
                        
Menswear Group $15,968  $18,048   (11.5)% $30,972  $26,969   14.8%
Womenswear Group  1,983   208   853.4%  5,888   (758) NA    
Tommy Bahama Group  10,109   5,895   71.5%  24,466   17,811   37.4%
Corporate and Other  (3,482)  (3,340)  4.3%  (8,044)  (5,802)  38.6%
   
Total Operating Income
 $24,578  $20,811   18.1% $53,282  $38,220   39.4%
   

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  Quarter Ended 
  September 2, 2005  August 27, 2004  % Change 
  (in thousands) 
Net Sales
            
Menswear Group $177,076  $118,737   49.1%
Womenswear Group  68,003   52,458   29.6%
Tommy Bahama Group  91,544   93,462   (2.1%)
Corporate and Other  (145)  165   N/A 
   
Total Net Sales
 $336,478  $264,822   27.1%
   
             
  Quarter Ended 
  September 2, 2005  August 27, 2004  % Change 
  (in thousands) 
Operating Income
            
Menswear Group $15,004  $8,921   68.2%
Womenswear Group  3,905   (966)  N/A 
Tommy Bahama Group  14,357   11,916   20.5%
Corporate and Other  (4,562)  (2,462)  (85.3%)
   
Total Operating Income
 $28,704  $17,409   64.9%
   
For further information regarding our segments, see Note 6 to our unaudited condensed consolidated financial statements included in this report.
The discussion below compares our results of operations by operating segment for the firstsecond quarter of fiscal 2006 compared to our resultsthe second quarter of operations forfiscal 2005 and also the first quarterhalf of fiscal 2006 compared to the first half of fiscal 2005. Each percentage change provided below reflects the change for the quarter or the half year between these periodsfiscal 2006 and fiscal 2005 as identified in the respective heading unless indicated otherwise.otherwise indicated.
Menswear Group
Second Quarter of Fiscal 2006 vs. Second Quarter of Fiscal 2005
The Menswear Group reported a 49.1%3.4% increase in net sales in the firstsecond quarter of fiscal 2006. The increase was primarily due to:to the unit sales increase of 3.3% for the group from new marketing initiatives in tailored clothing and dress, knit and woven shirts, partially offset by a decrease in unit sales of our Ben Sherman and golf division operations with a relatively flat average selling price per unit.
•Ben Sherman, which provided approximately $44.2 million of net sales in fiscal 2006 compared to $16.6 million during the month of August in fiscal 2005.
•The unit sales increase of 39.6% for the group, without considering the Ben Sherman operations, from new marketing initiatives in dress, knit and woven shirts.
The Menswear Group reported a decrease of 11.5% in operating income in the second quarter of fiscal 2006. The decrease in operating income was primarily due to lower profitability in our Ben Sherman business, resulting from lower sales and the effect of changes in foreign currency exchange rates.
First Half of Fiscal 2006 vs. First Half of Fiscal 2005
The Menswear Group reported a 21.5% increase in net sales in the first half of fiscal 2006. The increase was due to the unit sales increase of 20.8% in the historical Menswear business from new marketing initiatives in tailored clothing and dress, knit and woven shirts, as well as the inclusion of Ben Sherman for 26 weeks in the first half of fiscal 2006 and 17 weeks in the first half of fiscal 2005. Ben Sherman net sales were $92.6 million in fiscal 2006 and $69.4 million in fiscal 2005. These increases noted above were offset in part by anthe average selling price per unit decline of 5.8% including Ben Sherman and 7.0% excluding Ben Sherman,2.4% in the historical Menswear business, primarily as a result of a changean increase in product mix tosales of lower priced dress shirt products.shirts in fiscal 2006.
The Menswear Group reported a 68.2%14.8% increase in operating income in the first quarterhalf of fiscal 2006. The increase in operating income was primarily due to the benefit of the operations of Ben Sherman, which has higher operating profit margins, for the entire quarter in fiscal 2006 and the increase in sales volume in both our historical menswear business.business and the inclusion of Ben Sherman for all of the first half of fiscal 2006.
Womenswear Group
Second Quarter of Fiscal 2006 vs. Second Quarter of Fiscal 2005
The Womenswear Group, which primarily operates in the discount distributionmass merchant channel, reported a 29.6%25.8% increase in net sales in the firstsecond quarter of fiscal 2006. The change was primarily due to:
•The unit sales increase of 23.2%.
•The average selling price per unit increase of 9.2% primarily due to a change in product mix.
to a unit sales increase of 29.3% and a relatively flat selling price per unit.
The Womenswear Group reported an increase in operating income of $4.9$1.8 million in the firstsecond quarter of fiscal 2006. The change was primarily due to a greater focus on improved product sourcing as implemented in the second half of fiscal 2005 that continued through the second quarter of fiscal 2006, leveraging of SG&A over a higher sales base and only accepting programs that meetmet certain profitability hurdles.standards.

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First Half of Fiscal 2006 vs. First Half of Fiscal 2005

The Womenswear Group, reported a 27.9% increase in net sales in the first half of fiscal 2006. The change was primarily due to the unit sales increase of 25.8% and the average selling price per unit increase of 5.0%, which was a result of a change in product mix.
The Womenswear Group reported an increase in operating income of $6.6 million in the first half of fiscal 2006. The change was primarily due to a greater focus on improved product sourcing as implemented in the second half of fiscal 2005 that continued through the first half of fiscal 2006, leveraging of SG&A over a higher sales base and only accepting programs that met certain profitability standards.
Tommy Bahama Group
Second Quarter of Fiscal 2006 vs. Second Quarter of Fiscal 2005
The Tommy Bahama Group reported a 2.1% decline4.5% increase in net sales in the firstsecond quarter of fiscal 2006. The declineincrease was due to:to an average selling price per unit increase of 6.9%, excluding the private label business, resulting from increased retail sales and higher average selling price per unit on branded wholesale business. The increase in retail

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sales was primarily due to an increase in the number of retail stores from 48 at the end of the second quarter of fiscal 2005 to 57 at the end of the second quarter of fiscal 2006. The higher average selling price per unit on branded wholesale business was due to lower levels of off-price merchandise during fiscal 2006.
•A decrease in dollar and unit sales in the wholesale branded business.
•Exiting the private label business in fiscal 2005.
These declines wereThe increase was partially offset by:
•The average selling price per unit increase of 0.8% excluding the private label business, primarily due to increased retail sales.
•An increase in the number of retail stores from 45 at the end of the first quarter of fiscal 2005 to 55 at the end of the firstby exiting the private label business which accounted for $2.8 million of sales during the second quarter of fiscal 2005 and $0 during the second quarter of fiscal 2006.
The Tommy Bahama Group reported an increase of 20.5%71.5% in operating income in the firstsecond quarter of fiscal 2006. The increase in operating income was primarily due to:
 • Improvements in gross margins due to higher retail sales, improvements in product sourcing and improved inventory management, and product sourcing.which resulted in lower mark-downs.
 
 • Exiting the private label business, which providesprovided lower margins.
 
 • Reduced amortization expense related to intangible assets.
•Increased royalty and other income from existing licenses and the gain from the disposition of assets of Paradise Shoe.
First Half of Fiscal 2006 vs. First Half of Fiscal 2005
The Tommy Bahama Group reported a 1.1% increase in net sales in the first half of fiscal 2006. The increase was due to the average selling price per unit increase of 3.8% excluding the private label business, primarily due to increased retail sales and higher average selling price per unit on branded wholesale business. The increase in retail sales and higher average selling price per unit on branded wholesale business are due to the same reasons noted above for the quarter.
The increase was partially offset by exiting the private label business which accounted for $7.0 million of sales during the first half of fiscal 2005 and less than $0.1 million during the first half of fiscal 2006.
The Tommy Bahama Group reported an increase of 37.4% in operating income in the first half of fiscal 2006. The increase in operating income was primarily due to the same reasons noted above for the quarter.
Corporate and Other
Second Quarter of Fiscal 2006 vs. Second Quarter of Fiscal 2005
The Corporate and Other operating loss increased $2.1$0.1 million in the second quarter of fiscal 2006.
First Half of Fiscal 2006 vs. First Half of Fiscal 2005
The Corporate and Other operating loss increased $2.2 million in the first quarterhalf of fiscal 2006. The increase in the operating loss was primarily due to increased parent company costs and increased bad debt expense partially offset by LIFO inventory accounting.employment costs.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our primary source of revenue and cash flow is our operating activities in the United States and to some extent the United Kingdom. Additionally, subject to the terms thereof, we also have access to amounts under our U.S. Revolver and U.K. Revolver, each of which are described below, when cash inflows are less than cash outflows. We may seek to finance future capital investment programs through various methods, including, but not limited to, cash flow from operations, borrowings under our current or additional credit facilities issuance of additional long-term debt and sales of equity securities.
Our liquidity requirements arise from the funding of our working capital needs, which include inventory, other operating expenses and accounts receivable, funding of capital expenditures, payment of quarterly dividends, repayment of our indebtedness and acquisitions, if any. Generally, our product purchases are acquired through trade letters of credit which are drawn against our lines of credit at the time of shipment of the products and reduce the amounts available under our lines of credit when issued.
Cash and cash equivalentson hand was $7.0$6.8 million at SeptemberDecember 2, 2005 compared to $11.5$19.4 million at August 27,November 26, 2004.
Operating Activities
Quarter ended September 2, 2005
During the quarter ended September 2, 2005,first half of fiscal 2006, our operations used $18.6generated $8.9 million of cash compared to generating $12.1$14.7 million of cash during the quarter ended August 27, 2004.first half of fiscal 2005. The decrease in operating cash flows was primarily a result of the changes in working capital accounts including trade accounts payable, accrued expenses, prepaid expenses, receivables and income taxes payable from the balances at June 3, 2005. These changes were partially offset by receiving a full quarter’shalf year’s benefit of Ben Sherman during the quarter ended September 2, 2005first half of fiscal 2006 compared to one monthonly four months during the quarter ended August 27, 2004.first half of fiscal 2005.

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Receivableswere $200.4 million and $160.5 million at September 2, 2005 and August 27, 2004, respectively, representing an increase of 25%. The increase in receivables was primarily a result ofDuring the 27% increase in net sales during the quarter ended September 2, 2005 compared to the quarter ended August 27, 2004. Days sales outstanding for our accounts receivable balances, excluding retail receivables, was 59 days at September 2, 2005 and August 27, 2004.
Inventorieswere $168.6 million and $143.1 million at September 2, 2005 and August 27, 2004, respectively. The increase in inventories was primarily a result of an increase in inventories on hand in our Menswear Group to support certain replenishment programs and higher anticipated sales in the near term. Our replenishment program inventory in the Menswear Group is higher than our optimal level, however, we anticipate this excess to decrease in the future as the programs stabilize. These increases were partially offset by a reduction of inventory in our Womenswear Group and Tommy Bahama Group as we have lower levels of excess inventories on hand at September 2, 2005 compared to August 27, 2004 and generally purchased inventory later in fiscal 2006. Our days supply of inventory on hand, calculated on a trailing twelve month average using a FIFO basis, was 82 days at September 2, 2005 compared to 74 days at August 27, 2004.
Current liabilities, which primarily consist of payables arising out of our operating activities, were $174.8 million and $260.6 million at September 2, 2005 and August 27, 2004, respectively. The decrease was primarily due to the classification of our U.S. Revolver, which had a balance of $98.3 million at August 27, 2004, as non-current in fiscal 2006 as a result of an amendment to the agreement during the second quarterfirst half of fiscal 2005, and an approximately $9.0 million decrease in debt levels related to our U.K. Revolver and Seller Notes in fiscal 2006. These decreases in current liabilities were partially offset by the additional acquisition cost payable of $20.5 million at September 2, 2005 as only a portion of the fiscal 2005 earn-out payment related to the Tommy Bahama Group acquisition was paid during the first quarter of fiscal 2006. However, the entire payment for the fiscal 2004 earn-out payment was made during the quarter ended August 27, 2004. Substantially all the remaining liability at September 2, 2005 will be settled through the issuance of shares of our common stock. Also, income taxes payable is higher due to the higher earnings in fiscal 2006.
Deferred income tax liabilitieswere $76.5 million and $80.7 million at September 2, 2005 and August 27, 2004, respectively. The decrease was primarily a result of changes in property, plant and equipment basis differences, amortization of acquired intangibles, deferred rent and deferred compensation balances.
Other non-current liabilities, which primarily consist of deferred rent and deferred compensation amounts, were $25.7 million and $12.8 million at September 2, 2005 and August 27, 2004, respectively. The increase was primarily due to the recognition of deferred rent, for existing and new lease agreements, during the last three quarters of fiscal 2005 and the first quarter of fiscal 2006 as well as the deferral of certain compensation payments to our executives in accordance with our deferred compensation plans.
Quarter ended August 27, 2004
During the quarter ended August 27, 2004, we generated cash flows from operations of $12.1$14.7 million. This cash was generated primarily from the sale of our products net of cash paid for the cost of goods sold, general and administrative operating expenses, interest expense and inventory. 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 anticipated increased sales. Trade payables decreased primarily due to the timing of inventory purchases. Thepurchases while the decline in accrued expenses was primarily due to incentive compensation 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 quarterhalf of fiscal 2005 compared to the last two months of the fourth quarter of fiscal 2004. The inventory decline occurred in our pre-acquisition businesses. Trade payables increased primarily due to extended payment terms on letter of credit purchasing commitments with suppliers of finished goods. The increase in accrued expenses was primarily due to accrued interest on the senior notes. The accounts receivable increase was due to the increase in sales in the fourth quarter.
Our working capital ratio, which is calculated by dividing total current assets by total current liabilities, was 2.29:2.57:1 and 1.28:2.14:1 at SeptemberDecember 2, 2005 and August 27,November 26, 2004, respectively. The improvement was due to the changesincreases in accounts receivables, inventories and prepaid expenses and a decrease in current liabilities, primarily related to decreases in trade accounts payable and other accrued expenses, each as discussed below.
Receivableswere $185.6 million and $175.1 million at December 2, 2005 and November 26, 2004, respectively, representing an increase of 6.0%. The increase in receivables was primarily a result of the 6.9% increase in net sales during the second quarter of fiscal 2006 compared to the second quarter of fiscal 2005. Days’ sales outstanding for our accounts receivable balances, excluding retail receivables, was 54 days and 58 days at December 2, 2005 and November 26, 2004, respectively.
Inventorieswere $166.8 million and $161.8 million at December 2, 2005 and November 26, 2004, respectively. The increase in inventories was primarily a result of an increase in inventories on hand in our Menswear Group to support certain replenishment programs. Our replenishment program inventory in the individual asset and liability categories, withMenswear Group continues to be higher than our optimal level; however, we anticipate this excess to decrease in the most significant factors beingfuture as the different classification of our U.S. Revolver between the two periods and the significant increase in accounts receivable and inventory, whichprograms continue to stabilize. These increases were partially offset by thea reduction of inventory in our Tommy Bahama Group as we had minimal levels of excess inventory on hand at December 2, 2005 compared to November 26, 2004 and generally purchased inventory later in fiscal 2006. Our days supply of inventory on hand, calculated on a trailing twelve month average using a FIFO basis, was 75 days at December 2, 2005 and November 26, 2004.
Prepaid expenseswere $27.5 million and $17.8 million at December 2, 2005 and November 26, 2004, respectively. The increase in prepaid expenses was primarily due to the acquisitiontiming of certain monthly payments, which were required to be paid at the beginning of the month, prior to the end of the second quarter of fiscal 2006, whereas such payments were made subsequent to the end of the quarter in fiscal 2005.
Current liabilities, which primarily consist of payables arising out of our operating activities, were $150.2 million and $174.7 million at December 2, 2005 and November 26, 2004, respectively. The decrease was primarily due to the required payment of interest on the $200 million Senior Unsecured Notes and our U.S. Revolver on December 1 of each year, which was prior to quarter end in fiscal 2006 and subsequent to quarter end in fiscal 2005. Additionally, payments of certain recurring trade accounts payable eachand other accrued expenses occurred earlier during fiscal 2006 as discussed above.compared to fiscal 2005. Also, income taxes payable and accrued compensation was higher at December 2, 2005 compared to November 26, 2004 due to the higher earnings in the first half of fiscal 2006.

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Deferred income tax liabilitieswere $75.3 million and $79.8 million at December 2, 2005 and November 26, 2004, respectively. The decrease was primarily a result of changes in property, plant and equipment basis differences, amortization of acquired intangibles, deferred rent and deferred compensation balances.

Other non-current liabilities, which primarily consist of deferred rent and deferred compensation amounts, were $27.5 million and $13.7 million at December 2, 2005 and November 26, 2004, respectively. The increase was primarily due to the recognition of deferred rent during the second half of fiscal 2005 and the first half of fiscal 2006 as well as the deferral of certain compensation payments to our executives in accordance with our deferred compensation plans.
Investing Activities
During the quarter ended September 2, 2005,first half of fiscal 2006, investing activities used $8.5$18.7 million in cash, consistingcash. Cash paid for acquisitions during fiscal 2006, consisted of approximately $5.3 million ofthe earn-out paymentspayment in the first quarter of fiscal 2006 related to the fiscal 2004 Tommy Bahama Group acquisition and approximately $1.3 millionthe payment for the acquisition of the Solitude a California lifestyle trademark.® and Arnold Brant® trademarks and related working capital during fiscal 2006. Additionally, approximately $3.5$8.5 million of capital expenditures were incurred primarily related to new Tommy Bahama and Ben Sherman retail stores. These investments were partially offset by $1.9 million of proceeds received from our Paradise Shoe equity investment as a result of Paradise Shoe selling its assets.assets during the first quarter of fiscal 2006.

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During the quarter ended August 27, 2004,first half of fiscal 2005, investing activities used $141.7$146.5 million in cash, consisting of approximately $134.2$134.3 million (net of cash acquired) for the acquisition of Ben Sherman as well as payments in the first quarter of fiscal 2005 of approximately $5.5 million related to the Tommy Bahama Group acquisition. Additionally, we incurred capital expenditures of $2.5$6.5 million primarily related to new Tommy Bahama retail stores and capital expenditures for computer equipment and software.
Non-current assetsincluding property, plant and equipment, goodwill, intangible assets and other non-current assets increased primarily as a result of the fiscal 2005 earn-out related to the Tommy Bahama acquisition additional consideration and transaction costs associated with the Ben Sherman acquisition and capital expenditures for our retail stores, which were partially offset by depreciation and amortization of our fixed assets and intangible assets.
Financing Activities
During the quarter ended September 2, 2005,first half of fiscal 2006, financing activities provided approximately $27.7$10.8 million in cash, primarily from $11.5 of additional borrowings, net of repayments, under our U.S. Revolver in fiscal 2006 to fund our investments and working capital needs during the period. Additionally, $2.0period and $3.9 million of cash was provided by the issuance of common stock upon the exercise of employee stock options, and cash was used foroptions. These proceeds were partially offset by the payment of $2.3$4.6 million of quarterly dividends on our common shares.shares during the first half of fiscal 2006.
During the quarter ended August 27, 2004,first half of fiscal 2005 financing activities generated $93.6$103.2 million in cash. Substantially all of these proceeds represent the funding from the U.S. Revolver to finance the Ben Sherman acquisition on July 30, 2004, as well as other working capital investments, partially offset by the $2.8 million paid in the first quarter ended August 27, 2004of fiscal 2005 related to the refinancing of the U.S. Revolver. Additionally, $0.7$0.8 million of cash werewas provided by the issuance of common stock upon the exercise of employee stock options. These cash proceeds were partially offset by the use of cash to pay $1.9$3.9 million of dividends on our common stock.
On SeptemberDecember 5, 2005, we paid a cash dividend of $0.135 per share to shareholders of record as of August 22,November 15, 2005. Additionally, on January 9, 2006, our board of directors declared a cash dividend of $0.15 per share to shareholders of record as of February 15, 2006, payable on March 6, 2006. We expect to pay dividends in future quarters. However, we may decide to discontinue or modify the dividend payment at any time if we determine that other uses of our capital, including, but not limited to, payment of debt outstanding or funding of future acquisitions, may be in our best interest or if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend. Additionally, we may borrow to fund dividends in the short term based on our expectations of operating cash flows in future periods. All cash flow from operations will not necessarily be paid out as dividends in all periods.
Debtwas $320.6$303.9 million and $310.9$322.6 million at SeptemberDecember 2, 2005 and August 27,November 26, 2004, respectively. The increasedecrease was primarily due toa result of the funding of higher inventory levels at September 2, 2005 and higher sales in the quarter ended September 2, 2005 compared to the same quarter in the prior year.net cash generated from operations less any amounts reinvested or paid as dividends.

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Liquidity and Capital Resources
The table below provides a description of our significant financing arrangements, including amounts outstanding (in thousands):
        
 September 2, 2005  December 2, 2005 
$280 million U.S. Senior Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to certain financial ratios (6.02% at September 2, 2005), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and its domestic subsidiaries $116,900 
$280 million U.S. Senior Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest, unused line fees and letter of credit fees based upon a pricing grid which is tied to certain financial ratios (6.30% at December 2, 2005), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and its domestic subsidiaries $99,900 
£12 million Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.2% (5.70% at September 2, 2005), requires interest payments monthly with principal payable on demand or at maturity (July 2006), and is collateralized by substantially all the United Kingdom assets of Ben Sherman 1,192 
£12 million (or approximately $21 million) Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.2% (5.70% at December 2, 2005), requires interest payments monthly with principal payable on demand or at maturity (July 2006), and is collateralized by substantially all the United Kingdom assets of Ben Sherman 4,835 
$200 million Senior Unsecured Notes (“Senior Unsecured Notes”), which accrue interest at 8.875% (effective interest rate of 9.0%) and require interest payments semiannually on June 1 and December 1 of each year, with principal due at maturity (June 2011), are subject to certain prepayment penalties and are guaranteed by our domestic subsidiaries 198,982  199,027 
Unsecured Seller Notes (“Seller Notes”), which accrue interest at LIBOR plus 1.2% (5.73% at September 2, 2005), and require interest payments quarterly with principal payable on demand 3,378 
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets 130  113 
Total Debt 320,582  303,875 
Short-term Debt 4,624  4,886 
Long-term Debt 315,958  $298,989 

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On July 28, 2004, the U.S. Revolver was amended to increase the line of credit from $275 million to $280 million, to eliminate the asset borrowing base calculation to determinein determining availability and to adjust the amount that certain lenders were committed to loan, among other changes. Additionally, the terms and conditions of certain related agreements were modified in November 2004, including a change to a springing lock-box agreement, which resulted in amounts outstanding under the facility requiring classification as long-term debt subsequent to the modification. In September 2005, we amended the U.S. Revolver to remove certain items from the definition of Restricted Payments, as defined.defined in the agreement.
Our lines of credit under the U.S. Revolver and U.K. Revolver are used to finance trade letters of credit and standby letters of credit as well as provide funding for other operating activities and acquisitions. As of SeptemberDecember 2, 2005, approximately $109.4$113.7 million and $2.5$2.6 million of trade letters of credit and other limitations were outstanding against the U.S. Revolver and the U.K. Revolver, respectively. The net availability under our U.S. Revolver and U.K. Revolver was approximately $53.7$66.4 million and $18.4$13.3 million, respectively, as of SeptemberDecember 2, 2005.
The 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. The U.S. Revolver also includes limitations on certain restricted payments such as earn-outs, and prior to amendment in September 2005, included certain restrictions on payment of dividends and prepayment of debt as well.debt. As of SeptemberDecember 2, 2005, we were compliant with all financial covenants and restricted payment clauses related to our debt agreements.
We expect to fund the paymentUpon expiration of the Seller Notes, which are due upon demand and expected to be redeemed for payment during fiscal 2006, with borrowings from the U.K. Revolver. Additionally, the U.K. Revolver is also due upon demand and expires in July 2006. At expiration,2006, the U.S. Revolver in July 2009 and the Senior Unsecured Notes in June 2011, we anticipate that we will be able to refinance the U.K. Revolverfacilities either with the same lender or other lenders or under our U.S. Revolver.with terms available in the market at that time.
We anticipate that we will be able to satisfy our ongoing cash requirements, which generally consistsconsist of working capital needs, capital expenditures (primarily for the opening of Tommy Bahama and Ben Sherman retail stores) and interest and principal payments, on our debt during the remainder of fiscal 2006 primarily from cash on handflow from operations and cash flow from operationson hand supplemented by borrowings under our lines of credit, as necessary. Our need for working capital is typically seasonal with the greatest requirements generally existing from the late second quarter to early fourth quarter of each fiscal year as we build inventory for the spring/summer season. Our capital needs will depend on many factors including our growth rate, the need to finance increased inventory levels and the success of our various

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products. Our debt to total capitalization ratio was 50%47% and 54% at SeptemberDecember 2, 2005 and August 27,November 26, 2004, respectively.
If appropriate investment opportunities arise that exceed the availability under our existing credit facilities, we believe that we will be able to fund such acquisitions through additional or refinanced debt facilities or the issuance of additional equity. However, our ability to obtain additional borrowings or refinance our credit facilities will depend on many factors, including the prevailing market conditions, our financial condition and our ability to negotiate favorable terms and conditions. There is no assurance that financing would be available on terms that are acceptable or favorable to us, if at all.
Our contractual obligations as of SeptemberDecember 2, 2005 have not changed significantly from the contractual obligations outstanding at June 3, 2005 other than changes in the amounts outstanding under the U.S. Revolver and U.K. Revolver, amounts outstanding pursuant to letters of credit (both(each as discussed above) and leases for our recently opened retail stores, none of which occurred outside the ordinary course of business.
We anticipate our capital expenditures for fiscal 2006 to be approximately $30$25 million, including $3.5$8.5 million incurred in the first quarterhalf of fiscal 2006. These expenditures will consist primarily of the continued expansion of our retail operations of the Tommy Bahama Group and Ben Sherman brand, including the opening of additional retail stores.
Off Balance Sheet Arrangements
We have not entered into agreements which meet the definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments to or guarantees with any unconsolidated subsidiaries or special purpose entities.

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CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations are based upon our 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 judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures 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 believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
See the “Summary of Critical Accounting Policies” contained in our fiscal 2005 Form 10-K for a summary of our critical accounting policies. During fiscal 2006, there have been no significant changes in our critical accounting policies as disclosed in our fiscal 2005 Form 10-K.
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. As 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 fiscal 2005 was 20%, 24%, 27% and 29%, respectively, and the net earnings by quarter for fiscal 2005 were 13%, 18%, 28% and 41%, respectively, which may not be indicative of the distribution in fiscal 2006 or future years.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We are exposed to market risk from changes in interest rates on our indebtedness, which could impact our financial condition and results of operations in future periods. Our objective is to limit the impact of interest rate changes on earnings and cash flow, primarily through a mix of fixed and variable rate debt. This assessment also considers our need for flexibility in our borrowing arrangements resulting from the seasonality of our business, among other factors. We continuously monitor interest rates to consider the sources and terms of our borrowing facilities in order to determine whether we have achieved our interest rate management objectives.

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As of SeptemberDecember 2, 2005, approximately $121.5$104.7 million of debt outstanding (or 38%34% of our total debt) was subject to variable interest rates, with a weighted average rate of approximately 6.0%6.27%. Our average variable rate borrowings for the quarter ended September 2, 2005first half of fiscal 2006 were $100.0$104.1 million, with an average interest rate of 5.8%6.0% during the period. Our lines of credit are based on variable interest rates in order to take advantage of the lower rates available in the current interest rate environment and to provide the necessary borrowing flexibility required. To the extent that the amounts outstanding under our variable rate lines of credit change, our exposure to changes in interest rates would also change. If the average interest rate for the quarter ended September 2, 2005first half of fiscal 2006 increased by 100 basis points, our interest expense would have been approximately $0.1$0.3 million higher during the period.
At SeptemberDecember 2, 2005, we had approximately $199.1 million of fixed rate debt and capital lease obligations outstanding with substantially all the debt having an effective interest rate of 9.0% and maturing in June 2011. Such agreements may result in higher interest expense than could be obtained under variable interest rate arrangements in certain periods, but are primarily intended to provide long-term financing of our capital structure and minimize our exposure to increaseschanges in interest rates. A change in the market interest rate impacts the fair value of our fixed rate debt but has no impact on interest incurred or cash flows.
None of our debt was entered into for speculative purposes. We generally do not engage in hedging activities with respect to our interest rate risk and do not enter into such transactions on a speculative basis.

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FOREIGN CURRENCY RISK
To the extent that we have assets and liabilities, as well as operations, denominated in foreign currencies that are not hedged, we are subject to foreign currency transaction gains and losses. We do not hold or issue any derivative financial instruments related to foreign currency exposure for speculative purposes.
We receive United States dollars for substantially all of our product sales except for Ben Sherman sales in the United Kingdom and Europe and certain licensing fees earned in other foreign countries. We view our net investment in the Ben Sherman United Kingdom subsidiary, which has a functional currency of pounds sterling, as long-term. As a result, we generally do not hedge our investment. Ben Sherman net sales that were not denominated in United States dollars totaled $32.5$34.2 million and $66.7 million during the second quarter ended September 2,of fiscal 2006 and first half of fiscal 2006, respectively. Ben Sherman net sales that were not denominated in United States dollars totaled $40.0 million and $53.2 million during the second quarter of fiscal 2005 and $13.6 million for the periodfour months from the date of acquisition (July 30, 2004) through August 27, 2004.November 26, 2004, respectively. The foreign denominated sales during the quarter ended September 2, 2005first half of fiscal 2006 represented approximately 10% of our net sales for the period. With the dollar trading at a weaker position than it has historically traded (average rate of 1.801.78 for the quarterfirst half of fiscal 2006 and 1.83 for the four months ended September 2, 2005)November 26, 2004), a strengthening United States dollar could result in lower levels of sales and earnings in our consolidated statements of earnings in future periods, although the sales in pounds sterling could be equal to or greater than amounts as previously reported. Based on our current level of sales denominated in pounds sterling, if the dollar strengthens by 5%, we would experience a decrease in sales of approximately $6.3 million and a decrease in operating profit of approximately $0.8 million over a twelve month period.
Substantially all of our inventory purchases from contract manufacturers throughout the world are denominated in United States dollars. Purchase prices for our products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies, such as the Chinese Yuan, of the contract manufacturers, which may have the effect of increasing our cost of goods sold in the future. 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. However, we do not believe that exchange rate fluctuations will have a material impact on our inventory costs in future periods.
We may from time to time purchase foreign currency forward exchange contracts to hedge against changes in foreign currency exchange rates. During the quartersix months ended SeptemberDecember 2, 2005, we entered into foreign currency exchange contracts which have not been settled with maturities of less than twelve months totaling approximately $19.0$16.0 million at SeptemberDecember 2, 2005. Such contracts are marked to market with the offset being recognized in our consolidated statement of earnings as the criteria for hedge accounting has not been met. The impact on our consolidated statements of earnings for these contracts is not material.
TRADE POLICY RISK
Pursuant to the 1994 Agreement on Textiles and Clothing, quotas among World Trade Organization, or WTO, member countries, including the United States, were eliminated on January 1, 2005. As a result, the international textile and apparel trade is undergoing a significant realignment which is changing our sourcing patterns, could disrupt our supply chain and could put us at a disadvantage to our competitors.
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”). Pursuant to this authority, both the United States and the European Union

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have re-imposed quotas on several important product categories from China during calendar 2005. Subsequent to the imposition of safeguard quotas, both the United States and may re-impose quotas on additionalChina negotiated bilateral quota agreements that cover a number of important product categories and will remain in place until December 31, 2008 in the future.case of the U.S.-China bilateral agreement and until December 31, 2007 in the case of the European Union-China bilateral agreement. The impositionestablishment of these safeguard quotas 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. The recently adopted Central American-Dominican Republic Free Trade Agreement as well as several other pending free trade agreements could put us at a disadvantage to some of our competitors.

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COMMODITY AND INFLATION RISK
We are affected by inflation and changing prices primarily through the purchase of raw materials and finished goods and increased operating costs to the extent that any such fluctuations are not reflected by adjustments in the selling prices of our products, timely, or at all.products. Also, in recent years, there has been deflationary pressure on selling prices in our private label businesses. While we have been successful to some extent in offsetting such deflationary pressures through product improvements and lower costs, if deflationary price trends outpace our ability to obtain further price reductions, our profitability may be affected. Inflation/deflation risks are managed by each business unit through selective price increases when possible, productivity improvements and cost containment initiatives. We do not enter into significant long-term sales or purchase contracts and we do not engage in hedging activities with respect to such risk.
ITEM 4. CONTROLS AND PROCEDURES
Our Principal Executive Officer and Principal 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, our Principal Executive Officer and the Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were 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 significant changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act) during the second quarter of fiscal quarter ended September 2, 20052006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 September 2, 2005,first half of fiscal 2006, requiring disclosure under Item 103 of Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
NoneNone.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NoneNone.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NoneAt our Annual Meeting of Shareholders held on October 10, 2005, the shareholders:
a.Elected the following to serve three years for a term expiring in 2008 on our Board of Directors as Class I Directors.
Cecil D. Conlee
FOR: 15,855,837
WITHHOLD: 242,023
J. Reese Lanier, Sr.
FOR: 15,400,624
WITHHOLD: 697,236
Robert E. Shaw
FOR: 12,086,185
WITHHOLD: 4,011,675
b.Approved the ratification of Ernst & Young, LLP as our independent auditors.
FOR: 16,048,247
AGAINST: 46,783
ABSTAIN: 2,830
In addition to the Class I Directors noted above, J. Hicks Lanier, Thomas C. Gallagher and Clarence H. Smith continue as Class II Directors with terms expiring in 2006 and E. Jenner Wood III, Helen B. Weeks, S. Anthony Margolis and James A. Rubright continue as Class III Directors with terms expiring in 2007.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
3(a)Bylaws of the Company, as amended.*
10.1First Amendment to the Oxford Industries, Inc. Employee Stock Purchase Plan.*
10.2Second Amendment to Amended and Restated Credit Agreement dated July 28, 2004. Incorporated by reference to Exhibit 10.1 from the Company’s Form 8-K filed on September 26, 2005.
31.1 Section 302 Certification by Principal Executive Officer.*
 
31.2 Section 302 Certification by Principal Financial Officer.*
 
32 Section 906 Certification by Principal Executive Officer and Principal Financial Officer.*
 
* Filed herewith

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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 hereunto duly authorized.
     
October 5, 2005January 10, 2006 OXFORD INDUSTRIES, INC.
  
  (Registrant)  
     
  /s/ Thomas Caldecot Chubb III  
  
Thomas Caldecot Chubb III		  
  Executive Vice President  
  (Principal Financial Officer)  

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