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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


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

For the quarterly period ended NOVEMBER 26, 2004

OR


For the quarterly period ended FEBRUARY 25, 2005
¨
OR

o

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

For the transition period from            to            

For the transition period fromto

Commission File Number 1-4365


OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Georgia58-0831862


(State or other jurisdiction of

incorporation or organization)

 

58-0831862
(I.R.S. Employer

Identification number)


222 Piedmont Avenue, N.E., Atlanta, Georgia 30308
(Address of principal executive offices, 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.)

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. Yes xý    No o¨

Indicate by check mark whether the registrant is an accelerated filer as defined in rule 12b-2 of the Exchange Act. Yes xý    No o¨

        

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

Title of each class


Number of shares outstanding


as of January 3,March 28, 2005


Common Stock, $1 par value

 16,831,81816,849,538





Table of contents


OXFORD INDUSTRIES, INC.


INDEX TO FORM 10-Q


For quarter ended November 26, 2004

February 25, 2005


Page
Page

PART I.FINANCIAL INFORMATION

  


Item 1. Unaudited Condensed Consolidated Financial Statements



 

Unaudited Condensed Consolidated Statements of Earnings

(Unaudited)
 35

Unaudited

Condensed Consolidated Balance Sheets

(Unaudited)
 46

Unaudited

Condensed Consolidated Statements of Cash Flows

(Unaudited)
 57

Unaudited

Notes to Unaudited Condensed Consolidated Financial Statements

 68

Item 2.Management’s Management's Discussion and Analysis of Financial Condition and Results of Operations

 2223

Item 3.Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.Controls and Procedures

 35

PART II.OTHER INFORMATION

Item 4. Controls and Procedures
 37

PART II. OTHER INFORMATION



Item 1.Legal Proceedings


 
35
38

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

 3538

Item 3.Defaults Upon Senior Securities

 3538

Item 4.Submission of Matters to a Vote of Security Holders

 3638

Item 5.Other Information

 3638

Item 6.Exhibits

 3638

Signatures

 3739

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, including the acquisition of Ben Sherman. Forward-looking statements reflect our current expectations and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. These beliefs and assumptions could prove inaccurate. Forward-looking statements 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, all of the risks discussed under "Risk Factors" in our fiscal 2004 Form 10-K, including the following:


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

        Readers are cautioned not to place undue reliance on these forward looking statements, which speak only 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.



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


OXFORD INDUSTRIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)

(UNAUDITED)

   Quarters Ended

  Six Months Ended

   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


   ($ in thousands except per share amounts)

Net Sales

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

Cost of goods sold

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

  

  

  

Gross Profit

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

Selling, general and administrative

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

Amortization of intangibles

   2,424   1,677   4,136   3,355
   

  

  

  

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

Royalties and other operating income

   3,301   1,140   5,054   2,320
   

  

  

  

Operating Income

   20,811   17,046   38,220   33,827

Interest expense, net

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

  

  

  

Earnings Before Income Taxes

   13,956   10,948   23,444   21,983

Income taxes

   4,884   4,108   8,204   8,301
   

  

  

  

Net Earnings

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

  

  

  

Basic Earnings Per Share

  $0.54  $0.43  $0.91  $0.86

Diluted Earnings Per Share

  $0.53  $0.41  $0.89  $0.83

Basic Weighted Average Shares Outstanding

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

  

  

  

Diluted Weighted Average Shares Outstanding

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

  

  

  

Dividends Declared Per Share

  $0.12  $0.105  $0.24  $0.21
   

  

  

  

 
 Quarter Ended
 Nine Months Ended
 
 February 25,
2005

 February 27,
2004

 February 25,
2005

 February 27,
2004

 
 (in thousands except per share amounts)

Net Sales $349,095 $281,418 $926,754 $777,406
Cost of goods sold  235,542  194,350  628,176  542,615
  
 
 
 
Gross Profit  113,553  87,068  298,578  234,791
Selling, general and administrative  86,458  64,802  234,181  177,663
Amortization of intangible assets  2,265  1,678  6,401  5,033
  
 
 
 
   88,723  66,480  240,582  182,696
Other operating income  3,909  931  8,963  3,251
  
 
 
 
Operating Income  28,739  21,519  66,959  55,346
Interest expense, net  7,007  6,255  21,783  18,099
  
 
 
 
Earnings Before Income Taxes  21,732  15,264  45,176  37,247
Income taxes  7,744  5,724  15,948  14,025
  
 
 
 
Net Earnings $13,988 $9,540 $29,228 $23,222
  
 
 
 
Earnings Per Share—Basic $0.83 $0.59 $1.74 $1.45
  
 
 
 
Earnings Per Share—Diluted $0.80 $0.58 $1.69 $1.41
  
 
 
 
Weighted Average Shares Outstanding—Basic  16,816  16,197  16,763  16,062
Dilutive effect of options and restricted shares  399  473  491  455
  
 
 
 
Weighted Average Shares Outstanding—Diluted  17,215  16,670  17,254  16,517
  
 
 
 
Dividends Declared Per Share $0.135 $0.12 $0.375 $0.33
  
 
 
 

See notes to consolidated financial statements.accompanying notes.



OXFORD INDUSTRIES, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(UNAUDITED EXCEPT FOR MAY 28, 2004)

 
 February 25,
2005

 May 28,
2004

 February 27,
2004

 
 (in thousands)

Assets         
Current Assets:         
 Cash and cash equivalents $17,249 $47,569 $6,416
 Receivables  209,001  176,367  167,172
 Inventories  186,222  116,410  133,693
 Prepaid expenses  18,141  16,475  19,325
  
 
 
  Total current assets  430,613  356,821  326,606
Property, plant and equipment, net  57,575  51,826  51,624
Goodwill  167,870  115,426  93,642
Intangible assets, net  237,435  147,333  149,011
Other non-current assets, net  24,523  23,411  22,034
  
 
 
 Total Assets $918,016 $694,817 $642,917
  
 
 
Liabilities and Shareholders' Equity         
Current Liabilities:         
 Trade accounts payable $112,401 $100,813 $85,670
 Accrued compensation  26,226  33,113  23,489
 Additional acquisition cost payable    22,779  
 Other accrued expenses  42,977  30,440  28,891
 Dividends payable  2,274  1,946  1,945
 Income taxes payable  7,316  4,294  2,646
 Short-term debt  4,873  98  13,698
  
 
 
  Total current liabilities  196,067  193,483  156,339
Long-term debt, less current maturities  336,241  198,814  198,783
Other non-current liabilities  15,627  11,124  10,765
Deferred income taxes  78,738  52,419  52,650
Shareholders' Equity:         
 Common stock  16,850  16,215  16,213
 Additional paid-in capital  44,482  23,673  23,627
 Retained earnings  230,011  199,089  184,540
  
 
 
Total shareholders' equity  291,343  238,977  224,380
  
 
 
Total Liabilities and Shareholders' Equity $918,016 $694,817 $642,917
  
 
 

See accompanying notes.


   November 26,
2004


  May 28,
2004


  November 28,
2003


   ($ in thousands)

Assets

            

Current Assets:

            

Cash and cash equivalents

  $19,414  $47,569  $5,499

Receivables

   175,053   176,367   135,794

Inventories

   161,832   116,410   127,437

Prepaid expenses

   17,817   16,475   19,978
   

  

  

Total current assets

   374,116   356,821   288,708

Property, plant and equipment, net

   55,431   51,826   51,421

Goodwill

   165,650   115,426   92,761

Intangibles, net

   239,698   147,333   150,687

Other noncurrent assets, net

   24,657   23,411   22,025
   

  

  

Total Assets

  $859,552  $694,817  $605,602
   

  

  

Liabilities and Shareholders’ Equity

            

Current Liabilities:

            

Trade accounts payable

  $96,595  $100,813  $72,184

Accrued compensation

   22,027   33,113   19,648

Additional acquisition cost payable

   —     22,779   —  

Other accrued expenses

   45,495   30,440   34,007

Dividends payable

   2,013   1,946   1,700

Income taxes payable

   1,555   4,294   99

Short-term debt

   6,973   98   97
   

  

  

Total current liabilities

   174,658   193,483   127,735

Long-term debt, less current maturities

   315,608   198,814   198,764

Other noncurrent liabilities

   13,665   11,124   10,177

Deferred income taxes

   79,754   52,419   52,676

Shareholders’ Equity:

            

Common stock

   16,778   16,215   16,190

Additional paid-in capital

   42,709   23,673   23,115

Retained earnings

   216,380   199,089   176,945
   

  

  

Total Shareholders’ Equity

   275,867   238,977   216,250
   

  

  

Total Liabilities and Shareholders’ Equity

  $859,552  $694,817  $605,602
   

  

  

See notes to consolidated financial statements.


OXFORD INDUSTRIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(UNAUDITED)

   Six Months Ended

 
   November 26,
2004


  November 28,
2003


 
   ($ in thousands) 

Cash Flows from Operating Activities

         

Net earnings

  $15,240  $13,682 

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

         

Depreciation

   6,305   5,183 

Amortization of intangible assets

   4,136   3,355 

Amortization of deferred financing costs and bond discount

   3,118   1,289 

Gain on the sale of assets

   (106)  (207)

Equity income

   (323)  (105)

Deferred income taxes

   (3,333)  (964)

Changes in working capital:

         

Receivables

   25,241   4,105 

Inventories

   (18,703)  5,266 

Prepaid expenses

   1,900   (2,091)

Trade accounts payable

   (9,352)  (10,401)

Accrued expenses and other current liabilities

   (8,888)  (5,487)

Stock options income tax benefit

   965   1,641 

Income taxes payable

   (2,852)  (3,316)

Other noncurrent assets

   (1,181)  (3,215)

Other noncurrent liabilities

   2,541   4,553 
   


 


Net cash provided by operating activities

   14,708   13,288 

Cash Flows from Investing Activities

         

Acquisition, net of cash acquired

   (139,814)  (222,370)

Decrease in restricted cash

   —     204,986 

Investment in deferred compensation plan

   (593)  (1,439)

Purchases of property, plant and equipment

   (6,508)  (7,266)

Proceeds from sale of property, plant and equipment

   413   72 
   


 


Net cash used in investing activities

   (146,502)  (26,017)

Cash Flows from Financing Activities

         

Payments of short-term debt

   (7,555)  —   

Proceeds from (payments of) long-term debt

   116,693   (172)

Payments of debt issuance costs

   (2,766)  (7,374)

Proceeds from issuance of common shares

   752   4,956 

Dividends paid on common shares

   (3,896)  (3,273)
   


 


Net cash provided by (used in) financing activities

   103,228   (5,863)

Net change in cash and cash equivalents

   (28,566)  (18,592)

Effect of foreign currency translation on cash and cash equivalents

   411   —   

Cash and cash equivalents at the beginning of period

   47,569   24,091 
   


 


Cash and cash equivalents at the end of period

  $19,414  $5,499 
   


 


 
 Nine Months Ended
 
 
 February 25,
2005

 February 27,
2004

 
 
 (in thousands)

 
Cash Flows from Operating Activities       
Net earnings $29,228 $23,222 
Adjustments to reconcile net earnings to net cash provided by operating activities:       
 Depreciation  9,696  8,088 
 Amortization of intangible assets  6,401  5,033 
 Amortization of deferred financing costs and bond discount  3,779  1,974 
 Gain on the sale of assets  (240) (749)
 Equity income  (378) (105)
 Deferred income taxes  (4,356) (1,652)
Changes in working capital:       
 Receivables  (10,581) (27,273)
 Inventories  (42,667) (990)
 Prepaid expenses  1,467  (776)
 Trade accounts payable  6,255  3,085 
 Accrued expenses and other current liabilities  (5,730) (6,762)
 Stock options income tax benefit  1,336  1,875 
 Income taxes payable  2,905  (769)
Other non-current assets  (1,182) (4,171)
Other non-current liabilities  4,503  5,141 
  
 
 
  Net cash provided by operating activities  436  5,171 

Cash Flows from Investing Activities

 

 

 

 

 

 

 
 Acquisition, net of cash acquired  (142,929) (222,737)
 Decrease in restricted cash    204,986 
 Investment in deferred compensation plan  (770) (1,656)
 Purchases of property, plant and equipment  (12,000) (10,823)
 Proceeds from sale of property, plant and equipment  425  1,111 
  
 
 
  Net cash used in investing activities  (155,274) (29,119)

Cash Flows from Financing Activities

 

 

 

 

 

 

 
 Proceeds from (payments of) short-term debt  (7,086) 13,600 
 Proceeds from (payments of) long-term debt  137,263  (196)
 Payments of debt issuance costs  (2,766) (7,415)
 Proceeds from issuance of common shares  2,226  5,257 
 Dividends paid on common shares  (5,909) (4,973)
  
 
 
  Net cash provided by financing activities  123,728  6,273 

Net change in cash and cash equivalents

 

 

(31,110

)

 

(17,675

)
Effect of foreign currency translation on cash and cash equivalents  790   
Cash and cash equivalents at the beginning of period  47,569  24,091 
  
 
 
Cash and cash equivalents at the end of period��$17,249 $6,416 
  
 
 

Supplemental schedule of noncashnon-cash investing and financing activities:


As of November 26, 2004,February 25, 2005, approximately $6.9$4.2 million of the Ben Sherman acquisition has been financed through the Seller Notes, as discussed in Note 5.

See notes to consolidated financial statements.accompanying notes.



OXFORD INDUSTRIES, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


QUARTER ENDED NOVEMBER 26,FEBRUARY 25, 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 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 and financial statements and notes thereto included in our fiscal 2004 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 2004," "fiscal 2005" and "fiscal 2006" refer to our fiscal years ended or ending on May 28, 2004, June 3, 2005 and June 2, 2006, respectively.

2.
Inventories: The components of inventories are summarized as follows:

 
 February 25,
2005

 May 28,
2004

 February 27,
2004

 
 (in thousands)

Finished goods $155,055 $85,492 $105,660
Work in process  8,007  9,925  10,697
Fabric, trim and supplies  23,160  20,993  17,336
  
 
 
Total $186,222 $116,410 $133,693
  
 
 
3.
Intangible Assets: Intangible assets by category at February 25, 2005 are summarized below:

 
 Intangibles
at cost

 Accumulated
amortization

 Intangibles,
net

 
 (in thousands)

Trademarks $210,378 $358 $210,020
License agreements  20,683  6,461  14,222
Customer relationships  19,500  6,564  12,936
Covenant not to compete  460  203  257
  
 
 
Total $251,021 $13,586 $237,435
  
 
 
4.
Acquisitions: On July 30, 2004, we acquired 100% of the capital stock of Ben Sherman Limited ("Ben Sherman"), which we operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses of approximately $3.1 million. The transaction was financed with cash on hand,

 
 (in thousands)

 
Total purchase price $148,974 
  
 
Cash $7,656 
Accounts receivable  25,637 
Inventories  26,053 
Other current assets  2,841 
Goodwill  45,074 
Intangibles  96,500 
Property, plant and equipment  3,765 
Current liabilities  (29,602)
Deferred taxes  (28,950)
  
 
Fair value of net assets acquired $148,974 
  
 
 
 Amount
 Life
 
 (in thousands)

  
Trademarks $82,000 Indefinite
License agreements  11,700 4-8 years
Customer relationships  2,800 15 years
  
  
Total $96,500  
  
  

 
 (in thousands)

 
Total purchase price $278,419 
  
 
Cash $22,145 
Accounts receivable  29,521 
Inventories  27,697 
Other current assets  6,015 
Goodwill  110,164 
Intangibles  153,360 
Property, plant and equipment  28,087 
Other assets  2,470 
Current liabilities  (45,626)
Non-current liabilities  (1,253)
Deferred taxes  (54,161)
  
 
Fair value of net assets acquired $278,419 
  
 

 
 Quarter Ended
 Nine Months Ended
 
 February 25,
2005

 February 27,
2004

 February 25,
2005

 February 27,
2004

 
 (in thousands except per share amounts)

Net sales $349,095 $312,132 $957,234 $900,013
Net earnings $13,988 $9,078 $32,012 $26,769
Net earnings per share            
 Basic $0.83 $0.56 $1.91 $1.66
 Diluted $0.80 $0.54 $1.86 $1.62
5.
Debt: The following table details our debt as of the dates specified:

 
 February 25,
2005

 May 28,
2004

 February 27,
2004

 
 (in thousands)

$280 million U.S. 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 (4.82% at February 25, 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 guarantor subsidiaries(1) $137,300 $ $13,600
12 million Pounds Sterling Senior Secured Revolving Credit Facility ("U.K. Revolver"), which accrues interest at the bank's base rate plus 1.2%, (5.95% at February 25, 2005) requires interest payments monthly with principal payable on demand, and is collateralized by substantially all the United Kingdom assets of Ben Sherman(2)  634    
$200 million Senior Unsecured Notes ("Senior Unsecured Notes"), which accrue interest at 8.875% and require interest payments semiannually on June 1 and December 1 of each year, with principal due at maturity (June 2011)(3)  198,893  198,760  198,715
Unsecured Seller Notes ("Seller Notes"), which accrue interest at LIBOR plus 1.2% (6.52% at February 25, 2005), and require interest payments quarterly with principal payable on demand(2)  4,172    
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets  115  152  166
  
 
 
Total Debt  341,114  198,912  212,481
  
 
 
Short-term Debt  4,873  98  13,698
  
 
 
Long-term Debt  336,241  198,814  198,783
  
 
 

(1)
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. Additionally, the terms and conditions of certain related agreements were modified in November 2004, including a change to a springing lock-box agreement, which results in amounts

(2)
The U.K. Revolver and Seller Notes, both denominated in pounds sterling, were entered into in connection with the Ben Sherman acquisition.

(3)
The Senior Unsecured Notes were sold on May 16, 2003 at a discount of 0.713% ($1.4 million) in connection with the acquisition of the Tommy Bahama Group to yield an effective interest rate of 9.0%.
6.
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 fiscal 2004, allother disclosures related to stock-based compensation plans are presented below as if compensation cost of options granted had been determined in accordance with the fair value provisions of the Statement of Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation."

 
 Quarter Ended
 Nine Months Ended
 
 
 February 25,
2005

 February 27,
2004

 February 25,
2005

 February 27,
2004

 
 
 (in thousands, except per share amounts)

 
Net earnings as reported $13,988 $9,540 $29,228 $23,222 
  
 
 
 
 
Add: Stock-based employee compensation recognized in reported net income, net of related tax effects(1)  246    246   
Deduct: Employee compensation expense, net of related tax effects  (230) (193) (647) (421)
  
 
 
 
 
Pro forma net earnings $14,004 $9,347 $28,827 $22,801 
Basic earnings per share—as reported $0.83 $0.59 $1.74 $1.45 
Basic earnings per share—pro forma $0.83 $0.58 $1.72 $1.42 
Diluted earnings per share—as reported $0.80 $0.58 $1.69 $1.41 
Diluted earnings per share—pro forma $0.80 $0.56 $1.67 $1.38 
  
 
 
 
 

(1)
Stock-based compensation recognized in reported net income relates to purchase sharesacceleration of our common stock were includedvesting for certain options granted to employees who retired in the computation of diluted earnings per share.

current period.

7.
Segment Information: We organize the components of our business into operating segments for purposes of allocating resources and assessing performance. Our reportable segments are the Menswear Group, the Womenswear Group and the Tommy Bahama Group. The Menswear Group produces a variety of branded and private label sportswear, tailored clothing, dress shirts and golf apparel. The Womenswear Group produces private label women's sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses the Tommy Bahama brand for other product categories.
 
 Quarter Ended
 Nine Months Ended
 
 February 25,
2005

 February 27,
2004

 February 25,
2005

 February 27,
2004

 
 (in thousands)

Net Sales            
Menswear Group $168,816 $99,828 $468,609 $330,935
Womenswear Group  78,853  78,052  176,408  202,846
Tommy Bahama Group  101,399  103,438  281,351  243,105
Corporate and Other  27  100  386  520
  
 
 
 
Total $349,095 $281,418 $926,754 $777,406

   

7.Segment Information:We organize the components of our business for purposes of allocating resources and assessing performance. Our reportable segments are the Menswear Group, the Womenswear Group and the Tommy Bahama Group. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportscoats, suit separates, walkshorts, golf apparel, jeans, swimwear, footwear and headwear, operates one Ben Sherman retail store and licenses the Ben Sherman brand for other product categories. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses the Tommy Bahama brand for other product categories. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis, which do not necessarily correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Total assets for Corporate and other include the LIFO inventory reserve of $37.1 million, $35.5 million and $35.5 million at November 26, 2004, May 28, 2004 and November 28, 2003. respectively. Segment results are as follows:
 
 Quarter Ended
 Nine Months Ended
 
 
 February 25,
2005

 February 27,
2004

 February 25,
2005

 February 27,
2004

 
 
 (in thousands)

 
Depreciation and amortization             
Menswear Group $1,922 $832 $4,951 $2,643 
Womenswear Group  42  82  172  364 
Tommy Bahama Group  3,590  3,554  10,680  9,734 
Corporate and Other  102  114  294  380 
  
 
 
 
 
Total $5,656 $4,582 $16,097 $13,121 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 
Menswear Group $14,114 $7,016 $41,083 $26,712 
Womenswear Group  5,218  3,341  4,460  8,458 
Tommy Bahama Group  13,524  14,822  31,335  29,331 
Corporate and Other  (4,117) (3,660) (9,919) (9,155)
  
 
 
 
 
Total $28,739 $21,519 $66,959 $55,346 
Interest expense, net  7,007  6,255  21,783  18,099 
  
 
 
 
 
Earnings before taxes $21,732 $15,264 $45,176 $37,247 

   

   Quarters Ended

  Six Months Ended

   ($ in thousands)
   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


Net Sales

                

Menswear Group

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

Womenswear Group

   45,097   61,841   97,555   124,794

Tommy Bahama Group

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

Corporate and Other

   194   300   359   420
   

  

  

  

Total

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

  

  

  

 
 February 25,
2005

 May 28,
2004

 February 27,
2004

 
 (in thousands)

Assets         
Menswear Group $427,209 $171,718 $174,607
Womenswear Group  89,656  95,866  94,364
Tommy Bahama Group  397,059  390,961  365,807
Corporate and Other  4,092  36,272  8,139
  
 
 
Total $918,016 $694,817 $642,917

OXFORD INDUSTRIES, INC.8.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)New Accounting Standards:

QUARTER ENDED NOVEMBER 26, In November 2004, the Financial Accounting Standards Board, or FASB issued FASB Statement No. 151 "Inventory Costs, an Amendment of ARB No. 43 Chapter 4" ("FAS 151"). FAS 151 is applicable for inventory costs incurred during fiscal years beginning after June 15, 2005. FAS 151 requires that items such as idle facility expense, excessive spoilage, double freight, and re-handling be recognized as current-period charges rather than being included in inventory regardless of whether the costs meet the criterion of abnormal as defined in ARB 43. We do not believe the adoption of FAS 151 will have a material impact on us upon adoption in fiscal 2006 as we have historically expensed such costs as incurred.

7.Segment Information (continued):

   Quarters Ended

  Six Months Ended

 
   ($ in thousands) 
   November 26,
2004


  November 28,
2003


  November 26,
2004


  November 28,
2003


 

Depreciation and amortization

                 

Menswear Group

  $1,892  $899  $3,029  $1,811 

Womenswear Group

   65   83   130   282 

Tommy Bahama Group

   3,646   3,402   7,090   6,180 

Corporate and Other

   90   789   192   265 
   


 


 


 


Total

  $5,693  $5,173  $10,441  $8,538 

Operating Income

                 

Menswear Group

  $18,048  $10,221  $26,969  $19,696 

Womenswear Group

   208   1,893   (758)  5,117 

Tommy Bahama Group

   5,895   7,550   17,811   14,509 

Corporate and Other

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


 


 


 


Total

  $20,811  $17,046  $38,220  $33,827 

Interest expense, net

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


 


 


 


Earnings before taxes

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


  

 

May 28,

2004


  November 28,
2003


 
      ($ in thousands) 

Assets

                 

Menswear Group

      $405,010  $171,718  $177,109 

Womenswear Group

       71,170   95,866   73,072 

Tommy Bahama Group

       386,396   390,961   349,293 

Corporate and Other

       (3,024)  36,272   6,128 
       


 


 


Total

      $859,552  $694,817  $605,602 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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


9.
Consolidating Financial Data of Subsidiary Guarantors: Our U.S. Revolver and our $200 million 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 the United States. Set forth below are the condensed consolidating financial statements for the nine months and quarters ended February 25, 2005 and February 27, 2004. We have used the equity method with respect to investment in subsidiaries.

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

9.Consolidating Financial Data of Subsidiary Guarantors:The $200 million Senior Unsecured Notes were issued by Oxford Industries, Inc. but not all of our subsidiaries guarantee the notes. Each subsidiary guarantor is wholly owned by Oxford Industries, Inc. and is organized in the U.S. All guarantees are full and unconditional. Non-guarantors consist of subsidiaries of Oxford Industries, Inc. which are organized outside the U.S. Set forth below are the condensed consolidated financial statements for the six months and quarters ended November 26, 2004, May 28, 2004, and November 28, 2003. We have used the equity method with respect to investment in subsidiaries.

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Balance Sheet
February 25, 2005

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Assets               
Current Assets:               
Cash and cash equivalents $4,549 $2,738 $9,978 $(16)$17,249
Receivables  111,925  69,947  70,849  (43,720) 209,001
Inventories  103,354  63,055  20,081  (268) 186,222
Prepaid expenses  7,733  5,573  4,835    18,141
  
 
 
 
 
Total current assets  227,561  141,313  105,743  (44,004) 430,613
Property, plant and equipment, net  12,191  37,567  7,817    57,575
Goodwill  1,847  114,156  51,867    167,870
Intangibles, net  221  142,829  94,385    237,435
Other non-current assets, net  570,464  149,697  1,323  (696,961) 24,523
  
 
 
 
 
Total Assets $812,284 $585,562 $261,135 $(740,965)$918,016
  
 
 
 
 
Liabilities and Shareholders' Equity               
Current Liabilities:               
Trade accounts payable $92,752 $31,894 $26,758 $(39,003)$112,401
Accrued compensation  13,567  8,932  3,727    26,226
Other accrued expenses  15,358  14,340  18,003  (4,724) 42,977
Dividends payable  2,274        2,274
Income taxes payable  (10,892) 13,140  4,902  166  7,316
Short-term debt  29  38  4,806    4,873
  
 
 
 
 
Total current liabilities  113,088  68,344  58,196  (43,561) 196,067
Long term debt, less current maturities  336,215  26      336,241
Other non-current liabilities  91,484  (78,949) 112,261  (109,169) 15,627
Deferred income taxes  3,999  45,764  28,984  (9) 78,738
Total Shareholders'/invested equity  267,498  550,377  61,694  (588,226) 291,343
  
 
 
 
 
Total Liabilities and Shareholders' Equity $812,284 $585,562 $261,135 $(740,965)$918,016
  
 
 
 
 

November 26, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $7,918  $2,396  $9,099  $1  $19,414

Receivables

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

Inventories

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

Prepaid expenses

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


 


 

  


 

Total current assets

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

Property, plant and equipment, net

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

Goodwill

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

Intangibles, net

   230   144,176   95,292   —     239,698

Other assets net

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


 


 

  


 

Total Assets

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


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

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

Accrued compensation

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

Other accrued expenses

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

Dividends payable

   2,013   —     —     —     2,013

Income taxes payable

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

Short-terrm debt

   28   58   6,887   —     6,973
   


 


 

  


 

Total current liabilities

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

Long term debt, less current maturities

   315,578   30   —     —     315,608

Noncurrent liabilities

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

Deferred income taxes

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

Total Shareholders’/invested equity

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


 


 

  


 

Total Liabilities and Shareholders’ Equity

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


 


 

  


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc

Inc.
Condensed Consolidated Balance Sheet


May 28, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $45,405  $1,438  $724  $2  $47,569

Receivables

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

Inventories

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

Prepaid expenses

   10,377   5,716   382   —     16,475
   


 


 

  


 

Total current assets

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

Property, plant and equipment, net

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

Goodwill

   1,847   113,579   —         115,426

Intangibles, net

   249   147,084   —         147,333

Other assets net

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


 


 

  


 

Total Assets

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


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

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

Accrued compensation

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

Additional acquisition cost payable

   22,779   —     —     —     22,779

Other accrued expenses

   20,056   10,028   356   —     30,440

Dividends payable

   1,946   —     —     —     1,946

Income taxes payable

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

Short-term debt

   —     98   —     —     98
   


 


 

  


 

Total current liabilities

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

Long term debt, less current maturities

   198,760   54   —     —     198,814

Noncurrent liabilities

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

Deferred income taxes

   4,130   48,249   40   —     52,419

Total Shareholders’/invested equity

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


 


 

  


 

Total Liabilities and Shareholders’ Equity

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


 


 

  


 

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Assets               
Current Assets:               
Cash and cash equivalents $45,405 $1,438 $724 $2 $47,569
Receivables  110,092  69,989  36,192  (39,906) 176,367
Inventories  75,699  38,412  2,299    116,410
Prepaid expenses  10,377  5,716  382    16,475
  
 
 
 
 
Total current assets  241,573  115,555  39,597  (39,904) 356,821
Property, plant and equipment, net  13,839  33,186  4,801    51,826
Goodwill  1,847  113,579       115,426
Intangibles, net  249  147,084       147,333
Other non-current assets, net  382,738  7,053  1,604  (367,984) 23,411
  
 
 
 
 
Total Assets $640,246 $416,457 $46,002 $(407,888)$694,817
  
 
 
 
 
Liabilities and Shareholders' Equity               
Current Liabilities:               
Trade accounts payable $92,517 $34,647 $13,562 $(39,913)$100,813
Accrued compensation  19,339  11,357  2,417    33,113
Additional acquisition cost payable  22,779        22,779
Other accrued expenses  20,056  10,028  356    30,440
Dividends payable  1,946        1,946
Income taxes payable  (16,847) 19,533  1,607  1  4,294
Short-term debt    98      98
  
 
 
 
 
Total current liabilities  139,790  75,663  17,942  (39,912) 193,483
Long term debt, less current maturities  198,760  54      198,814
Other non-current liabilities  82,943  (74,847) 3,031  (3) 11,124
Deferred income taxes  4,130  48,249  40    52,419
Total Shareholders'/invested equity  214,623  367,338  24,989  (367,973) 238,977
  
 
 
 
 
Total Liabilities and Shareholders' Equity $640,246 $416,457 $46,002 $(407,888)$694,817
  
 
 
 
 


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Balance Sheet
February 27, 2004

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Assets               
Current Assets:               
Cash and cash equivalents $3,888 $417 $2,082 $29 $6,416
Receivables  98,028  64,232  37,769  (32,857) 167,172
Inventories  87,182  45,342  1,169    133,693
Prepaid expenses  10,595  8,341  389    19,325
  
 
 
 
 
Total current assets  199,693  118,332  41,409  (32,828) 326,606
Property, plant and equipment, net  14,577  32,200  4,847    51,624
Goodwill  1,847  91,795      93,642
Intangibles, net  259  148,752      149,011
Other non-current assets, net  344,755  5,410  1,555  (329,686) 22,034
  
 
 
 
 
Total Assets $561,131 $396,489 $47,811 $(362,514)$642,917
  
 
 
 
 
Liabilities and Shareholders' Equity               
Current Liabilities:               
Trade accounts payable $65,430 $35,467 $17,616 $(32,843)$85,670
Accrued compensation  17,516  3,348  2,625    23,489
Other accrued expenses  17,563  11,247  81    28,891
Dividends payable  1,945        1,945
Income taxes payable  (7,974) 9,145  1,475    2,646
Short-term debt  13,600  98      13,698
  
 
 
 
 
Total current liabilities  108,080  59,305  21,797  (32,843) 156,339
Long term debt, less current maturities  198,720  63      198,783
Other non-current liabilities  51,507  (43,746) 3,004    10,765
Deferred taxes  2,638  49,971  41    52,650
Total Shareholders'/invested equity  200,186  330,896  22,969  (329,671) 224,380
  
 
 
 
 
Total Liabilities and Shareholders' Equity $561,131 $396,489 $47,811 $(362,514)$642,917
  
 
 
 
 

November 28, 2003

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Assets

                    

Current Assets:

                    

Cash and cash equivalents

  $2,659  $883  $1,936  $21  $5,499

Receivables

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

Inventories

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

Prepaid expenses

   10,337   9,129   512   —     19,978
   


 


 

  


 

Total current assets

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

Property, plant and equipment, net

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

Goodwill

   1,847   90,914   —     —     92,761

Intangibles, net

   268   150,419   —     —     150,687

Other assets, net

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


 


 

  


 

Total Assets

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


 


 

  


 

Liabilities and Shareholders’ Equity

                    

Current Liabilities:

                    

Trade accounts payable

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

Accrued compensation

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

Other accrued expenses

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

Dividends payable

   1,700   —     —     —     1,700

Income taxes payable

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

Short-term debt

   —     97   —     —     97
   


 


 

  


 

Total current liabilities

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

Long term debt, less current maturities

   198,676   88   —     —     198,764

Noncurrent liabilities

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

Deferred taxes

   2,403   50,232   41       52,676

Total Shareholders’/invested equity

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


 


 

  


 

Total Liabilities and Shareholders’ Equity

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


 


 

  


 

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Earnings


Quarter Ended November 26, 2004
February 25, 2005

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Net Sales $191,560 $132,382 $44,228 $(19,075)$349,095
Cost of goods sold  150,582  68,105  23,184  (6,329) 235,542
  
 
 
 
 
Gross Profit  40,978  64,277  21,044  (12,746) 113,553
Selling, general and administrative  37,856  49,839  16,524  (15,496) 88,723
Royalties and other income    1,622  2,287    3,909
  
 
 
 
 
Operating Income  3,122  16,060  6,807  2,750  28,739
Interest expense (income), net  4,871  (2,580) 2,047  2,669  7,007
Income from equity investment  16,340  25    (16,365) 
  
 
 
 
 
Earnings Before Income Taxes  14,591  18,665  4,760  (16,284) 21,732
Income taxes  513  5,712  1,348  171  7,744
  
 
 
 
 
Net Earnings $14,078 $12,953 $3,412 $(16,455)$13,988
  
 
 
 
 

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Net Sales

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

Cost of goods sold

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


 


 

  


 

Gross Profit

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

Selling, general and administrative

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

Royalties and other income

   —     1,960   1,341   —     3,301
   


 


 

  


 

Operating Income

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

Interest expense (income), net

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

Income from equity investment

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


 


 

  


 

Earnings Before Income Taxes

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

Income taxes

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


 


 

  


 

Net Earnings

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


 


 

  


 

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Earnings


Quarter Ended November 28, 2003
February 27, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


   ($ in thousands)

Net Sales

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

Cost of goods sold

   129,962   46,422   264   403   177,051
   

  


 


 


 

Gross Profit

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

Selling, general and administrative

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

Royalties and other income

   —     1,140   —     —     1,140
   

  


 


 


 

Operating Income

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

Interest (income) expense, net

   4,351   (360)  (24)  2,131   6,098

Income from equity investment

   6,749   5   —     (6,754)  —  
   

  


 


 


 

Earnings Before Income Taxes

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

Income taxes

   293   3,360   455   —     4,108
   

  


 


 


 

Net Earnings

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

  


 


 


 

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Net Sales $162,221 $122,330 $9,642 $(12,775)$281,418
Cost of goods sold  129,942  64,849  358  (799) 194,350
  
 
 
 
 
Gross Profit  32,279  57,481  9,284  (11,976) 87,068
Selling, general and administrative  32,063  41,261  6,964  (13,808) 66,480
Royalties and other income    931      931
  
 
 
 
 
Operating Income  216  17,151  2,320  1,832  21,519
Interest expense (income), net  4,090  354  (24) 1,835  6,255
Income from equity investment  12,486  29    (12,515) 
  
 
 
 
 
Earnings Before Income Taxes  8,612  16,826  2,344  (12,518) 15,264
Income taxes  (928) 6,260  392    5,724
  
 
 
 
 
Net Earnings $9,540 $10,566 $1,952 $(12,518)$9,540
  
 
 
 
 


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Earnings

Six
Nine Months Ended November 26, 2004
February 25, 2005

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Net Sales $502,067 $353,607 $124,638 $(53,558)$926,754
Cost of goods sold  397,175  181,852  61,097  (11,948) 628,176
  
 
 
 
 
Gross Profit  104,892  171,755  63,541  (41,610) 298,578
Selling, general and administrative  99,276  138,748  48,635  (46,077) 240,582
Royalties and other income    4,951  4,012    8,963
  
 
 
 
 
Operating Income  5,616  37,958  18,918  4,467  66,959
Interest expense (income), net  18,288  (6,110) 4,871  4,734  21,783
Income from equity investment  39,900  68    (39,968) 
  
 
 
 
 
Earnings Before Income Taxes  27,228  44,136  14,047  (40,235) 45,176
Income taxes  (2,439) 14,112  4,104  171  15,948
  
 
 
 
 
Net Earnings $29,667 $30,024 $9,943  (40,406)$29,228
  
 
 
 
 

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


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

Cost of goods sold

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


 


 

  


 

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

Selling, general and administrative

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

Royalties and other income

   —     3,329   1,725   —     5,054
   


 


 

  


 

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

Interest expense (income), net

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

Income from equity investment

   23,560   43   —     (23,603)  —  
   


 


 

  


 

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

Income taxes

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


 


 

  


 

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


 


 

  


 

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Earnings

Six
Nine Months Ended November 28, 2003
February 27, 2004

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


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

Cost of goods sold

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

  


 


 


 

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

Selling, general and administrative

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

Royalties and other income

   —     2,320   —     —     2,320
   

  


 


 


 

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

Interest (income) expense, net

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

Income from equity investment

   14,520   19   —     (14,539)  —  
   

  


 


 


 

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

Income taxes

   2,088   5,513   700   —     8,301
   

  


 


 


 

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

  


 


 


 

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 (in thousands)

Net Sales $497,683 $290,592 $28,153 $(39,022)$777,406
Cost of goods sold  391,705  150,530  226  154  542,615
  
 
 
 
 
Gross Profit  105,978  140,062  27,927  (39,176) 234,791
Selling, general and administrative  93,645  108,462  23,306  (42,717) 182,696
Royalties and other income    3,251      3,251
  
 
 
 
 
Operating Income  12,333  34,851  4,621  3,541  55,346
Interest expense (income), net  14,956  (334) (71) 3,548  18,099
Income from equity investment  27,005  48    (27,053) 
  
 
 
 
 
Earnings Before Income Taxes  24,382  35,233  4,692  (27,060) 37,247
Income taxes  1,160  11,772  1,093    14,025
  
 
 
 
 
Net Earnings $23,222 $23,461 $3,599 $(27,060)$23,222
  
 
 
 
 


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Cash Flow

Six
Nine Months Ended November 26, 2004
February 25, 2005

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


 
   ($ in thousands) 
Cash Flows From Operating Activities                     

Net earnings

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

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

                     

Depreciation and amortization

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

Equity income

   —     (323)  —     —     (323)

Loss (gain) on sale of assets

   84   (594)  404       (106)

Deferred income taxes

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

Changes in working capital

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

Income for equity investment in subsidiaries

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

Other noncurrent assets

   (1,001)  13   (192)  (1)  (1,181)

Other noncurrent liabilities

   1,299   1,242   —     —     2,541 
   


 


 


 


 


Net cash (used in) provided by operating activities

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

Acquisitions net of cash acquired

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

Investment in subsidiaries

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

Investment in deferred comp plan

   —     (593)  —     —     (593)

Purchases of property, plant and equipment

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

Proceeds from sale of property, plant and equipment

   7   406   —     —     413 
   


 


 


 


 


Net cash (used in) provided by investing activities

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

Payments of short-term debt

   —     —     (7,555)  —     (7,555)

Proceeds (payments) of long-term debt

   116,757   (64)          116,693 

Equity contribution received

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

(Payments) proceeds of loan to subsidiaries

   —     (109,191)  109,191   —     —   

Proceeds from issuance of common stock

   752   —     —     —     752 

Debt issue costs

   (2,766)  —     —     —     (2,766)

Change in intercompany payable

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

Dividends on common stock

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


 


 


 


 


Net cash provided by (used in) financing activities

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

Effect of foreign currency translation on cash and cash equivalents

   —     —     411   —     411 

Cash and cash equivalents at the beginning of period

   45,405   1,438   724   2   47,569 
   


 


 


 


 


Cash and cash equivalents at the end of period

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


 


 


 


 


 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 
 (in thousands)

 
Cash Flows from Operating Activities                
Net earnings $29,667 $30,024 $9,943 $(40,406)$29,228 
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:                
 Depreciation and amortization  6,102  10,886  2,888    19,876 
 Equity income    (378)     (378)
 Loss (gain) on sale of assets  118  (746) 388    (240)
Deferred income taxes  (131) (2,484) (2,006) 265  (4,356)
Changes in working capital  (29,771) (31,745) 3,604  10,897  (47,015)
Income for equity investment in subsidiaries  (39,900) (68)   39,968   
Other non-current assets  1,636  372  (3,192) 2  (1,182)
Other non-current liabilities  1,804  2,700    (1) 4,503 
  
 
 
 
 
 
  Net cash (used in) provided by operating activities  (30,475) 8,561  11,625  10,725  436 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Acquisitions net of cash acquired  (5,475) 4  (137,458)   (142,929)
Investment in subsidiaries  (141,807) (32,616)   174,423   
Investment in deferred comp plan    (770)     (770)
Purchases of property, plant and equipment  (784) (10,824) (392)   (12,000)
Proceeds from sale of property, plant and equipment  19  406      425 
  
 
 
 
 
 
  Net cash (used in) provided by investing activities  (148,047) (43,800) (137,850) 174,423  (155,274)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Payments of short-term debt      (7,085) (1) (7,086)
Proceeds (payments) of) long-term debt  137,351  (90)   2  137,263 
Equity contribution received    141,807  32,616  (174,423)  
(Payments) proceeds of loan to subsidiaries    (109,191) 109,191     
Proceeds from issuance of common stock  2,226        2,226 
Debt issue costs  (2,766)       (2,766)
Change in intercompany payable  (1,254) 1,197  10,680  (10,623)  
Dividends on common stock  2,109  2,816  (10,713) (121) (5,909)
  
 
 
 
 
 
  Net cash provided by (used in) financing activities  137,666  36,539  134,689  (185,166) 123,728 

Net Change in Cash and Cash Equivalents

 

 

(40,856

)

 

1,300

 

 

8,464

 

 

(18

)

 

(31,110

)
Effect of foreign currency translation on cash and cash equivalents      790    790 
Cash and cash equivalents at the beginning of period  45,405  1,438  724  2  47,569 
  
 
 
 
 
 
Cash and cash equivalents at the end of period $4,549 $2,738 $9,978 $(16)$17,249 
  
 
 
 
 
 


OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

QUARTER ENDED NOVEMBER 26, 2004

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

Oxford Industries, Inc.

Unaudited
Condensed Consolidated Statement of Cash Flow

Six
Nine Months Ended November 28, 2003
February 27, 2004

 
 Oxford Industries
(Parent)

 Subsidiary
Guarantors

 Subsidiary Non-
Guarantors

 Consolidating
Adjustments

 Consolidated
Total

 
 
 (in thousands)

 
Cash Flows from Operating Activities                
Net earnings $23,222 $23,461 $3,599 $(27,060)$23,222 
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:                
 Depreciation and amortization  4,769  9,958  368    15,095 
 Equity income    (105)     (105)
 Loss (gain) on sale of assets  30  (163) (616)   (749)
Deferred income taxes  (441) (1,527) 26  290  (1,652)
Changes in working capital  (105,848) 76,496  (2,075) (183) (31,610)
Income for equity investment in subsidiaries  (27,005) (48)   27,053   
Other non-current assets  (2,717) (1,572) 313  (195) (4,171)
Other non-current liabilities  2,834  2,307      5,141 
  
 
 
 
 
 
  Net cash (used in) provided by operating activities  (105,156) 108,807  1,615  (95) 5,171 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Acquisitions  (245,062) 22,325      (222,737)
Decrease in restricted cash  204,986        204,986 
Investment in deferred comp plan    (1,656)     (1,656)
Purchases of property, plant and equipment  (2,107) (8,622) (94)   (10,823)
Proceeds from sale of property, plant and equipment  480  (378) 1,009    1,111 
  
 
 
 
 
 

Net cash (used in) provided by investing activities

 

 

(41,703

)

 

11,669

 

 

915

 

 


 

 

(29,119

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Principal payments of long-term debt  13,476  (72)     13,404 
Proceeds from issuance of common stock  5,257        5,257 
Debt issue costs  (7,415)       (7,415)
Change in intercompany payable  121,380  (120,205) (1,168) (7)  
Dividends on common stock  (4,973)       (4,973)
  
 
 
 
 
 
  Net cash provided by (used in) financing activities  127,725  (120,277) (1,168) (7) 6,273 

Net Change in Cash and Cash Equivalents

 

 

(19,134

)

 

199

 

 

1,362

 

 

(102

)

 

(17,675

)
Cash and cash equivalents at the beginning of period  23,022  218  720  131  24,091 
  
 
 
 
 
 
Cash and cash equivalents at the end of period $3,888 $417 $2,082 $29 $6,416 
  
 
 
 
 
 

   Oxford Industries
(Parent)


  Subsidiary
Guarantors


  Subsidiary Non-
Guarantors


  Consolidating
Adjustments


  Consolidated
Total


 
   ($ in thousands) 
Cash Flows From Operating Activities                     

Net earnings

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

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

                     

Depreciation and amortization

   3,204   6,376   247   —     9,827 

Equity income

   —     (105)  —     —     (105)

Loss (gain) on sale of assets

   12   (213)  (6)  —     (207)

Deferred income taxes

   (676)  (1,266)  26   952   (964)

Changes in working capital

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

Income for equity investment in subsidiaries

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

Other noncurrent assets

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

Other noncurrent liabilities

   2,505   2,048   —     —     4,553 
   


 


 


 


 


Net cash (used in) provided by operating activities

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

Acquisitions

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

Decrease in restricted cash

   204,986   —     —     —     204,986 

Investment in deferred comp plan

   —     (1,439)  —     —     (1,439)

Purchases of property, plant and equipment

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

Proceeds from sale of property, plant and equipment

   21   63   (12)  —     72 
   


 


 


 


 


Net cash (used in) provided by investing activities

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

Principal payments of long-term debt

   (124)  (48)  —     —     (172)

Proceeds from issuance of common stock

   4,956   —     —     —     4,956 

Debt issue costs

   (7,374)  —     —     —     (7,374)

Change in intercompany payable

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

Dividends on common stock

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


 


 


 


 


Net cash provided by (used in) financing activities

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

Cash and cash equivalents at the beginning of period

   23,022   218   720   131   24,091 
   


 


 


 


 


Cash and cash equivalents at the end of period

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


 


 


 


 



ITEM 2. MANAGEMENT’SMANAGEMENT'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 StatementsStatements" and theUnaudited "Notes to Unaudited Condensed Consolidated Financial StatementsStatements" contained in this report and the "Consolidated Financial Statements,,” “Notes" "Notes to Consolidated Financial StatementsStatements" andManagement’s"Management's Discussion and Analysis of Financial Condition and Results of OperationsOperations" contained in our fiscal 2004 Form 10-K.

OVERVIEW

        

We are engaged ingenerate revenues and cash flow through the design, production, distribution and sale of branded and private label consumer apparel for men, women, and children.children and the licensing of company owned trademarks. Our principal markets and customers are located primarily in the United States. We source thesemore than 90% of our products fromthrough third party producers, but also manufacture certain of our ownedproducts in manufacturing facilities owned directly by us and through our joint venture partners.arrangements. We primarily distribute our products primarily through our wholesale customers including chain stores, department stores, specialty stores, mail order, mass merchandising and also through our own retail stores.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 factor impacting our results of operationsevent for the current year was the completion of theJuly 30, 2004 acquisition of Ben Sherman, which we operate as part of our Menswear Group. We acquired Ben Sherman for approximately $145 million, plus associated expenses, as discussed in Note 4 of our condensed consolidated financial statements contained in this report. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear.

The transaction was financed with cash on hand, borrowings under our U.S. Revolver and certain Seller Notes (each described in Note 5 of our condensed consolidated financial statements contained in this report). In conjunctionconnection with thethis acquisition, of Ben Sherman, our U.S. Revolver was amended and restated to provide the necessary flexibility to finance the acquisition. This acquisition has resulted in significant increases in substantially all balance sheet accounts and has had and is expected to continue to have a positive impact on July 28, 2004 and increased to $280 million with a syndicatethe amount of eight financial institutions.cash flows generated from operating activities.

        During fiscal 2005, we have continued to see increases in sales and operating results. We generated diluted earnings per share of $0.80 and $1.69, during the quarter and nine months ended February 25, 2005, respectively compared to $0.58 and $1.41 during the quarter and nine months ended February 27, 2004. The increases in sales and earnings per share were primarily a result of the acquisition of Ben Sherman, growth in the Tommy Bahama Group's branded business, growth in the historical Menswear business and a higher percentage of our sales being branded rather than private label.

RESULTS OF OPERATIONS

The following tables set forth: (1) the line items in the "Unaudited Condensed Consolidated Statements of Earnings (Unaudited),"the dollar amounts of each for the periods indicated and the percentage change



relative to the comparable period of the prior year, and (2) the line items in the "Condensed Consolidated Statements of Earnings (Unaudited)" as a percentage of net sales. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding. Individual line items of our“Unaudited "Condensed Consolidated Statements of Earnings (Unaudited)" may not be directly comparable to those of our competitors, as income statement classification of certain expenses may vary by company. The results of operations of Ben Sherman and the Tommy Bahama Group are included in our consolidated statements of earnings from the respective dates of the acquisition.

  Quarters Ended

 Six Months Ended

  Quarter Ended
 Nine Months Ended
 
  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 Nov. 26, 2004

  Nov. 28, 2003

  % Change

  Feb. 25,
2005

 Feb. 27,
2004

 % Change
 Feb. 25,
2005

 Feb. 27,
2004

 % Change
 
  ($ in thousands)  (in thousands)

 

Net sales

  $312,869  $253,883  23.2% $577,659  $495,988  16.5% $349,095 $281,418 24.0%$926,754 $777,406 19.2%

Cost of goods sold

   212,766   177,051  20.2%  392,634   348,265  12.7%  235,542  194,350 21.2% 628,176  542,615 15.8%
  

  

  

 

  

  

 
 
 
 
 
 
 

Gross profit

   100,103   76,832  30.3%  185,025   147,723  25.3%  113,553  87,068 30.4% 298,578  234,791 27.2%

Selling, general and administrative

   80,169   59,249  35.3%  147,723   112,861  30.9%  86,458  64,802 33.4% 234,181  177,663 31.8%

Amortization of intangibles

   2,424   1,677  44.5%  4,136   3,355  23.3%  2,265  1,678 35.0% 6,401  5,033 27.2%

Royalties and other operating income

   3,301   1,140  189.6%  5,054   2,320  117.8%  3,909  931 319.9% 8,963  3,251 175.7%
  

  

  

 

  

  

 
 
 
 
 
 
 

Operating income

   20,811   17,046  22.1%  38,220   33,827  13.0%  28,739  21,519 33.6% 66,959  55,346 21.0%

Interest expense, net

   6,855   6,098  12.4%  14,776   11,844  24.8%  7,007  6,255 12.0% 21,783  18,099 20.4%
  

  

  

 

  

  

 
 
 
 
 
 
 

Earnings before income taxes

   13,956   10,948  27.5%  23,444   21,983  6.6%  21,732  15,264 42.4% 45,176  37,247 21.3%

Income taxes

   4,884   4,108  18.9%  8,204   8,301  (1.2)%  7,744  5,724 35.3% 15,948  14,025 13.7%
  

  

  

 

  

  

 
 
 
 
 
 
 

Net earnings

  $9,072  $6,840  32.6% $15,240  $13,682  11.4% $13,988 $9,540 46.6%$29,228 $23,222 25.9%
  

  

  

 

  

  

 
 
 
 
 
 
 

   

   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  Nov. 26, 2004

  Nov. 28, 2003

 
   (As a percentage of net sales) 

Net sales

  100.0% 100.0% 100.0% 100.0%

Cost of goods sold

  68.0% 69.7% 68.0% 70.2%
   

 

 

 

Gross profit

  32.0% 30.3% 32.0% 29.8%

Selling, general and administrative

  25.6% 23.3% 25.6% 22.8%

Amortization of intangibles

  0.8% 0.7% 0.7% 0.7%

Royalties and other operating income

  1.1% 0.4% 0.9% 0.5%
   

 

 

 

Operating income

  6.7% 6.7% 6.6% 6.8%

Interest expense, net

  2.2% 2.4% 2.6% 2.4%
   

 

 

 

Earnings before income taxes

  4.5% 4.3% 4.1% 4.4%

Income taxes

  1.6% 1.6% 1.4% 1.7%
   

 

 

 

Net earnings

  2.9% 2.7% 2.6% 2.8%
   

 

 

 

ACQUISITION

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

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

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

For further discussion of the acquisition, see Note 4 of “Unaudited Notes to Condensed Consolidated Financial Statements.”For further discussion of financing arrangements, see the section below titled “Financing Arrangements” and Note 5 of “Unaudited Notes to Condensed Consolidated Financial Statements.”

 
 Quarter Ended
 Nine Months Ended
 
 
 Feb. 25,
2005

 Feb. 27,
2004

 Feb. 25,
2005

 Feb. 27,
2004

 
 
 (as a percentage of net sales)

 
Net sales 100.0%100.0%100.0%100.0%
Cost of goods sold 67.5%69.1%67.8%69.8%
  
 
 
 
 
Gross profit 32.5%30.9%32.2%30.2%
Selling, general and administrative 24.8%23.0%25.3%22.9%
Amortization of intangibles 0.6%0.6%0.7%0.6%
Royalties and other operating income 1.1%0.3%1.0%0.4%
  
 
 
 
 
Operating income 8.2%7.6%7.2%7.1%
Interest expense, net 2.0%2.2%2.4%2.3%
  
 
 
 
 
Earnings before income taxes 6.2%5.4%4.9%4.8%
Income taxes 2.2%2.0%1.7%1.8%
  
 
 
 
 
Net earnings 4.0%3.4%3.2%3.0%
  
 
 
 
 

TOTAL COMPANY

SecondThird Quarter

        The discussion below compares our results of operations for the third quarter of fiscal 2005 compared to our results of operations for the third quarter of fiscal 2004. Each percentage change provided below reflects the change between these periods.



Net salesincreased 23.2% from $253.9 million24.0% in the second quarter of fiscal 2004 to $312.9 million in the secondthird quarter of fiscal 2005. The increase was primarily due to:

A
    Ben Sherman, which provided approximately $41.9 million of net sales.

    The unit sales increase of 7.0%10.9%, primarily attributable to the addition of Ben Sherman, and increased sales ofan increase in the Tommy Bahama GroupGroup's branded sales, and new marketing initiatives in our historical menswear business including the licensed Nick(it) sportswear collection partially offset by a decline in the Womenswearexit from the private label business by the Tommy Bahama Group.

An

The average selling price per unit increase of 15.2%12.5%, primarily attributable to the shift in product mix due to an increase in Menswear sales, including Ben Sherman, and an increase in the Tommy Bahama Group's branded sales, both of which have higher average selling prices per unit than our historical businesses, and a declinethe exit from the private label business by the Tommy Bahama Group.

Gross profit increased 30.4% in Womenswear sales, which have a lower average selling price per unit.

Cost of goods soldfor the secondthird quarter of fiscal 2005 was $212.8 million or 68.0% of net2005. The increase is due to higher sales compared to $177.0 million or 69.7% of net sales inand higher gross margins. Gross margins increased from 30.9% during the secondthird quarter of fiscal 2004.2004 to 32.5% during the third quarter of fiscal 2005. The decline in cost of goods sold, as a percentage of net sales,increase was primarily due to:

    The increased branded sales of the Tommy Bahama Group, which has higher gross margins.



The exit from the private label business by the Tommy Bahama Group, which has lower gross margins.

The acquisition of Ben Sherman, which has higher gross margins.



The decreased salesimproved sourcing structure of the Womenswear Group, which has lowerGroup.

        Gross profit and gross margins.

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.

        

Selling, general and administrative expenses(“ ("SG&A”&A") increased from $59.2 million or 23.3%33.4% during the third quarter of fiscal 2005. SG&A was 24.8% of net sales in the secondthird quarter of fiscal 20042005 compared to $80.2 million or 25.6%23.0% of net sales in the secondthird quarter of fiscal 2005.2004. The increase in SG&A was primarily due to:

The continued growth into the Tommy Bahama Group, which has a higher SG&A expense structure.

The acquisitionstructure associated with our recently acquired branded businesses and expenses associated with the start-up of Ben Sherman, which also has a highernew marketing initiatives.

        SG&A expense structure.

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 as a result of recent acquisitions and due to the impact of seasonality which would result in higher or lower SG&A in certain periods.

        

Amortization of intangiblesincreased from $1.7 million35.0% in the second quarter of fiscal 2004 to $2.4 million in the secondthird quarter of fiscal 2005. The increase was primarily due to $0.9 million of amortization of intangibles acquired as part of the Ben Sherman acquisition partially offset by lower amortization amounts related to the Tommy Bahama Group acquisition. We expect that amortization of intangibles will decrease slightly in future years as some shorter lived intangible assets become fully amortized.

        

Royalties and other operating incomeincreased from $1.1 million319.9% in the secondthird quarter of fiscal 20042005. We derive licensing income through licensing our trademarks across a range of categories that complement our current product offerings. The increase was due to $3.3 million in the second quarter of fiscal 2005 primarily due to:

Licensinghigher licensing income from existing and additional licenses for the Tommy Bahama brand.

Higher revenues from existing licenses for the Tommy Bahama brand.

Licensing income associated with theand Ben Sherman brand.
brands. We anticipate that royalties and other operating 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, netincreased from $6.1 million12.0% in the second quarter of fiscal 2004 to $6.9 million in the secondthird quarter of fiscal 2005. The increase in interest expense was primarily due to the interest on debt incurred to finance the acquisition of Ben Sherman.



Interest expense in future periods will be dependent upon the interest rate during the period as well as the total amount of debt outstanding during the period.

        

Income taxes.taxesThe were at an effective tax rate was approximately 37.5% inof 35.6% for the secondthird quarter of fiscal 2004 and 35.0% in2005 compared to 37.5% for the secondthird quarter of fiscal 2005.2004. Variations in the effective tax rate were primarily attributable to:

Theto the acquisition of Ben Sherman which is subject to lower statutory income tax rates inand the United Kingdom.

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

First HalfNine Months

        The discussion below compares our results of operations for the nine months of fiscal 2005 compared to our results of operations for the nine months of fiscal 2004. Each percentage change provided below reflects the change between these periods.

Net salesincreased 16.5% from $496.0 million19.2% in the first half of fiscal 2004 to $577.7 million in the first halfnine months of fiscal 2005. The increase was primarily due to:

An
exit from the private label business by the Tommy Bahama Group.

        

A unit sales declineGross profit increased 27.2% in the nine months of 1.8%fiscal 2005. The increase is due to higher sales and higher gross margins. Gross margins increased from 30.2% during the decline in Womenswear, partially offsetnine months of fiscal 2004 to 32.2% during the nine months of fiscal 2005. The increase was primarily due to:

SG&A increased 31.8% in the growth in Tommy Bahama.

Cost of goods soldfor the first halfnine months of fiscal 20052005. SG&A was $392.6 million or 68.0% of net sales, compared to $348.3 million or 70.2%25.3% of net sales in the first halfnine months of fiscal 2004. The decline in cost of goods sold, as a percentage of net sales, was primarily due2005 compared to the reasons stated above for the second quarter.

SG&A increased from $112.9 million or 22.8% of net sales22.9% in the first halfnine months of fiscal 2004 to $147.7 million or 25.6% of net sales in the first half of fiscal 2005.2004. The increase in SG&A was primarily due to the reasons stated above forhigher SG&A expense structure associated with our recently acquired branded businesses and expenses associated with the second quarter.start-up of new marketing initiatives.

        

Amortization of intangiblesincreased from $3.4 million27.2% in the first halfnine months of fiscal 2004 to $4.1 million in the first half of fiscal 20052005. The change was primarily as a result of the amortization of intangibles acquired as part of the Ben Sherman acquisition partially offset by lower amortization amounts related to the Tommy Bahama Group acquisition.

        

Royalties and other operating incomeincreased from $2.3 million175.7% in the first halfnine months of fiscal 2004 to $5.1 million in the first half of fiscal 2005 primarily2005. The increase was due to the reasons stated abovehigher licensing income from existing and additional licenses for the second quarter.Tommy Bahama and Ben Sherman brands.

        

Interest expense, netincreased from $11.8 million20.4% in the first half of fiscal 2004 to $14.8 million in the first halfnine months of fiscal 2005. The increase in interest expense was due to:

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

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

        

Income taxes.taxesThe were at an effective tax rate was approximately 37.8% inof 35.3% for the first halfnine months of fiscal 2004 and 35.0% in2005 compared to 37.7% for the first halfnine months of fiscal 2005.2004. Variations in the effective tax rate were primarily due attributable



to the reasons stated above foracquisition of Ben Sherman which is subject to lower statutory income tax rates and the second quarter.relative distribution of pre-tax earnings among the various taxing jurisdictions in which we operate.

SEGMENT RESULTS OF OPERATIONS

        

OUR SEGMENTS

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

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

 
 Quarter Ended
 Nine Months Ended
 
 
 Feb. 25,
2005

 Feb. 27,
2004

 % Change
 Feb. 25,
2005

 Feb. 27,
2004

 % Change
 
 
 (in thousands)

 
Net Sales                 
Menswear Group $168,816 $99,828 69.1%$468,609 $330,935 41.6%
Womenswear Group  78,853  78,052 1.0% 176,408  202,846 (13.0)%
Tommy Bahama Group  101,399  103,438 (2.0)% 281,351  243,105 15.7%
Corporate and Other  27  100 (73.0)% 386  520 (25.8)%
  
 
 
 
 
 
 
Total Net Sales $349,095 $281,418 24.0%$926,754 $777,406 19.2%
  
 
 
 
 
 
 

   

 Quarter Ended
 Nine Months Ended
 
  Quarters Ended

 Six Months Ended

  Feb. 25,
2005

 Feb. 27,
2004

 % Change
 Feb. 25,
2005

 Feb. 27,
2004

 % Change
 
  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 Nov. 26, 2004

  Nov. 28, 2003

  % Change

  (in thousands)

 
  ($ in thousands) 

Net Sales

               
Operating Income                

Menswear Group

  $181,088  $115,353  57.0% $299,793  $231,107  29.7% $14,114 $7,016 101.2%$41,083 $26,712 53.8%

Womenswear Group

   45,097   61,841  (27.1)%  97,555   124,794  (21.8)%  5,218  3,341 56.2% 4,460  8,458 (47.3)%

Tommy Bahama Group

   86,490   76,389  13.2%  179,952   139,667  28.8%  13,524  14,822 (8.8)% 31,335  29,331 6.8%

Corporate and Other

   194   300  (35.3)%  359   420  (14.5)%  (4,117) (3,660)12.5% (9,919) (9,155)8.3%
  

  

  

 

  

  

 
 
 
 
 
 
 

Total Net Sales

  $312,869  $253,883  23.2% $577,659  $495,988  16.5%
Total Operating Income $28,739 $21,519 33.6%$66,959 $55,346 21.0%
  

  

  

 

  

  

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

        The discussion below compares our results of operations for the third quarter of fiscal 2005 compared to our results of operations for the third quarter of fiscal 2004 and also the nine months of fiscal 2005 compared to our results of operations for the nine months of fiscal 2004. Each percentage change provided below reflects the change for the quarter or nine months between fiscal 2005 and fiscal 2004 as identified in the respective heading.

   Quarters Ended

  Six Months Ended

 
   Nov. 26, 2004

  Nov. 28, 2003

  % Change

  Nov. 26, 2004

  Nov. 28, 2003

  % Change

 
   ($ in thousands) 

Operating Income

                       

Menswear Group

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

Womenswear Group

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

Tommy Bahama Group

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

Corporate and Other

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


 


 

 


 


 

Total Operating Income

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


 


 

 


 


 


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

SEGMENT RESULTS



Menswear Group

SecondThird Quarter

        

The Menswear Group reported a 57.0%69.1% increase in net sales from $115.3 million in the second quarter of fiscal 2004 to $181.1 million in the secondthird quarter of fiscal 2005. The increase was primarily due to:

$52.7 million of

Aof $41.9 million.

The unit sales increase of 53.0%24.5% for the segment, primarily due towithout considering the Ben Sherman operations, from new marketing initiatives in dress and 14.7% from increases in other menswear business, which was primarily insport shirts, tailored clothing and the chain, direct mail and discount distribution channels.

Anlicensed Nick(it) sportswear collection.

The average selling price per unit increase of 2.3% due to the acquisition of10.9% including Ben Sherman which has a higher average selling price per unit than other lines.
and 2.2% without considering Ben Sherman.

        

The Menswear Group reported a 76.6%101.2% increase in operating income from $10.2 million in the second quarter of fiscal 2004 to $18.0 million in the secondthird quarter of fiscal 2005. The increase in operating income was primarily due to the addition of Ben Sherman which has higher grossoperating profit margins and the increase in sales volume in our Ben Shermanhistorical menswear business.

First HalfNine Months

        

The Menswear Group reported a 29.7%41.6% increase in net sales from $231.1 million in the first half of fiscal 2004 to $299.8 million in the first halfnine months of fiscal 2005. The change was primarily due to:

$69.2

A

The unit sales increase of 0.3%7.9% for the segment without considering Ben Sherman and 25.3% overall.

Anfor the same reasons as noted above.

The average selling price per unit increase of 3.4%, primarily due to the acquisition of7.9% including Ben Sherman which has a higher average price per unit than other lines.

and no change without considering Ben Sherman.

The Menswear Group reported a 36.9%53.8% increase in operating income from $19.7 million in the first half of fiscal 2004 to $27.0 million in the first halfnine months of fiscal 2005. The increase in operating income was primarily due to the higher grossaddition of Ben Sherman partially offset by lower operating margins in our Ben Shermanhistorical menswear business.

Womenswear Group

SecondThird Quarter

        

The Womenswear Group reported a 27.1% decline1.0% increase in net sales from $61.8 million in the second quarter of fiscal 2004 to $45.1 million in the secondthird quarter of fiscal 2005. The change was primarily due to the unit sales decline of 28.7%, primarily in the discount distribution channel, notably with Wal-Mart which has narrowed its womenswear assortment, reduced rack space devoted to women’s apparel and placed greater emphasis on direct sourcing. The decline in unit sales was partially offset by ana 3.5% increase of 1.3% in the average selling price per unit, primarily due to product mix within the discount distribution channel. The increase in the average selling price per unit was partially offset by a unit sales decline of 1.7% due to a change in product mix.

        

The Womenswear Group reported an 89.0% declinea 56.2% increase in operating profit from $1.9 millionincome in the second quarter of fiscal 2004 to $0.2 million in the secondthird quarter of fiscal 2005. The change was primarily due to the significant decreasean improved sourcing structure resulting in sales, which was slightly offset by operating expense reductions.

improved gross margins on comparable sales.

First HalfNine Months

        

The Womenswear Group reported a 21.8%13.0% decline in net sales from $124.8 million in the first half of fiscal 2004 to $97.6 million in the first halfnine months of fiscal 2005. The change was primarily due to the unit sales decline of 25.0% due to15.9%, primarily in the same reasons as described above for the second quarter.discount distribution channel. The decline in unit sales was partially offset by an increase of 2.6% in the average selling price per unit. The reasons for the increase3.0% in the average selling price per unit were the same as described above for the second quarter.primarily due to a change in product mix.



        

The Womenswear Group reported a 114.8%47.3% decline in operating income from a profit of $5.1 million in the first half of fiscal 2004 to a loss of $0.8 million in the first halfnine months of fiscal 2005. The decrease was primarily due to:

Theto the reduction in sales.

Grosssales and gross margin pressures.

pressures, particularly during the first two quarters of fiscal 2005.

Tommy Bahama Group

SecondThird Quarter

        

The Tommy Bahama Group reported a 13.2% increase2.0% decline in net sales from $76.4 million in the second quarter of fiscal 2004 to $86.5 million in the secondthird quarter of fiscal 2005. The increasedecline was primarily due to:to exiting the private label business which is not aligned with the ongoing strategy of growing the lifestyle branded businesses of the Tommy Bahama Group. The private label business provided revenues totaling $13.5 million during the third quarter of fiscal 2004 compared to $2.5 million during the third quarter of fiscal 2005. This decline is partially offset by:

An6.9% excluding private label business.

The average selling price per unit increase of 4.8%3.5% excluding the private label business, primarily due to product and channel mix.

a higher proportion of sales through our retail stores as opposed to our wholesale distribution channel.

An increase in the number of retail stores from 39 at the end of the secondthird quarter of fiscal 2004 to 4850 at the end of the secondthird quarter of fiscal 2005.

The Tommy Bahama Group reported a 21.9%an 8.8% decline in operating income from $7.6 million in the second quarter of fiscal 2004 to $5.9 million in the secondthird quarter of fiscal 2005. The decline in operating income was primarily due to:

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

        The decline in operating income was partially offset by a favorable change in product mix from the lower margin private label business to the higher margin branded business and a higher proportion of sales through our retail stores as opposed to our wholesale distribution channel.

First HalfNine Months

        

The Tommy Bahama Group reported a 28.8%15.7% increase in net sales from $139.7 million in the first halfnine months of fiscal 20042005 despite a reduction in net sales of $15.2 million due to $180.0 million inexiting the first half of fiscal 2005.private label business. The increase was primarily due to:

Ownership

A2004.

The unit sales increase of 21.2%.

An21.7% excluding the private label business due to ownership of the Tommy Bahama Group for the full nine months in fiscal 2005 and growth in sales.

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

2.6% excluding the private label business.

An increase in the number of total retail stores from 39 at the end of the first half of FiscalFebruary 27, 2004 to 4850 at the end of the first half of FiscalFebruary 25, 2005.

        

The Tommy Bahama Group reported a 22.8%6.8% increase in operating income from $14.5 million in the first half of fiscal 2004 to $17.8 million in the second halfnine months of fiscal 2005. The benefit of the increase in sales resulting fromduring the year as compared to the prior year and the impact of owning Tommy Bahama for the entire period noted above was partially offset by the increaseincreases in operating expenses during the nine months for the same reasons as described above for the secondthird quarter.



Corporate and Other

SecondThird Quarter

        

The Corporate and Other operating loss increased from $2.6 million12.5% in the second quarter of fiscal 2004 to $3.3 million in the secondthird quarter of fiscal 2005. The increase in the operating loss was primarily due to increased employment costs.

parent company expenses partially offset by LIFO inventory accounting.

First HalfNine Months

        

The Corporate and Other operating loss increased from $5.5 million8.3% in the first half of fiscal 2004 to $5.8 million in the first halfnine months of fiscal 2005. The increase in the operating loss was primarily due to increased employment costsparent company expenses partially offset by LIFO inventory accounting.

EARNINGS OUTLOOK

        While our profitability for the third quarter was stronger than expected, spring bookings in certain sectors of the business remain softer than anticipated. For the fourth quarter of fiscal 2005, we anticipate sales in the range of $350 million to $365 million and earnings per diluted share in the range of $1.00 to $1.10. These results would provide fiscal 2005 sales in the range of $1.278 billion to $1.292 billion and earnings per diluted share in the range of $2.69 to $2.79.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

        

Financing Arrangements

U.S. Revolver

In connection withOur primary source of revenue and cash flow is our operating activities in the Ben Sherman acquisition on July 30, 2004,United States. Additionally, we also have access to amounts under our U.S. Revolver was amended on July 28, 2004 and increasedU.K. Revolver as necessary when cash inflows are less than cash outflows. We may seek to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. Under the amended U.S. Revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of total debt to EBITDA, calculated as applicable on a pro forma basis. The credit agreement also requires us to maintain certain financial ratios. Our borrowings under the amended U.S. Revolver are no longer subject to a borrowing base calculation based on our accounts receivable, inventories and real property. The amendment of our U.S. Revolver resulted in a write-off of deferred financing costs of $1.8 million in the first quarter of fiscal 2005. We are in compliance with the covenants as of November 26, 2004. At November 26, 2004, gross availability under the U.S. Revolver totaled $280.0 million, against which approximately $129.8 million in letters of credit and $116.7 million in direct borrowings were outstanding.

On November 19, 2004, we amended the agreements governing our lockbox activities associated with the U.S. Revolver. In accordance with accounting principles generally accepted in the United States, the terms of the new agreements resulted in the reclassification of all debt outstanding under our $280 million U.S. Revolver from a current liability to a non-current obligation on our balance sheet as of November 26, 2004. As a result of these agreements and the resulting reclassification, certain of our financial ratios,finance future capital investment programs through various methods, including but not limited to, borrowings under our current credit facilities, issuance of additional long-term debt, sales of equity securities and leases. However, we do not currently have any plans with respect to significant changes in our capital structure or financing arrangements.

        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 and repayment of our indebtedness. 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.

Operating Activities

        Cash flow from operations was $0.4 million during the nine months ended February 25, 2005 compared to $5.1 million during the nine months ended February 27, 2004. This cash was generated primarily from revenues from the sale of our products net of cash paid for cost of goods sold, general and administrative operating expenses, interest expense and inventory. The decrease in operating cash flows was primarily due to a substantial amount of inventory purchases during the third quarter to build seasonal inventory levels for the fourth quarter partially offset by the results of operations of Ben Sherman. Cash flows from operations in future periods should be greater than those in the current ratio, in currentperiod as we sell the inventory currently on hand and obtain the benefit of a full period of operations from Ben Sherman. The cash flows for the period are not necessarily indicative of the cash flows anticipated for future periods may not necessarily be comparableand are subject to prior periods.seasonality.

        

U.K. RevolverInventories

On July 30, were $186.2 million and $133.7 million at February 25, 2005 and February 27, 2004, Ben Sherman entered intorespectively. The increase in inventories is primarily a £12result of approximately $25.0 million U.K. Revolver to provide for seasonal working capital requirements and general corporate purposes. The facility is secured by substantially all of the United Kingdom assetsinventories of Ben Sherman on hand at February 25, 2005 and bears interest at the lender’s prime or base rate plus 1.2%. The facility is payable on demand and requires the borrower to maintain certain financial ratios. Ben Sherman isseasonal inventory build-ups for anticipated fourth quarter sales in compliance with these covenants as of November 26, 2004.

Senior Unsecured Notes

On May 16, 2003, we completed a $200 million private placement of our Senior Unsecured Notes to finance the acquisitionother Menswear businesses. Also, inventory levels of the Tommy Bahama Group. The notes bear interestGroup increased due to recently opened retail stores and earlier deliveries of Spring inventory. Our days supply inventory on hand, calculated using a FIFO basis, was 76 days at 8.875%, have an 8-year life and were soldFebruary 25, 2005 compared to 79 days at a discount of 0.713%, or $1.4 million, to yield an effective interest rate of 9.0%. Interest is payable semi-annually with the principal amount due at maturity on June 1, 2011. The notes are guaranteed by all of our existing and future direct and indirect domestic wholly owned restricted subsidiaries. Among other restrictions, the indenture restricts our ability to incur additional indebtedness or liens, to enter into lease or hedging arrangements, to make investments and acquisitions, to sell assets, to pay dividends and to pay amounts due under the earnout agreement with the selling shareholders of the Tommy Bahama Group. The indenture also requires us to maintain certain financial ratios and covenants. We are in compliance with these covenants as of November 26,February 27, 2004.

Seller Notes

        

In conjunction with our acquisitionReceivables were $209.0 million and $167.2 million at February 25, 2005 and February 27, 2004, respectively. The increase in receivables is primarily a result of approximately $33.0 million of receivables of Ben Sherman on July 30, 2004, we entered into Seller Notes withat February 25, 2005 as well as the management shareholders of Ben Sherman. The Seller Notes total approximately $6.9 million and are payable on demand beginning six months after July 30, 2004. The Seller Notes bear interest athigher sales in the annual rate of LIBOR plus 1.2% payable on the last day of September, December, March and June until the principal has been paid in full.

Operating Activities

During the first halfthird quarter of fiscal 2005 we generated cashcompared to the third quarter of fiscal 2004. Days sales outstanding for our accounts receivable balances increased from 49 days at February 27, 2004 to 52 days at February 25, 2005.

Current liabilities, which primarily consist of payables arising out of our operating activities, were $196.1 million and $156.3 million at February 25, 2005 and February 27, 2004, respectively. The $39.7 million increase was primarily the result of $14.7approximately $39.6 million primarily from net earnings and non-cash charges offset by a net increase inof current liabilities at February 25, 2005 related to Ben Sherman.

        Our working capital after giving effectratio was 2.20:1 and 2.09:1 at February 25, 2005 and February 27, 2004, respectively. The improvement is due to the acquisition of Ben Sherman.

Duringchanges in the first half of fiscal 2004, we generated cash from operating activities of $13.3 million primarily from net earningsindividual asset and non-cash charges offset by a net increase in working capital after giving effect to the acquisition of Tommy Bahama.liability categories specified above.



Investing Activities

        

During the first halfnine months of fiscal 2005, investing activities used $146.5$155.3 million in cash, principallyconsisting of approximately $137.5 million (net of cash acquired) for the acquisition of Ben Sherman as well as payments in the first quarter of fiscal 2005 of approximately $5.4 million related to the Tommy Bahama earn-out agreement. CapitalGroup acquisition. Additionally, approximately $12.0 million of capital expenditures of $6.5 million were incurred primarily related to new Tommy Bahama retail stores as well as leasehold improvements and office equipmentcapital expenditures associated with our recently leased headquarters for the Tommy Bahama corporate offices.Group in Seattle, Washington.

        

During the first halfnine months of fiscal 2004, investing activities used $26.0$29.1 million in cash, principally for the acquisition of the Tommy Bahama Group on June 13, 2003 net of the reduction in restricted proceeds from the sale of the Senior Unsecured Notes. CapitalNotes during the fourth quarter of fiscal 2003. Additionally, we incurred capital expenditures of $7.3$10.8 million were primarily related to new Tommy Bahama retail stores and capital expenditures for computer equipment and software.

        Non-current assets including property, plant and equipment, goodwill, intangible assets and other non-current assets increased as a result of the fiscal 2005 acquisition of Ben Sherman as well as current period capital expenditures at February 25, 2005 compared to February 27, 2004.

Financing Activities

        

During the first halfnine months of fiscal 2005, financing activities generated $103.2provided approximately $123.7 million in cash. Substantially all of these proceeds represent the funding from the U.S. Revolver to finance the Ben Sherman acquisition in the current period partially offset by the amounts paid in the current period related to the refinancing of the U.S. Revolver. Additionally, certain amounts of cash were provided by the issuance of common stock upon the exercise of employee stock options, and cash was used to repay certain short-term debt and for the payment of quarterly dividends on our common shares.

        During the nine months of fiscal 2004, financing activities provided approximately $6.3 million in cash. This primarily represents the proceeds from increased U.S. Revolvershort-term borrowings from our short-term debt facilities and proceeds from the issuance of common stock upon the exercise of employee stock options, which were partially offset by payments on the U.K. Revolver during the period, deferred financing paid to amend our U.S. Revolver and dividends on our common shares.

During the first half of fiscal 2004, financing activities used $5.9 million in cash. This represents payments on debt issuance costs paid related to the issuance of our Senior Unsecured Notes and the payment of quarterly dividends partially offseton our common shares.

        On January 10, 2005, our board of directors declared the third quarter cash dividend of $0.135 per common share payable on February 28, 2005 to shareholders of record on February 14, 2005. On March 28, 2005, our board of directors declared the fourth quarter cash dividend of $0.135 per common share payable on June 6, 2005 to shareholders of record of May 23, 2005. 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 in all periods.

Debt increased by proceeds$137.5 million at February 25, 2005 compared to February 27, 2004 primarily as a result of the borrowings under the U.S. Revolver to finance the acquisition of Ben Sherman. Additionally, the increase in deferred income taxes is primarily the result of the acquisition of Ben Sherman and the increase in other non-current liabilities is primarily a result of additional deferred compensation recognized in the current year.



Liquidity and Capital Resources

        The table below provides a description of our significant financing arrangements:

 
 February 25,
2005

$280 million U.S. Secured Revolving Credit Facility ("U.S. Revolver"), which accrues interest and letter of credit fees based upon a pricing grid which is tied to certain debt ratios (4.82% at February 25, 2005), requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the Company and Guarantor Subsidiaries $137,300
12 million Pounds Sterling Senior Secured Revolving Credit Facility ("U.K. Revolver"), which accrues interest at the bank's base rate plus 1.2% (5.95% at February 25, 2005), requires interest payments monthly with principal payable on demand, and is collateralized by substantially all the United Kingdom assets of Ben Sherman  634
$200 million Senior Unsecured Notes ("Senior Unsecured Notes"), which accrue interest at 8.875% and require interest payments semiannually with principal due at maturity (June 2011)(1)  198,893
Unsecured Seller Notes ("Seller Notes"), which accrue interest at LIBOR plus 1.2% (6.52% at February 25, 2005), and require interest payments quarterly with principal payable on demand after January 30, 2005  4,172
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets  115
  
Total Debt  341,114
  
Short-term Debt  4,873
  
Total Long-term Debt  336,241
  

(1)
The Senior Unsecured Notes were sold on May 16, 2003 at a discount of 0.713% ($1.4 million) in connection with the acquisition of the Tommy Bahama Group to yield an effective interest rate of 9.0%.

        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. Trade letters of credit of $100.5 million and $2.2 million were outstanding under our U.S. Revolver and U.K. Revolver, respectively as of February 25, 2005. The net availability under our U.S. Revolver and U.K. Revolver was approximately $42.2 million and $20.2 million, respectively as of February 25, 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 facilities also include limitations on certain restricted payments such as dividends, earn-out payments, and prepayment of debt. To ensure compliance with the minimum availability requirement of our U.S. Revolver, we sought and obtained the consent of our U.S. Revolver bank group to pay our third and fourth quarter fiscal 2005 dividends without regard to the availability requirement. We currently do not anticipate the need for a consent to pay dividends in subsequent quarters. As of February 25, 2005, we were compliant with all restrictive financial covenants related to our debt agreements.

        We expect to fund the payment of the Seller Notes, which are due upon demand and expected to be redeemed for payment in the next twelve months with borrowings from the U.K. Revolver. Additionally, the U.K. Revolver is also due upon demand and expires in July 2005. At expiration, we



anticipate that we will be able to refinance the U.K. Revolver either with the same lender, other lenders or under our U.S. Revolver.

        We anticipate that we will be able to satisfy our ongoing cash requirements which generally consists of working capital needs, capital expenditures (primarily for the opening of Tommy Bahama retail stores) and interest and principal payments on our debt during the remainder of fiscal 2005 and fiscal 2006, primarily from cash on hand and cash flow from operations 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 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 products.

        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 common shares uponadditional equity. However, our ability to obtain additional borrowings or refinance our credit facilities will depend on many factors, including the exerciseprevailing 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 debt to shareholders' equity ratio was 1.17:1 and 0.95:1 at February 25, 2005 and February 27, 2004, respectively. The change was primarily a result of employee stock options.the additional debt incurred to finance the acquisition of Ben Sherman on July 30, 2004. We anticipate that the amount of debt as well as the ratio of debt to shareholders' equity will decrease in future periods as a result of anticipated cash flow from operations.

        Our contractual obligations as of February 25, 2005 have not changed significantly from the contractual obligations outstanding at May 28, 2004, other than the increase in debt outstanding under our U.S. Revolver and the Seller Notes, amounts outstanding pursuant to letters of credit (both as discussed above) and leases for our recently opened retail stores and our Tommy Bahama Group offices in Seattle, Washington, none of which occurred outside the ordinary course of business.

        Our anticipated capital expenditures for fiscal 2005 are expected to approximate $19 million with a similar amount currently anticipated for fiscal 2006. These expenditures will consist primarily of the continued expansion of our retail operations of the Tommy Bahama Group including the opening of additional retail stores.

Off Balance Sheet Arrangements

We have no off-balancenot entered into agreements which meet the definition of an off balance sheet financing arrangements.

arrangement, other than operating leases, and have made no financial commitments to or guarantees with any unconsolidated subsidiaries or special purpose entities.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon ourUnaudited Condensed Consolidated Financial Statements,, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosuredisclosures 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.

The Securities and Exchange Commission’s Financial Reporting Release No. 60 requires all companies to include a discussion of the significant estimates, assumptions and judgments that underlie their critical accounting policies or methods used in the preparation of financial statements.        See the "Summary of Critical Accounting Policies" contained in our fiscal 2004 Form 10-K. ThereDuring fiscal 2005, there have been no significant changes in our critical accounting policies as disclosed in our fiscal 2004 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. Because 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 2004 were 22%, 23%, 25% and 30%, respectively, and the percentage of net earnings by quarter for fiscal 2004 were 17%, 17%, 24% and 42%, respectively.

FUTURE LIQUIDITY, CAPITAL RESOURCES AND RESULTS OF OPERATIONS

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

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

The statements in this section are forward-looking statements subject to the risks and uncertainties described below in “Cautionary Statements Regarding Forward-Looking Statements.”

CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS

Our Securities and Exchange Commission filings and public announcements often include forward-looking statements about future events. Important assumptions relating to these forward looking statements include, among others, assumptions regarding demand for our products, expected pricing levels, raw material costs, the timing and cost of planned capital expenditures, expected outcomes of pending litigation, competitive conditions, general economic conditions and expected synergies in connection with acquisitions and joint ventures, including the acquisition of Ben Sherman. Forward-looking statements reflect our current expectations and areSherman, the distribution for fiscal 2005 may not guaranteesbe consistent with that 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

fiscal 2004.

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

general economic cycles;

competitive conditions in our industry;

price deflation in the worldwide apparel industry;

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

changes in trade quotas or other trade regulations;

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

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

the price and availability of raw materials;

our dependence on and relationships with key customers;

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

potential disruptions in the operation of our distribution facilities;

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

the integration of Ben Sherman into our company;

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

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

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

increased competition from direct sourcing;

our ability to maintain our licenses;

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

our reliance on key management;

risks associated with changes in global currency exchange rates;

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

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

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

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

our ability to open new retail stores.

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

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


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.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. We do not anticipate any significant changes in management of our exposure to interest rate fluctuations or the related exposure, as we do not have any plans to significantly alter our capital structure in the near term.

Interest        Approximately $142.1 million of debt outstanding (or 42% of our total debt) is subject to variable interest rates, with a weighted average rate risk is managed throughof approximately 4.87% at February 25, 2005. Our average variable rate borrowings for the maintenancenine months ended February 25, 2005 were $97.7 million, with an average interest rate of a portfolio4.4% during the nine month 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 nine month average interest rate increased by 100 basis points, our interest expense would have been approximately $0.3 million higher during the period.

        At February 25, 2005, we had approximately $199.0 million of fixed rate debt composedand capital lease obligations outstanding with substantially all the debt having an effective interest rate of short9.0% and maturing in June 2011. Such agreements may result in higher fixed interest rates in certain periods of lower variable interest rates, but are primarily intended to provide long-term instruments. The objective isfinancing of our capital structure and minimize our exposure to maintain a cost-effective mix that management deems appropriate.increases in interest rates. A change in the market interest rate impacts the net financial instrument position of our fixed rate debt but has no impact on interest incurred or cash flows.

        None of our debt was entered into for trading purposes. We generally do not engage in hedging activities with respect to suchour interest rate risk and do not enter into such transactions on a speculative basis.

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

At November 26, 2004, we had variable rate debt of $123.6 million. Our average variable rate borrowings for the six months ended November 26, 2004 were $78.5 million, with an average interest rate of 4.4%. If the six-month average interest rate increased by 10%, our interest expense would have changed by $163,711.



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 for trading or speculative purposes.

We receive United States dollars for substantially all of our product sales except for Ben Sherman. Sales generated bySherman 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’s U.K. operations areSherman 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 sales that were not denominated in United States dollars totaled $30.3 million during the three months ended February 25, 2005, which represented approximately 9% of our total sales for the quarter ended February 25, 2005. Ben Sherman sales that were not denominated in United States dollars totaled $83.5 million during the period from the date of acquisition through February 25, 2005, which represents approximately 9% of our total sales for the nine months ended February 25, 2005. With the dollar trading at a weaker position than it has historically traded (average rate of 1.90 for the quarter ended February 25, 2005), a strengthening United States dollar could result in lower levels of sales in the consolidated statements of earnings in future periods, although the sales in pounds sterling and euros.could be equal to or greater than amounts as previously reported.

        Substantially all inventory purchases from contract manufacturers throughout the world are also denominated in United States dollars. However, purchaseCertain purchases of our Ben Sherman subsidiary in the United Kingdom, totaling less than 5% of our total inventory purchases, are based on other currencies. Purchase prices for our products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies of the contract manufacturers, which may have the effect of increasing our cost of goods sold in the future. ExchangeWe do not believe that exchange rate fluctuations have not had a material impact on our inventory costs; however, duecosts, nor do we expect that such fluctuations will have a significant impact in future periods. 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.

        

Ben Sherman engages inWe may from time to time purchase foreign currency forward exchange contracts forto hedge against changes in foreign currency exchange rates, but at February 25, 2005 we have not entered into any such agreements that have not been settled. When such contracts are outstanding, the purchase of finished products from production sources in Asia where the currency denomination of choice is the United States dollar. These contracts are marked to market and are not material.

with the offset being recognized in the statement of earnings or other comprehensive income depending upon whether the transaction qualifies as a hedge in accordance with accounting principles generally accepted in the United States.

TRADE POLICY RISK

        

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

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

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

The 1994 Agreement on Textiles and Clothing, quotas among World Trade Organization (“WTO”("WTO") countries mandated the elimination of textile and apparel product quotas for WTOmember 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.

        

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

In addition, notwithstanding quota elimination, under the terms of China’sChina'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”"safeguard quota"). Data released by the U.S. government in March indicates that there were significant increases in the level of imports from China is a major source of production for us, andin several important product categories during January 2005. These increases may result in the re-impositionimposition of safeguard quotas on China following the elimination of the existing quota regime on January 1, 2005which 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”"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”"countervailing" duties). The imposition of anti-dumping or countervailing duties on products we import would increase the cost of those products to us. We may not be able to pass on any such cost increase to our customers. There are numerous free trade agreements pending, including the United States-Central American Free Trade Agreement that, if adopted, could put us as a disadvantage to some of our competitors.


ITEM 4. CONTROLS AND PROCEDURES

        

The Company’sCompany's 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’sCommission'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 the 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 fiscal quarter ended November 26, 2004February 25, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        

In the ordinary course of business, we may become subject to litigation or claims. There are no material pending legal proceedings, proceedings known to be contemplated by governmental authorities or changes in items previously disclosed involving us during the quarter ended November 26, 2004,February 25, 2005, requiring disclosure under Item 103 of Regulation S-K.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        

None


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

None


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

        

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

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

For

14,194,959

Withheld:

854,664

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

For:

10,604,632

Against:

1,308,619

Abstention:

14,814

Broker Non-Vote:

3,121,558

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

For:

8,882,234

Against:

3,028,907

Abstention:

16,924

Broker Non-Vote:

3,121,558

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

For:

14,991,912

Against:

31,464

Abstention:

26,247

None


ITEM 5. OTHER INFORMATION

        

None


ITEM 6. EXHIBITS

(a) Exhibits.



SIGNATURES

        

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated January 5,April 4, 2005

 OXFORD INDUSTRIES, INC.
(Registrant)

 

 
(Registrant)



/s/  
THOMAS CALDECOT CHUBB III      


Thomas Caldecot Chubb III


Thomas Caldecot Chubb III

Executive Vice President

(Principal Financial Officer)



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37

OXFORD INDUSTRIES, INC. INDEX TO FORM 10-Q For quarter ended February 25, 2005
PART I. FINANCIAL INFORMATION
OXFORD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
OXFORD INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED EXCEPT FOR MAY 28, 2004)
OXFORD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
OXFORD INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED FEBRUARY 25, 2005
PART II. OTHER INFORMATION
SIGNATURES