Oxford Industries (OXM) 10-Q 2007 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSEPTEMBER 1, 2006

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number 1-4365

OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Georgia	58-0831862
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(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. Yesþ  Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ     Accelerated filero     Non-accelerated filero

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso  Noþ

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

Title of each class	Number of shares outstanding as of September 29, 2006
Common Stock, $1 par value	17,728,842

OXFORD INDUSTRIES, INC.
INDEX TO FORM 10-Q
For quarter ended September 1, 2006

	Page
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Earnings (Unaudited)		4
Condensed Consolidated Balance Sheets (Unaudited)		5
Condensed Consolidated Statements of Cash Flows (Unaudited)		6
Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		26
Item 1A. Risk Factors		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3. Defaults Upon Senior Securities		26
Item 4. Submission of Matters to a Vote of Security Holders		26
Item 5. Other Information		26
Item 6. Exhibits		27
Signatures		27
EX-10.1 FIRST AMENDMENT TO DEFERRED COMPENSATION PLAN
EX-31.1 SECTION 302 CERTIFICATION OF PEO
EX-31.2 SECTION 302 CERTIFICATION OF PFO
EX-32 SECTION 906 CERTIFICATION OF PEO/PFO

2

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Our U.S. Securities and Exchange Commission filings and public announcements often include forward-looking statements about future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. We intend for all such forward-looking statements contained herein, the entire contents of our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). 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 and regulatory actions, competitive conditions, general economic conditions and expected synergies in connection with acquisitions and joint ventures. Forward-looking statements reflect our current expectations, based on currently available information, and are not guarantees of performance. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. 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. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. Risk Factors contained in our fiscal 2006 Form 10-K, as updated by Part II, Item 1A. Risk Factors in this report, and those described from time to time in our future reports filed with the U.S. Securities and Exchange Commission.

We caution that one should not place undue reliance on forward-looking statements, which are current only as of the date this report is filed with the U.S. 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.

DEFINITIONS

As used in this report, unless the context requires otherwise, “our,” “us” and “we” mean Oxford Industries, Inc. and its consolidated subsidiaries. Also, the terms “FASB,” “SFAS” and “SEC” mean the Financial Accounting Standards Board, Statement of Financial Accounting Standards and the U.S. Securities and Exchange Commission, respectively. Additionally, the terms listed below reflect the respective period noted:

Fiscal 2007	52 weeks ending June 1, 2007
Fiscal 2006	52 weeks ended June 2, 2006
Fourth quarter fiscal 2007	13 weeks ending June 1, 2007
Third quarter fiscal 2007	13 weeks ending March 2, 2007
Second quarter fiscal 2007	13 weeks ending December 1, 2006
First quarter fiscal 2007	13 weeks ended September 1, 2006
Fourth quarter fiscal 2006	13 weeks ended June 2, 2006
Third quarter fiscal 2006	13 weeks ended March 3, 2006
Second quarter fiscal 2006	13 weeks ended December 2, 2005
First quarter fiscal 2006	13 weeks ended September 2, 2005

3

PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(in thousands, except per share amounts)

	First Quarter			First Quarter
	Fiscal 2007			Fiscal 2006
Net sales	$	284,078		$	268,475
Cost of goods sold		175,967			162,760
Gross profit		108,111			105,715
Selling, general and administrative expenses		86,446			82,788
Amortization of intangible assets		1,547			1,853
		87,993			84,641
Royalties and other operating income		2,892			3,261
Operating income		23,010			24,335
Interest expense, net		5,492			5,833
Earnings before income taxes		17,518			18,502
Income taxes		6,363			6,682
Earnings from continuing operations		11,155			11,820
Earnings (loss) from discontinued operations, net of taxes		(205	)		2,063
Net earnings	$	10,950		$	13,883
Earnings from continuing operations per common share:
Basic	$	0.63		$	0.68
Diluted	$	0.63		$	0.67
Earnings (loss) from discontinued operations per common share:
Basic	$	(0.01	)	$	0.12
Diluted	$	(0.01	)	$	0.12
Net earnings per common share:
Basic	$	0.62		$	0.80
Diluted	$	0.62		$	0.79
Weighted average common shares outstanding:
Basic		17,594			17,391
Dilutive impact of stock options and unvested restricted shares		184			275
Diluted		17,778			17,666
Dividends per common share	$	0.15		$	0.135

See accompanying notes.

4

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except per share amounts)

	September 1,		June 2,		September 2,
	2006		2006		2005
ASSETS
Current Assets:
Cash and cash equivalents	$	10,742	$	10,479	$	7,024
Receivables, net		155,602		142,297		151,277
Inventories		139,444		123,594		149,835
Prepaid expenses		25,847		21,996		24,066
Current assets related to discontinued operations, net		18,132		59,215		67,947
Total current assets		349,767		357,581		400,149
Property, plant and equipment, net		73,527		73,663		64,057
Goodwill, net		200,228		199,232		186,759
Intangible assets, net		234,390		234,453		234,283
Other non-current assets, net		27,896		20,666		22,785
Non-current assets related to discontinued operations, net		—		—		4,842
Total Assets	$	885,808	$	885,595	$	912,875
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable and other accrued expenses	$	102,428	$	105,038	$	101,150
Accrued compensation		16,367		26,754		20,139
Additional acquisition cost payable		—		11,897		20,433
Dividends payable		—		2,646		2,301
Income taxes payable		8,468		3,138		10,103
Short-term debt and current maturities of long-term debt		122		130		4,614
Current liabilities related to discontinued operations		11,488		30,716		16,075
Total current liabilities		138,873		180,319		174,815
Long-term debt, less current maturities		226,864		200,023		315,911
Other non-current liabilities		32,433		29,979		25,737
Deferred income taxes		78,404		76,573		76,494
Non-current liabilities related to discontinued operations		—		—		47
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, $1.00 par value; 30,000 authorized and none issued and outstanding at September 1, 2006; June 2, 2006; and September 2, 2005		—		—		—
Common stock, $1.00 par value; 60,000 authorized and 17,723 issued and outstanding at September 1, 2006; 17,646 issued and outstanding at June 2, 2006; and 17,049 issued and outstanding at September 2, 2005		17,723		17,646		17,049
Additional paid-in capital		76,461		74,812		48,931
Retained earnings		309,261		300,973		252,281
Accumulated other comprehensive income		5,789		5,270		1,610
Total shareholders’ equity		409,234		398,701		319,871
Total Liabilities and Shareholders’ Equity	$	885,808	$	885,595	$	912,875

See accompanying notes.

5

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

	First Quarter			First Quarter
	Fiscal 2007			Fiscal 2006
Cash Flows From Operating Activities:
Earnings from continuing operations	$	11,155		$	11,820
Adjustments to reconcile earnings from continuing operations to net cash provided by (used in) operating activities:
Depreciation		3,747			3,501
Amortization of intangible assets		1,547			1,853
Amortization of deferred financing costs and bond discount		617			616
Stock compensation expense		840			591
Loss (gain) on sale of property, plant and equipment		18			7
Equity loss (income) from unconsolidated entities		(97	)		(164	)
Deferred income taxes		(47	)		(1,820	)
Changes in working capital:
Receivables		(12,973	)		(5,100	)
Inventories		(15,614	)		(3,759	)
Prepaid expenses		(4,132	)		(2,819	)
Current liabilities		(7,975	)		(33,688	)
Other non-current assets		1,356			(1,327	)
Other non-current liabilities		2,440			2,169
Net cash provided by (used in) operating activities		(19,118	)		(28,120	)
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired		(12,111	)		(6,569	)
Investment in unconsolidated entity		(9,063	)		—
Distribution from unconsolidated entity		—			1,856
Purchases of property, plant and equipment		(3,556	)		(3,448	)
Proceeds from sale of property, plant and equipment		—			6
Net cash provided by (used in) investing activities		(24,730	)		(8,155	)
Cash Flows From Financing Activities:
Repayment of financing arrangements		(27,048	)		(73,971	)
Proceeds from financing arrangements		53,835			101,920
Proceeds from issuance of common stock		886			2,586
Dividends on common stock		(5,304	)		(2,278	)
Net cash provided by (used in) financing activities		22,369			28,257
Cash Flows From Discontinued Operations:
Net operating cash flows provided by discontinued operations		21,650			8,677
Net investing cash flows provided by (used in) discontinued operations		—			(25	)
Net cash provided by (used in) discontinued operations		21,650			8,652
Net change in cash and cash equivalents		171			634
Effect of foreign currency translation on cash and cash equivalents		92			(109	)
Cash and cash equivalents at the beginning of period		10,479			6,499
Cash and cash equivalents at the end of period	$	10,742		$	7,024
Supplemental disclosure of non-cash investing and financing activities:
Accrual for additional acquisition cost	$	—		$	20,465
Supplemental disclosure of cash flow information:
Cash paid for interest, net	$	2,760		$	2,574
Cash paid for income taxes	$	6,959		$	11,466

See accompanying notes.

6

OXFORD INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FIRST QUARTER FISCAL 2007

1.	Basis of Presentation:The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States. We believe our condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations for the periods presented. Results of operations for the interim periods presented are not necessarily indicative of results to be expected for the year primarily due to the impact of seasonality on our business. The accounting policies applied during the interim periods presented are consistent with the significant and critical accounting policies as described in our fiscal 2006 Form 10-K. The information included in this Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included in our fiscal 2006 Form 10-K.
	As disclosed in our fiscal 2006 Form 10-K, we sold substantially all of the assets of our Womenswear Group on June 2, 2006. Therefore, the results of operations of the Womenswear Group have been reported as discontinued operations in our consolidated statements of earnings. The assets and liabilities related to the Womenswear Group for all periods presented have been reclassified to current assets, non-current assets, current liabilities and non-current liabilities related to discontinued operations, as applicable.
2.	Inventories:The components of inventories as of the dates specified are summarized as follows (in thousands):

	September 1, 2006		June 2, 2006		September 2, 2005
Finished goods	$	110,744	$	99,576	$	125,995
Work in process		8,995		6,388		8,914
Fabric, trim and supplies		19,705		17,630		14,926
Total	$	139,444	$	123,594	$	149,835

3. Debt:The following table details our debt as of the dates specified (in thousands):

	September 1,			June 2,			September 2,
	2006			2006			2005
$280 million U.S. Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest (8.25% at September 1, 2006), unused line fees and letter of credit fees based upon a pricing grid which is tied to certain debt ratios, requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and our consolidated domestic subsidiaries	$	27,700		$	900		$	116,900
£12 million Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.0% (5.75% at September 1, 2006), requires interest payments monthly with principal payable on demand or at maturity (July 2007), and is collateralized by substantially all the United Kingdom assets of Ben Sherman		101			102			1,192
$200 million Senior Unsecured Notes (“Senior Unsecured Notes”), which accrue interest at 8.875% (effective interest rate of 9.0%) and require interest payments semi-annually on June 1 and December 1 of each year, require payment of principal at maturity (June 2011), are subject to certain prepayment penalties and are guaranteed by our consolidated domestic subsidiaries		200,000			200,000			200,000
Seller Notes, which accrued interest at LIBOR plus 1.2%, required interest payments quarterly with principal payable on demand and were repaid during February, May and November 2005		—			—			3,378
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets		24			35			73
Total debt		227,825			201,037			321,543
Unamortized discount on Senior Unsecured Notes		(839	)		(884	)		(1,018	)
Short-term debt and current maturities of long-term debt		(122	)		(130	)		(4,614	)
Long-term debt, less current maturities	$	226,864		$	200,023		$	315,911

7

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 we believe are customary for similar facilities. The U.S. Revolver also includes limitations on certain restricted payments such as earn-outs, payment of dividends and prepayment of debt. As of September 1, 2006, we were compliant with all financial covenants and restricted payment clauses related to our debt agreements.

Our 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, if any. As of September 1, 2006, approximately $76.6 million of trade letters of credit and other limitations on availability, were outstanding against our U.S. Revolver and our U.K. Revolver. The combined net availability under our U.S. Revolver and U.K. Revolver agreements was approximately $198.5 million as of September 1, 2006.

4. Comprehensive Income:Comprehensive income, which reflects the effects of foreign currency translation adjustments, is calculated as follows for the periods presented (in thousands):

	First Quarter of
	Fiscal 2007		Fiscal 2006
Net earnings	$	10,950	$	13,883
Gain (loss) on foreign currency translation, net of tax		519		1,312
Comprehensive income	$	11,469	$	15,195

5.	Stock Compensation:In December 2004, the FASB issued FASB Statement No. 123 (revised 2004), “Share-Based Payment” (FAS 123R), which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (FAS 123). FAS 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in FAS 123R is similar to the approach described in FAS 123. However, FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in consolidated statement of earnings based on their fair values. Pro forma disclosure is no longer an alternative.
	We adopted FAS 123R on June 3, 2006 and applied the modified prospective transition method. Under this transition method, we (1) did not restate any prior periods and (2) are recognizing compensation expense for all share-based payment awards that were outstanding, but not yet vested, as of June 3, 2006, based upon the same estimated grant-date fair values and service periods used to prepare our FAS 123 pro forma disclosures.
	At September 1, 2006, we have options or awards outstanding under certain plans as further described in our fiscal 2006 Form 10-K. As permitted by FAS 123, we had previously accounted for share-based payments to employees using APB 25’s intrinsic value method. Accordingly, no stock-based employee compensation costs for any options were reflected in net earnings unless the options were modified, as all options granted under our plans had an exercise price equal to the market value of the underlying common stock on the date of grant. In fiscal 2005, we transitioned from the use of options to performance and service based restricted stock awards as the primary vehicle in our stock-based compensation strategy.
	During the first quarter of fiscal 2007, we recognized stock compensation expense of approximately $0.8 million in earnings from continuing operations. This expense consists of approximately $0.5 million related to restricted stock awards, which would have been recognized under FAS 123R or APB 25, and approximately $0.3 million (or $0.2 million after tax and $0.01 per common share after tax) related to stock options and our employee stock purchase plan which would not have been expensed under APB 25. The income tax benefit related to the compensation cost was approximately $0.3 million and $0.2 million during the first quarter of fiscal 2007 and the first quarter of fiscal 2006, respectively. The adoption of FAS 123R resulted in an increase in cash flow from operations and a decrease in cash flow from financing activities of approximately $0.1 million during the first quarter of fiscal 2007.
	The following table illustrates the effect on earnings from continuing operations and net earnings in the first quarter of fiscal 2006, if we had applied the fair value recognition provisions of FAS 123R to stock-based employee compensation (in thousands, except per share amounts). For purposes of this pro forma disclosure, the value of the options is estimated using a Black-Scholes option-pricing model and amortized over the option vesting period.

8

	First Quarter
	Fiscal 2006
Earnings from continuing operations, as reported	$	11,820
Add: Total stock-based employee compensation expense recognized in continuing operations as determined under intrinsic value method for all awards, net of related tax effects		328
Deduct: Total stock-based employee compensation expense to be recognized in continuing operations determined under fair value based method for all awards, net of related tax effects		(495	)
Pro forma earnings from continuing operations	$	11,653
Basic earnings from continuing operations per common share as reported	$	0.68
Pro forma basic earnings from continuing operations per common share	$	0.67
Diluted earnings from continuing operations per common share as reported	$	0.67
Pro forma diluted earnings from continuing operations per common share	$	0.66
Net earnings as reported	$	13,883
Add: Total stock-based employee compensation expense recognized in net earnings as determined under intrinsic value method for all awards, net of related tax effects		376
Deduct: Total stock-based employee compensation expense to be recognized in net earnings determined under fair value based method for all awards, net of related tax effects		(568	)
Pro forma net earnings	$	13,691
Basic net earnings per common share as reported	$	0.80
Pro forma basic net earnings per common share	$	0.79
Diluted net earnings per common share as reported	$	0.79
Pro forma diluted net earnings per common share	$	0.78

The following table summarizes information about the stock options as of September 1, 2006.

	Number of		Exercise		Grant Date		Number
Date of Option Grant	Shares		Price		Fair Value		Exercisable		Expiration Date
July 1998		24,000	$	17.83	$	5.16		24,000	July 2008
July 1999		28,100		13.94		4.70		28,100	July 2009
July 2000		29,820		8.63		2.03		29,820	July 2010
July 2001		43,330		10.73		3.18		43,330	July 2011
July 2002		89,300		11.73		3.25		54,620	August 2012
August 2003		140,320		26.44		11.57		61,800	August 2013
November 2003		40,000		32.15		14.81		16,000	November 2013
December 2003		101,700		32.75		14.17		33,900	December 2013
		496,570						291,570

The table below summarizes options activity during the first quarter of fiscal 2007.

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at June 2, 2006		533,180		$	22
Granted		—			—
Exercised		(32,410	)		15
Forfeited		(4,200	)		28
Outstanding at September 1, 2006		496,570		$	22
Exercisable at September 1, 2006		291,570		$	19

The total intrinsic value for options exercised during the first quarter of fiscal 2007 and the first quarter of fiscal 2006 was approximately $0.7 million and $2.7 million, respectively. The total fair value for options that vested during the first quarter of fiscal 2007 and the first quarter of fiscal 2006 was approximately $1.1 million and $1.2 million, respectively. The aggregate intrinsic value for all options outstanding and exercisable at September 1, 2006 was approximately $9.7 million and $6.7 million, respectively.

9

Grants of restricted stock and restricted share units are made to certain officers, key employees and members of our Board of Directors under our Long-Term Stock Incentive Plan. The following table summarizes information about the unvested stock as of September 1, 2006.

			Market Price on Date of
Restricted Stock Grant	Number of Shares		Grant		Vesting Date
Grants Based on Fiscal
2005 Performance Awards		61,650	$	42	June 2008
Grants Based on Fiscal
2006 Performance Awards		38,771	$	42	June 2009
		100,421

The table below summarizes the restricted stock award activity during the first quarter of fiscal 2007:

	Shares
Outstanding at June 2, 2006		67,125
Issued		39,772
Vested		(4,976	)
Forfeited		(1,500	)
Outstanding at September 1, 2006		100,421

Additionally, during the first quarter of fiscal 2007, we awarded performance share awards and restricted share unit awards to certain officers, key employees and members of our Board of Directors, pursuant to which a maximum total of approximately 0.1 million shares of our common stock may be granted (initially in the form of restricted shares and restricted share units) subject to specified operating performance measures being met for fiscal 2007 and the employee being employed by us on June 1, 2010. As of September 1, 2006, there was approximately $2.3 million of unrecognized compensation cost related to unvested share-based compensation awards which have been made. That cost is expected to be recognized over the next three years. Additionally, approximately $2.0 million of compensation cost related to unvested stock options will be recognized through the first half of fiscal 2009.

6.	Segment Information:In our continuing operations, we have two operating segments for purposes of allocating resources and assessing performance. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportcoats, suit separates, walkshorts, golf apparel, outerwear, sweaters, jeans, swimwear, footwear and headwear, licenses its brands for accessories and other products and operates retail stores. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture and other products. The head of each operating segment reports to the chief operating decision maker.
	Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. Total assets for Corporate and Other includes the LIFO inventory reserve of $38.0 million, $38.0 million and $37.3 million at September 1, 2006, June 2, 2006 and September 2, 2005, respectively.
	As discussed in note 3 in our consolidated financial statements included in our fiscal 2006 Form 10-K, we sold substantially all of the assets of our Womenswear Group operations at the end of fiscal 2006. Our Womenswear Group produced private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The operating results of the Womenswear Group have not been included in segment information as all amounts were reclassified to discontinued operations. The information below presents certain information about our segments for the periods or as of the dates specified (in thousands).

	First Quarter		First Quarter
	Fiscal 2007		Fiscal 2006
Net Sales
Menswear Group	$	178,811	$	177,076
Tommy Bahama Group		104,148		91,544
Corporate and Other		1,119		(145	)
Total	$	284,078	$	268,475

10

	First Quarter		First Quarter
	Fiscal 2007		Fiscal 2006
Depreciation
Menswear Group	$	973	$	944
Tommy Bahama Group		2,672		2,456
Corporate and Other		102		101
Total	$	3,747	$	3,501

	First Quarter		First Quarter
	Fiscal 2007		Fiscal 2006
Amortization of Intangible Assets
Menswear Group	$	803	$	811
Tommy Bahama Group		744		1,042
Total	$	1,547	$	1,853

	First Quarter			First Quarter
	Fiscal 2007			Fiscal 2006
Operating Income
Menswear Group	$	10,611		$	15,004
Tommy Bahama Group		16,835			14,357
Corporate and Other		(4,436	)		(5,026	)
Total Operating Income		23,010			24,335
Interest Expense		5,492			5,833
Earnings before taxes	$	17,518		$	18,502

	September 1,		June 2,		September 2,
	2006		2006		2005
Assets
Menswear Group	$	437,510	$	398,930	$	452,694
Tommy Bahama Group		426,577		423,376		386,977
Womenswear Group (discontinued)		18,132		59,215		72,789
Corporate and Other		3,589		4,074		415
Total	$	885,808	$	885,595	$	912,875

7. Consolidating Financial Data of Subsidiary Guarantors:Our Senior Unsecured Notes are guaranteed by our wholly owned domestic subsidiaries (“Subsidiary Guarantors”). All guarantees are full and unconditional. Non-guarantors consist of our subsidiaries which are organized outside of the United States and any subsidiaries which are not wholly-owned. We use the equity method with respect to investment in subsidiaries included in other non-current assets in our condensed consolidating financial statements. Set forth below are our unaudited condensed consolidating balance sheets as of September 1, 2006, June 2, 2006 and September 2, 2005, our unaudited condensed consolidating statements of earnings for the first quarter of fiscal 2007 and the first quarter of fiscal 2006 and our unaudited condensed consolidating statements of cash flows for the first quarter of fiscal 2007 and the first quarter of fiscal 2006 (in thousands).

11

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
September 1, 2006

	Oxford						Subsidiary
	Industries			Subsidiary			Non-		Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors		Adjustments			Total
				ASSETS
Current Assets:
Cash and cash equivalents	$	3,499		$	840		$	6,402	$	1		$	10,742
Receivables, net		79,389			53,825			29,384		(6,996	)		155,602
Inventories		65,106			57,626			17,438		(726	)		139,444
Prepaid expenses		11,061			9,631			5,155		—			25,847
Current assets related to discontinued operations, net		2,323			31			15,778		—			18,132
Total current assets		161,378			121,953			74,157		(7,721	)		349,767
Property, plant and equipment, net		10,668			54,167			8,692		—			73,527
Goodwill, net		1,847			148,556			49,825		—			200,228
Intangible assets, net		1,441			138,662			94,287		—			234,390
Other non-current assets, net		688,329			152,795			1,394		(814,622	)		27,896
Total Assets	$	863,663		$	616,133		$	228,355	$	(822,343	)	$	885,808
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities related to continuing operations	$	50,698		$	49,952		$	33,142	$	(6,407	)	$	127,385
Current liabilities related to discontinued operations		60			67			11,361		—			11,488
Long-term debt, less current portion		226,861			3			—		—			226,864
Non-current liabilities		177,325			(148,016	)		112,273		(109,149	)		32,433
Deferred income taxes		(515	)		46,652			32,267		—			78,404
Total shareholders’/invested equity		409,234			667,475			39,312		(706,787	)		409,234
Total Liabilities and Shareholders’/Invested Equity	$	863,663		$	616,133		$	228,355	$	(822,343	)	$	885,808

12

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
June 2, 2006

	Oxford						Subsidiary
	Industries			Subsidiary			Non-		Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors		Adjustments			Total
				ASSETS
Current Assets:
Cash and cash equivalents	$	5,175		$	1,134		$	4,181	$	(11	)	$	10,479
Receivables, net		61,428			57,785			37,227		(14,143	)		142,297
Inventories		58,924			50,880			14,546		(756	)		123,594
Prepaid expenses		8,959			7,321			5,716		—			21,996
Current assets related to discontinued operations, net		52,065			7,150			—		—			59,215
Total current assets		186,551			124,270			61,670		(14,910	)		357,581
Property, plant and equipment, net		11,122			53,648			8,893		—			73,663
Goodwill, net		1,847			148,342			49,043		—			199,232
Intangible assets, net		1,451			139,406			93,596		—			234,453
Other non-current assets, net		677,414			143,790			1,436		(801,974	)		20,666
Total Assets	$	878,385		$	609,456		$	214,638	$	(816,884	)	$	885,595
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities related to continuing operations	$	70,262		$	57,872		$	35,026	$	(13,557	)	$	149,603
Current liabilities related to discontinued operations		27,813			2,903			—		—			30,716
Long-term debt, less current portion		200,016			7			—		—			200,023
Non-current liabilities		181,845			(154,586	)		111,878		(109,158	)		29,979
Deferred income taxes		(252	)		46,795			30,030		—			76,573
Total shareholders’/invested equity		398,701			656,465			37,704		(694,169	)		398,701
Total Liabilities and Shareholders’/Invested Equity	$	878,385		$	609,456		$	214,638	$	(816,884	)	$	885,595

13

OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
September 2, 2005

	Oxford					Subsidiary
	Industries		Subsidiary			Non-		Consolidating			Consolidated
	(Parent)		Guarantors			Guarantors		Adjustments			Total
			ASSETS
Current Assets:
Cash and cash equivalents	$	4,317	$	938		$	1,768	$	1		$	7,024
Receivables, net		85,107		48,796			64,768		(47,394	)		151,277
Inventories		91,402		39,115			19,961		(643	)		149,835
Prepaid expenses		11,619		6,170			6,277		—			24,066
Current assets related to discontinued operations, net		50,743		15,854			1,350		—			67,947
Total current assets		243,188		110,873			94,124		(48,036	)		400,149
Property, plant and equipment, net		11,193		44,235			8,629		—			64,057
Goodwill, net		1,847		135,918			48,994		—			186,759
Intangible assets, net		1,480		140,123			92,680		—			234,283
Other non-current assets, net		647,650		148,327			1,774		(774,966	)		22,785
Other assets related to discontinued operations, net		848		3,994			—		—			4,842
Total Assets	$	906,206	$	583,470		$	246,201	$	(823,002	)	$	912,875
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities related to continuing operations	$	103,106	$	53,624		$	49,167	$	(47,157	)	$	158,740
Current liabilities related to discontinued operations		15,066		971			38		—			16,075
Long-term debt, less current portion		315,892		19			—		—			315,911
Non-current liabilities		148,122		(120,709	)		107,619		(109,295	)		25,737
Deferred income taxes		4,102		43,428			28,964		—			76,494
Non-current liabilities related to discontinued operations		47		—			—		—			47
Total shareholders’/invested equity		319,871		606,137			60,413		(666,550	)		319,871
Total Liabilities and Shareholders’/Invested Equity	$	906,206	$	583,470		$	246,201	$	(823,002	)	$	912,875

14

OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
First Quarter of Fiscal 2007

	Oxford						Subsidiary
	Industries			Subsidiary			Non-		Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors		Adjustments			Total
Net sales	$	135,870		$	120,622		$	38,653	$	(11,067	)	$	284,078
Cost of goods sold		105,985			54,586			18,604		(3,208	)		175,967
Gross profit		29,885			66,036			20,049		(7,859	)		108,111
Selling, general and administrative		26,865			53,480			18,198		(10,550	)		87,993
Royalties and other income		—			1,495			1,473		(76	)		2,892
Operating income		3,020			14,051			3,324		2,615			23,010
Interest (income) expense, net		3,840			(2,843	)		1,912		2,583			5,492
Income from equity investment		11,924			3			—		(11,927	)		—
Earnings before income taxes		11,104			16,897			1,412		(11,895	)		17,518
Income taxes		(28	)		6,066			315		10			6,363
Earnings from continuing operations		11,132			10,831			1,097		(11,905	)		11,155
Earnings from discontinued operations, net of tax		(205	)		(36	)		—		36			(205	)
Net earnings	$	10,927		$	10,795		$	1,097	$	(11,869	)	$	10,950

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
First Quarter of Fiscal 2007

	Oxford						Subsidiary
	Industries			Subsidiary			Non-			Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors			Adjustments			Total
Cash Flows From Operating Activities
Net cash (used in) provided by operating activities	$	(24,568	)	$	3,597		$	1,843		$	10		$	(19,118	)
Cash Flows from Investing Activities
Acquisitions		(12,111	)		—			—			—			(12,111	)
Investment in unconsolidated entity		—			(9,063	)		—			—			(9,063	)
Purchases of property, plant and equipment		(82	)		(3,360	)		(114	)		—			(3,556	)
Net cash (used in) provided by investing activities		(12,193	)		(12,423	)		(114	)		—			(24,730	)
Cash Flows from Financing Activities
Change in debt		26,793			(4	)		(2	)		—			26,787
Proceeds from issuance of common stock		886			—			—			—			886
Change in inter-company payable		(5,138	)		4,734			402			2			—
Dividends on common stock		(5,304	)		—			—			—			(5,304	)
Net cash (used in) provided by financing activities		17,237			4,730			400			2			22,369
Cash Flows from Discontinued Operations
Net operating cash flows provided by discontinued operations		17,848			3,802			—			—			21,650
Net change in Cash and Cash Equivalents		(1,676	)		(294	)		2,129			12			171
Effect of foreign currency translation		—			—			92			—			92
Cash and Cash Equivalents at the Beginning of Period		5,175			1,134			4,181			(11	)		10,479
Cash and Cash Equivalents at the End of Period	$	3,499		$	840		$	6,402		$	1		$	10,742

15

OXFORD INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
First Quarter of Fiscal 2006

	Oxford						Subsidiary
	Industries			Subsidiary			Non-			Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors			Adjustments			Total
Net sales	$	132,429		$	108,001		$	46,596		$	(18,551	)	$	268,475
Cost of goods sold		100,984			47,251			21,191			(6,666	)		162,760
Gross profit		31,445			60,750			25,405			(11,885	)		105,715
Selling, general and administrative		27,398			47,691			20,460			(10,908	)		84,641
Royalties and other income		(150	)		1,930			1,481			—			3,261
Operating income		3,897			14,989			6,426			(977	)		24,335
Interest (income) expense, net		7,170			(2,533	)		1,990			(794	)		5,833
Income from equity investment		15,468			79			—			(15,547	)		—
Earnings before income taxes		12,195			17,601			4,436			(15,730	)		18,502
Income taxes		(563	)		6,154			1,105			(14	)		6,682
Earnings from continuing operations		12,758			11,447			3,331			(15,716	)		11,820
Earnings from discontinued operations, net of tax		1,295			878			(110	)		—			2,063
Net earnings	$	14,053		$	12,325		$	3,221		$	(15,716	)	$	13,883

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
First Quarter of Fiscal 2006

	Oxford						Subsidiary
	Industries			Subsidiary			Non-			Consolidating			Consolidated
	(Parent)			Guarantors			Guarantors			Adjustments			Total
Cash Flows From Operating Activities
Net cash (used in) provided by operating activities	$	(23,581	)	$	(1,137	)	$	(3,479	)	$	77		$	(28,120	)
Cash Flows from Investing Activities
Acquisitions		(6,569	)		—			—			—			(6,569	)
Distribution from joint venture		—			1,856			—			—			1,856
Purchases of property, plant and equipment		(921	)		(1,936	)		(591	)		—			(3,448	)
Proceeds from sale of property, plant and equipment		6			—			—			—			6
Net cash (used in) provided by investing activities		(7,484	)		(80	)		(591	)		—			(8,155	)
Cash Flows from Financing Activities
Change in debt		26,790			(9	)		1,168			—			27,949
Proceeds from issuance of common stock		2,586			—			—			—			2,586
Change in inter-company payable		149			(3,388	)		3,341			(102	)		—
Dividends on common stock		(2,278	)		—			—			—			(2,278	)
Net cash (used in) provided by financing activities		27,247			(3,397	)		4,509			(102	)		28,257
Cash Flows from Discontinued Operations
Net operating cash flows provided by discontinued operations		5,422			3,693			(463	)		—			8,652
Net change in Cash and Cash Equivalents		1,604			(921	)		(24	)		(25	)		634
Effect of foreign currency translation		—			—			(109	)		—			(109	)
Cash and Cash Equivalents at the Beginning of Period		2,713			1,859			1,901			26			6,499
Cash and Cash Equivalents at the End of Period	$	4,317		$	938		$	1,768		$	1		$	7,024

16

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

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to unaudited condensed consolidated financial statements contained in this report and the consolidated financial Statements, notes to consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our fiscal 2006 Form 10-K.

OVERVIEW

We generate revenues and cash flow through the design, sale, production and distribution of branded and private label consumer apparel and footwear for men, women and children and the licensing of company-owned trademarks. Our markets and customers are located primarily in the United States. We source more than 95% of our products through third-party producers. We primarily distribute our products through our wholesale customers which include chain stores, department stores, specialty stores, specialty catalogs and mass merchants. We also sell our products for some brands in our own retail stores.

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 providing opportunities for operating synergies. Our success in the future will depend on our ability to continue to design products that are acceptable to the markets we serve and to source our products on a competitive basis while still earning appropriate margins.

The most significant factors impacting our results and contributing to the change in diluted earnings from continuing operations per common share to $0.63 in the first quarter of fiscal 2007 from $0.67 in the first quarter of fiscal 2006 and the change in diluted net earnings per common share to $0.62 in the first quarter of fiscal 2007 from $0.79 in the first quarter of fiscal 2006 were:

• relatively flat sales and a 29% decrease in operating income in the Menswear Group primarily due to the decreased sales for Ben Sherman and a decline in the gross margins in our historical menswear business;

• the Tommy Bahama Group’s 14% increase in net sales and 17% increase in operating income primarily due to product line expansion including Tommy Bahama Relax^tm and Tommy Bahama Golf 18^tm; and

• the disposition of substantially all of the assets of our Womenswear Group on June 2, 2006, resulting in all Womenswear Group operations being reclassified to discontinued operations for all periods presented, including the loss of $0.2 million in the first quarter of fiscal 2007 which primarily consists of expenses incurred in wrapping up the Womenswear Group operations.

17

RESULTS OF OPERATIONS

The following tables set forth the line items in our consolidated statements of earnings both in dollars (in thousands) and as a percentage of net sales. The first tables also sets forth the percentage change of the data as compared to the comparable period in the prior year. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding. Individual line items of our consolidated statements of earnings may not be directly comparable to those of our competitors, as statement of earnings classification of certain expenses may vary by company.

	First			First
	Quarter			Quarter		Percent
	Fiscal 2007			Fiscal 2006		Change
Net sales	$	284,078		$	268,475		5.8	%
Cost of goods sold		175,967			162,760		8.1	%
Gross profit		108,111			105,715		2.3	%
Selling, general and administrative		86,446			82,788		4.4	%
Amortization of intangible assets		1,547			1,853		(16.6	)%
Royalties and other operating income		2,892			3,261		(11.3	)%
Operating income		23,010			24,335		(5.4	)%
Interest expense, net		5,492			5,833		(5.8	)%
Earnings before income taxes		17,518			18,502		(5.3	)%
Income taxes		6,363			6,682		(4.8	)%
Earnings (loss) from continuing operations		11,155			11,820		(5.6	)%
Earnings from discontinued operations, net of taxes		(205	)		2,063		(109.9	)%
Net earnings	$	10,950		$	13,883		(21.1	)%

	Percent of
	Net Sales
	First			First
	Quarter			Quarter
	Fiscal 2007			Fiscal 2006
Net sales		100.0	%		100.0	%
Cost of goods sold		61.9	%		60.6	%
Gross profit		38.1	%		39.4	%
Selling, general and administrative		30.4	%		30.8	%
Amortization of intangible assets		0.5	%		0.7	%
Royalties and other operating income		1.0	%		1.2	%
Operating income		8.1	%		9.1	%
Interest expense, net		1.9	%		2.2	%
Earnings before income taxes		6.2	%		6.9	%
Income taxes		2.2	%		2.5	%
Earnings from continuing operations		3.9	%		4.4	%
Earnings (loss) from discontinued operations, net of taxes		(0.1	%)		0.8	%
Net earnings		3.9	%		5.2	%

SEGMENT DEFINITION

In our continuing operations, we have two operating segments for purposes of allocating resources and assessing performance. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportcoats, suit separates, walkshorts, golf apparel, outerwear, sweaters, jeans, swimwear, footwear and headwear, licenses its brands for accessories and other products and operates retail stores. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture and other products. The head of each operating segment reports to the chief operating decision maker.

Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, LIFO inventory accounting adjustments and other costs that are not allocated to the operating segments.

As discussed in note 3 in our consolidated financial statements included in our fiscal 2006 Form 10-K, we sold substantially all of the assets of our Womenswear Group at the end of fiscal 2006. Our Womenswear Group produced private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The operating

18

results of the Womenswear Group have not been included in segment information as all amounts were reclassified to discontinued operations. The information below presents certain information about our segments (in thousands).

	First Quarter		First Quarter			Percent
	Fiscal 2007		Fiscal 2006			Change
Net Sales
Menswear Group	$	178,812	$	177,076			1.0	%
Tommy Bahama Group		104,148		91,544			13.8	%
Corporate and Other		1,118		(145	)	Na
Total	$	284,078	$	268,475			5.8	%

	First Quarter			First Quarter			Percent
	Fiscal 2007			Fiscal 2006			Change
Operating Income
Menswear Group	$	10,611		$	15,004			(29.3	)%
Tommy Bahama Group		16,835			14,357			17.3	%
Corporate and Other		(4,436	)		(5,026	)		(11.7	)%
Total	$	23,010		$	24,335			(5.4	)%

For further information regarding our segments, see Note 6 to our unaudited condensed consolidated financial statements included in this report.

FIRST QUARTER OF FISCAL 2007 COMPARED TO FIRST QUARTER OF FISCAL 2006

The discussion below compares our results of operations for the first quarter of fiscal 2007 to the first quarter of fiscal 2006. Each percentage change provided below reflects the change between these periods unless indicated otherwise.

Net salesincreased by $15.6 million, or 5.8%. The increase was primarily due to an increase in unit sales of 4.4% and an increase in the average selling price per unit of 1.1%.

The Menswear Group reported a 1.0% increase in net sales. The increase was due to the unit sales increase of 2.7% partially offset by a decline in the average selling price per unit of 1.3%. The increase in unit sales was a result of an increase in unit sales in the historical menswear business partially offset by a decrease in the Ben Sherman unit sales. The decline in the average selling price per unit was primarily due to the decreased ratio of Ben Sherman sales to total menswear sales. Ben Sherman sales carry a higher average selling price per unit than our historical menswear business.

The Tommy Bahama Group reported a 13.8% increase in net sales as a result of growth in wholesale and retail sales. The increase was due to an increase in unit sales of 14.3% partially offset by a decline in the average selling price per unit of 0.5%. The decline in the average selling price per unit was primarily due to higher growth in wholesale sales than retail sales. The higher growth in wholesale sales was primarily due to new product offerings (Tommy Bahama Relax^tm and Tommy Bahama Golf 18^tm). The increase in retail sales was due to an increase in the number of retail stores to 62 at the end of the first quarter of fiscal 2007 compared to 55 at the end of first quarter of fiscal 2006.

Gross profitincreased 2.3%. The increase was due to higher net sales partially offset by lower gross margins. Gross margins decreased from 39.4% of net sales in the first quarter of fiscal 2006 to 38.1% of net sales in the first quarter of fiscal 2007. The decrease in gross margins was primarily due to a shift in sales in our Menswear Group from higher-margin Ben Sherman products to lower-margin historical menswear products and decreased margins in our historical menswear business.

Our gross profit may not be directly comparable to those of our competitors, as income statement classifications of certain expenses may vary by company.

Selling, general and administrative expenses, or SG&A, increased 4.4%. SG&A was 30.8% of net sales in the first quarter of fiscal 2006 compared to 30.4% of net sales in the first quarter of fiscal 2007. The increase in SG&A was primarily due to additional Tommy Bahama and Ben Sherman retail stores and expenses associated with new marketing initiatives in the Tommy Bahama Group.

Amortization of intangible assetsdecreased 16.6%. The decrease was due to certain intangible assets acquired as part of our acquisitions of Tommy Bahama and Ben Sherman, which have a greater amount of amortization in the earlier

19

periods following the acquisition than later periods. We expect that amortization expense will decrease in future years unless we acquire additional intangible assets.

Royalties and other operating incomedecreased 11.3%. The decrease was primarily due to a non-recurring $0.3 million gain recognized in the first quarter of fiscal 2006 related to the sale of the assets of our Paradise Shoe joint venture.

Operating incomedecreased 5.4% due to the changes in our Menswear and Tommy Bahama Group operations discussed below.

The Menswear Group reported a 29.3% decrease in operating income. The decrease in operating income was primarily due to the decline in gross profit at Ben Sherman and in our historical Menswear business. The decline in gross profit in our Ben Sherman business was primarily due to lower sales volume. The decline in gross profit in our historical menswear business was primarily due to lower gross margins.

The Tommy Bahama Group reported a 17.3% increase in operating income. The increase in operating income was primarily due to increased sales volume partially offset by increased operating expenses. The increased operating expenses were primarily due to the opening of additional retail stores and additional infrastructure to support our new product lines, including Tommy Bahama Relax^tm and Tommy Bahama Golf 18^tm.

The Corporate and Other operating loss decreased $0.6 million, or 11.7%. The decrease in the operating loss was primarily due to the reimbursement to us of certain corporate administrative expenses by the purchaser of the assets of the Womenswear Group pursuant to a transaction services agreement.

Interest expense,netdecreased 5.8%. The decrease in interest expense was primarily due to the lower debt levels in the first quarter of fiscal 2007, partially offset by higher interest rates during the first quarter of fiscal 2007.

Income taxeswere at an effective tax rate of 36.3% for the first quarter of fiscal 2007 compared to 36.1% for the first quarter of fiscal 2006. The effective tax rate for the first quarter of fiscal 2007 may not be indicative of the rate in future periods.

Discontinued operationsresulted from the disposition of our Womenswear Group operations on June 2, 2006, leading to all Womenswear Group operations being reclassified to discontinued operations for all periods presented. The decrease in earnings from discontinued operations was primarily due to the first quarter of fiscal 2006 including the full operations of the Womenswear Group, while the first quarter of fiscal 2007 only including incidental items related to the Womenswear Group.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our primary source of revenue and cash flow is our operating activities in the United States and to some extent the United Kingdom. When cash inflows are less than cash outflows, we also have access to amounts under our U.S. Revolver and U.K. Revolver, each of which are described below, subject to their terms. We may seek to finance future capital investment programs through various methods, including, but not limited to, cash flow from operations, borrowings under our current or additional credit facilities and sales of equity securities.

Our liquidity requirements arise from the funding of our working capital needs, which include inventory, other operating expenses and accounts receivable, funding of capital expenditures, payment of quarterly dividends, repayment of our indebtedness, payment of interest on outstanding indebtedness and acquisitions, if any. Generally, our product purchases are acquired through trade letters of credit which are drawn against our lines of credit at the time of shipment of the products and reduce the amounts available under our lines of credit when issued.

Cash and cash equivalentson hand was $10.7 million at September 1, 2006 and $7.0 million at September 2, 2005, respectively.

Operating Activities

During the first quarter of fiscal 2007, our continuing operations used $19.1 million of cash compared to $28.1 million during the first quarter of fiscal 2006. Operating cash flows from continuing operations was primarily a result of the earnings from continuing operations for the period adjusted for non-cash activities such as depreciation, amortization; stock compensation for restricted stock awards and changes in working capital accounts. The use of less cash by continuing operations in the first quarter of fiscal 2007 compared to the first quarter of fiscal 2006 was primarily due to a smaller impact from changes in working capital during the first quarter of fiscal 2007. During the first quarter of

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fiscal 2007, the changes in the working capital resulted in a net cash outflow primarily due to the increases in accounts receivable, inventories and prepaid expenses and the decrease in current liabilities. During the first quarter of fiscal 2006, the changes in working capital resulted in a net cash outflow primarily due to the significant decrease in current liabilities (primarily additional acquisition cost payable, short-term debt and current liabilities related to discontinued operations) and increases in accounts receivable, inventories and prepaid expenses.

Our working capital ratio, which is calculated by dividing total current assets by total current liabilities, was 2.52:1 and 2.29:1 at September 1, 2006 and September 2, 2005, respectively. The improvement was due to the 21% reduction of current liabilities partially offset by the 13% decrease in current assets primarily related to discontinued operations and inventories, each as discussed below.

Receivables, netwere $155.6 million and $151.3 million at September 1, 2006 and September 2, 2005, respectively, an increase of 3%. The increase was primarily due to the higher sales in the first quarter of fiscal 2007. Days’ sales outstanding for our accounts receivable, excluding retail sales, was 56 days and 57 days at September 1, 2006 and September 2, 2005, respectively.

Inventorieswere $139.4 million and $149.8 million at September 1, 2006 and September 2, 2005, respectively, a decrease of 7%. This decrease primarily resulted from a significant reduction of inventory in our Menswear Group largely due to a more optimal level of inventory for certain dress shirt replenishment programs and a lower level of inventory for our Ben Sherman operations. This reduction was partially offset by an increase in inventories in the Tommy Bahama Group primarily due to inventory related to our Tommy Bahama Relax^tm and Tommy Bahama Golf 18^tm product lines which we began in late fiscal 2006 as well as an increase in anticipated sales in the second quarter of fiscal 2007. Our days’ supply of inventory on hand related to continuing operations, calculated on a trailing twelve month average using a FIFO basis, was 94 days and 101 days at September 1, 2006 and September 2, 2005, respectively.

Prepaid expenseswere $25.8 million and $24.1 million at September 1, 2006 and September 2, 2005, respectively. The increase in prepaid expenses was primarily due to our having more retail stores at September 1, 2006 compared to September 2, 2005.

Current assets related to discontinued operationswere $18.1 million and $67.9 million at September 1, 2006 and September 2, 2005, respectively. The decrease in current assets related to discontinued operations resulted from the disposition of the Womenswear Group on June 2, 2006. The assets remaining at September 1, 2006 are primarily accounts receivable for in-process goods sold to the purchaser of the Womenswear Group upon delivery and certain in-transit inventory. We anticipate that substantially all of these current assets related to discontinued operations will be converted into cash during the second quarter of fiscal 2007.

Current liabilities, which primarily consist of payables arising out of our operating activities, were $138.9 million and $174.8 million at September 1, 2006 and September 2, 2005, respectively. The decrease in current liabilities related to continuing operations was primarily due to the payment of the Tommy Bahama earn-out in the first quarter of fiscal 2007 whereas the prior year earn-out payment was paid in the second quarter of fiscal 2006, the reduction in our short term debt levels and a reduction in accrued compensation primarily due to a lower level of bonus accruals in the first quarter of fiscal 2007. Additionally, current liabilities include current liabilities related to discontinued operations of $11.5 million and $16.1 million at September 1, 2006 and September 2, 2005, respectively. The current liabilities related to discontinued operations at September 1, 2006 primarily consisted of payables for which we will be reimbursed by the purchaser of the Womenswear Group. The current liabilities related to discontinued operations at September 2, 2005 reflected all operations of the Womenswear Group. We anticipate substantially all of the current liabilities related to discontinued operations will be paid during the second quarter of fiscal 2007.

Deferred income taxeswere $78.4 million and $76.5 million at September 1, 2006 and September 2, 2005, respectively. The change resulted primarily from changes in property, plant and equipment basis differences, amortization of acquired intangibles and deferred rent balances.

Other non-current liabilities, which primarily consist of deferred rent and deferred compensation amounts, were $32.4 million and $25.7 million at September 1, 2006 and September 2, 2005, respectively. The increase was primarily due to the recognition of deferred rent during the last three quarters of fiscal 2006 and first quarter of fiscal 2007.

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Investing Activities

During the first quarter of fiscal 2007, investing activities used $24.7 million in cash. We paid approximately $21.2 million related to acquisitions, consisting of the fiscal 2006 Tommy Bahama earn-out payment and the acquisition of an ownership interest in an unconsolidated entity that owns the trademark Hathaway^® and other related trademarks in the United States and certain other countries. Additionally, we incurred $3.6 million of capital expenditures, primarily related to new Tommy Bahama and Ben Sherman retail stores.

During the first quarter of fiscal 2006, investing activities used $8.2 million in cash. We paid approximately $6.6 million related to acquisitions, consisting of the fiscal 2005 Tommy Bahama earn-out payment and the acquisition of Solitude^®, a California lifestyle trademark. Additionally, we incurred capital expenditures of $3.5 million, primarily related to new Tommy Bahama and Ben Sherman retail stores. These investments were partially offset by $1.9 million of proceeds received from our Paradise Shoe equity investment as a result of Paradise Shoe selling substantially all of its assets.

Non-current assets,including property, plant and equipment, goodwill, intangible assets and other non-current assets, increased primarily as a result of the fiscal 2006 earn-out related to the Tommy Bahama acquisition, the acquisition of the ownership interest in an unconsolidated entity that owns the trademark Hathaway^® and other related trademarks in the United States and certain other countries, capital expenditures for our retail stores and the impact of changes in foreign currency exchange rates. These increases were partially offset by depreciation related to our property, plant and equipment and amortization of our intangible assets.

Financing Activities

During the first quarter of fiscal 2007, financing activities provided $22.4 million in cash. The cash flow used in our operating activities and our investing activities, partially offset by the cash flow provided by our discontinued operations, resulted in the need to borrow additional amounts under our U.S. revolving credit facility during the first quarter of fiscal 2007. We also received $0.9 million of cash from the exercise of employee stock options. These amounts were partially offset by the payment of an aggregate of $5.3 million during the first quarter of fiscal 2007 for dividends on our common shares declared for the fourth quarter of fiscal 2006 and first quarter of fiscal 2007.

During the first quarter of fiscal 2006, financing activities provided $28.3 million in cash, primarily from additional borrowings, net of repayments, under our U.S. revolving credit facility to fund our investments and working capital needs during the period. We also received $2.6 million of cash from the exercise of employee stock options. These cash proceeds were partially offset by the use of cash to pay $2.3 million of dividends on our common shares.

On September 1, 2006, we paid a cash dividend of $0.15 per share to shareholders of record as of August 22, 2006. That dividend is the 185th consecutive quarterly dividend we have paid since we became a public company in July 1960. 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, if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend or if the terms of our credit facilities limit our ability to pay dividends. We may borrow to fund dividends in the short term based on our expectations of operating cash flows in future periods. All cash flow from operations will not necessarily be paid out as dividends in all periods.

Debtwas $227.0 million and $320.5 million as of September 1, 2006 and September 2, 2005, respectively. The decrease resulted primarily from the excess of cash flow from operations over investments during the last three quarters of fiscal 2006 and the proceeds from our disposition of substantially all of the assets of our Womenswear Group on June 2, 2006, which were used to reduce outstanding debt, partially offset by an increase in borrowings under our U.S. revolving credit facility in the first quarter of fiscal 2007 as described above.

Cash Flows from Discontinued Operations

Our Womenswear Group generated cash flow of $21.7 million and $8.7 million during the first quarter of fiscal 2007 and the first quarter of fiscal 2006, respectively. The cash flows from discontinued operations for the first quarter of fiscal 2006 reflect the operating results of the Womenswear Group, whereas the first quarter of fiscal 2007 reflects the realization and disposition of retained assets and liabilities after the date of the transaction. Cash flows from discontinued operations during fiscal 2006 and fiscal 2007 is not indicative of cash flows from discontinued operations anticipated in future periods.

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Liquidity and Capital Resources

The table below provides a description of our significant financing arrangements (in thousands) at September 1, 2006:

	Balance
$280 million U.S. Secured Revolving Credit Facility (“U.S. Revolver”), which accrues interest (8.25% at September 1, 2006), unused line fees and letter of credit fees based upon a pricing grid tied to certain debt ratios, requires interest payments monthly with principal due at maturity (July 2009), and is collateralized by substantially all the assets of the company and our consolidated domestic subsidiaries	$	27,700
£12 million Senior Secured Revolving Credit Facility (“U.K. Revolver”), which accrues interest at the bank’s base rate plus 1.0% (5.75% at September 1, 2006), requires interest payments monthly with principal payable on demand or at maturity (July 2007), and is collateralized by substantially all the United Kingdom assets of Ben Sherman		101
$200 million Senior Unsecured Notes (“Senior Unsecured Notes”), which accrue interest at 8.875% (effective rate of 9.0%), require interest payments semi-annually on June 1 and December 1 of each year, require payment of principal at maturity (June 2011), are subject to certain prepayment penalties and are guaranteed by our consolidated domestic subsidiaries		200,000
Other debt, including capital lease obligations with varying terms and conditions, collateralized by the respective assets		24
Total debt		227,825
Unamortized discount on Senior Unsecured Notes		(839	)
Short-term debt and current maturities of long-term debt		(122	)
Total long-term debt, less current maturities	$	226,864

Our U.S. Revolver, U.K. Revolver and Senior Unsecured Notes each include certain debt covenant restrictions that require us or our subsidiaries to maintain certain financial ratios that we believe are customary for similar facilities. Our U.S. Revolver also includes limitations on certain restricted payments such as earn-outs, payment of dividends and prepayment of debt. As of September 1, 2006, we were compliant with all financial covenants and restricted payment provisions related to our debt agreements.

Our U.S. Revolver and U.K. Revolver are used to finance trade letters of credit and standby letters of credit, as well as provide funding for other operating activities and acquisitions. As of September 1, 2006, approximately $76.6 million of trade letters of credit and other limitations on availability were outstanding against our U.S. Revolver and the U.K. Revolver. The aggregate net availability under our U.S. Revolver and U.K. Revolver agreements was approximately $198.5 million as of September 1, 2006.

Our debt to total capitalization ratio was 36%, 33% and 50% at September 1, 2006, June 2, 2006 and September 2, 2005, respectively. The change in this ratio from September 2, 2005 was primarily a result of cash flows from operations during the last three quarters of fiscal 2006 and the disposition of substantially all of the assets of our Womenswear Group on June 2, 2006.

We anticipate that we will be able to satisfy our ongoing cash requirements, which generally consist of working capital needs, capital expenditures (primarily for the opening of retail stores) and interest payments on our debt during fiscal 2007, primarily from cash on hand and cash flow from operations supplemented by borrowings under our lines of credit, as necessary. 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 additional equity. However, our ability to obtain additional borrowings or refinance our credit facilities will depend on many factors, including the prevailing market conditions, our financial condition and our ability to negotiate favorable terms and conditions. There is no assurance that financing would be available on terms that are acceptable or favorable to us, if at all. At maturity of our U.K. Revolver, U.S. Revolver and Senior Unsecured Notes, we anticipate that we will be able to refinance the facilities and debt with terms available in the market at that time.

Our contractual obligations as of September 1, 2006 have not changed significantly from the contractual obligations outstanding at June 2, 2006 other than changes in the amounts outstanding under the U.S. Revolver and U.K. Revolver, amounts outstanding pursuant to letters of credit (both as discussed above) and new leases for our recently opened retail stores, none of which occurred outside the ordinary course of business.

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Our anticipated capital expenditures for fiscal 2007 are expected to approximate $25 to $30 million, including $3.6 million incurred during the first quarter of fiscal 2007. These expenditures will consist primarily of the continued expansion of our retail operations.

Off Balance Sheet Arrangements

We have not entered into agreements which meet the definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments to or guarantees with respect to 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 our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, contingencies and litigation and certain other accrued expenses. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2006 Form 10-K for a summary of our critical accounting policies.

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 the retail selling seasons, including spring, summer, fall and holiday. As the timing of product shipments and other events affecting the retail business may vary, results for any particular quarter may not be indicative of results for the full year. The percentage of our net sales by quarter for fiscal 2006 was 24%, 25%, 25% and 26%, respectively, and the percentage of our operating income by quarter for fiscal 2006 was 25%, 22%, 23% and 30%, respectively, which may not be indicative of the distribution in fiscal 2007 or future years.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain interest rate, trade policy, commodity and inflation risks as discussed in Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our fiscal 2006 Form 10-K. There have not been any significant changes in our exposure to these risks during the first quarter of fiscal 2007.

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 view our foreign investments as long-term and as a result we generally do not hedge such foreign investments. We do not hold or issue any derivative financial instruments related to foreign currency exposure for speculative purposes.

We receive United States dollars for most of our product sales. We anticipate that less than 15% of our net sales during fiscal 2007 will be denominated in currencies other than the United States dollar. These sales primarily relate to Ben Sherman sales in the United Kingdom and Europe and sales of certain products in Canada. With the United States dollar trading at a weaker position than it has historically traded versus the pound sterling and the Canadian dollar, a strengthening United States dollar could result in lower levels of sales and earnings in our consolidated statements of earnings in future periods, although the sales in foreign currencies could be equal to or greater than amounts as previously reported. Based on our fiscal 2006 sales denominated in foreign currencies, if the dollar had strengthened by 5% in fiscal 2006, we would have experienced a decrease in net sales of approximately $6.5 million.

Substantially all of our inventory purchases from contract manufacturers throughout the world are denominated in United States dollars. Purchase prices for our products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies, such as the Chinese Yuan, of the contract manufacturers, which may have the effect of increasing our cost of goods sold in the future. Due to the number of currencies involved and the fact that not all foreign currencies react in the same manner against the United States dollar, we cannot quantify in any meaningful way the potential effect of such fluctuations on future costs. However, we do not believe that exchange rate fluctuations will have a material impact on our inventory costs in future periods.

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We may from time to time purchase short-term foreign currency forward exchange contracts to hedge against changes in foreign currency exchange rates. As of September 1, 2006, we had entered into such contracts which have not been settled totaling approximately $22.5 million, all with settlement dates before the end of our fiscal year. When such contracts are outstanding, the contracts are marked to market with the offset being recognized in our consolidated statement of earnings or other comprehensive income if the transaction does not or does, respectively, qualify as a hedge in accordance with accounting principles generally accepted in the United States. The impact of these contracts on our consolidated financial statements was not material as of September 1, 2006.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Securities Exchange Act of 1934, such as this quarterly report on Form 10-Q, is reported in accordance with the rules of the SEC. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Principal Executive Officer and 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 SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any significant changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act) during the first quarter of fiscal 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may become subject to litigation or claims. We are not currently a party to any litigation or regulatory actions that we believe could reasonably be expected to have material adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

We believe that an investor should carefully consider the factors discussed in Part I. Item 1A. Risk Factors in our fiscal 2006 Form 10-K. There have been no material changes to the risk factors described in our fiscal 2006 Form 10-K. The risks described in our Form 10-K are not the only risks facing our company. If any of the risks described in our Form 10-K, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, actually occur, our business, financial condition or operating results could suffer.

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

The table below summarizes our stock repurchases during the first quarter of fiscal 2007.

					Total Number of		Maximum
			Weighted		Shares Purchased		Number of Shares
			Average		as Part of		That May Yet be
	Total Number		Price		Publicly		Purchased Under
	of Shares		Paid per		Announced Plans		the Plans or
Fiscal Month	Purchased (1)		Share		or Programs (2)		Programs (2)
June (6/2/06-6/30/06)		—	$	—		—		—
July (7/1/06-8/4/06)		254		39.34		—		—
August (8/5/06-9/1/06)		330		35.77		—		—
Total		584	$	37.32		—		1,000,000

(1)	Represents shares purchased from employees to pay taxes related to the vesting of restricted shares.
(2)	On August 3, 2006, our board of directors approved a stock repurchase authorization for up to one million shares of our common stock. As of September 1, 2006, no shares have been repurchased by us pursuant to this authorization.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

3(a)	Articles of Incorporation of Oxford Industries, Inc. Incorporated by reference to Exhibit 3.1 from Oxford Industries, Inc. Form 10-Q for the fiscal quarter ended August 29, 2003.
3(b)	Bylaws of Oxford Industries, Inc. as amended. Incorporated by reference to Exhibit 3(a) from the Oxford Industries, Inc. Form 10-Q for the fiscal quarter ended September 2, 2005.
10.1	First Amendment to the Oxford Industries, Inc. Deferred Compensation Plan, dated as of August 3, 2006.*†
10.2	Form of Performance Share Award Agreement pursuant to the Oxford Industries, Inc. Long-Term Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 from the Oxford Industries, Inc. Form 8-K filed on August 9, 2006. †
10.3	Form of Non-Employee Director Performance Share Award Agreement pursuant to the Oxford Industries, Inc. Long-Term Stock Incentive Plan. Incorporated by reference to Exhibit 10.2 from the Oxford Industries, Inc. Form 8-K filed on August 9, 2006. †
31.1	Section 302 Certification by Principal Executive Officer.*
31.2	Section 302 Certification by Principal Financial Officer.*
32	Section 906 Certification by Principal Executive Officer and Principal Financial Officer.*

*	Filed herewith
†	Exhibit is a management contract or compensatory plan or arrangement.

SIGNATURES

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

October 5, 2006	OXFORD INDUSTRIES, INC.
	(Registrant)

/s/ Thomas Caldecot Chubb III

Thomas Caldecot Chubb III 

Executive Vice President
(Principal Financial Officer)

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