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1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] Quarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended February 25, 1994 ----------------- OR [ ] Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 For the transition period from to -------------- -------------- Commission File Number 1-4365 ------ OXFORD INDUSTRIES, INC. - ------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Georgia 58-0831862 - ------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 222 Piedmont Avenue, N.E., Atlanta, Georgia 30308 -------------------------------------------------- (Address of principal executive offices) (Zip Code) (404) 659-2424 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - ------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares outstanding Title of each class as of April 4, 1994 - --------------------------- ---------------------------- Common Stock, $1 par value 8,635,245 2 OXFORD INDUSTRIES, INC. ----------------------- INDEX ----- PAGE NO. -------- PART I. FINANCIAL INFORMATION Consolidated Statements of Earnings 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II. OTHER INFORMATION 10 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENT OF EARNINGS NINE MONTHS AND QUARTERS ENDED FEBRUARY 25, 1994 AND FEBRUARY 26, 1993 Nine Months Ended Quarter Ended ----------------------------------------------------- $ in thousands except February 25, February 26, February 25, February 26, per share amounts 1994 1993 1994 1993 ----------------------------------------------------- Net Sales $470,589 $438,516 $143,141 $140,651 ----------------------------------------------------- Costs and Expenses: Cost of goods sold 376,957 352,675 113,912 113,049 Selling, general and administrative 67,885 65,638 21,200 21,337 Interest 1,739 1,707 510 547 ---------------------------------------------------- Total Costs and Expenses 446,581 420,020 135,622 134,933 ---------------------------------------------------- Earnings Before Income Taxes 24,008 18,496 7,519 5,718 Income Taxes 9,723 7,306 3,045 2,259 --------------------------------------------------- Net Earnings $14,285 $11,190 $4,474 $3,459 ======== ======== ======== ======== Net Earnings Per Common Share $1.66 $1.29 $0.52 $0.40 ===== ===== ===== ===== Average Number of Shares Outstanding 8,596,912 8,689,263 8,605,122 8,672,059 ========= ========= ========= ========= Dividends Per Share $0.510 $0.465 $0.180 $0.165 ====== ====== ====== ====== - ------------------------- See notes to consolidated financial statements. 4 OXFORD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS FEBRUARY 25, 1994, MAY 28, 1993 AND FEBRUARY 26, 1993 (UNAUDITED EXCEPT FOR MAY 28, 1993) February 25, May 28, February 26, $ in thousands 1994 1993 1993 -------------------------------------- Assets - ------ Current Assets: Cash $ 1,057 $ 3,254 $ 2,584 Receivables 89,494 68,093 80,624 Inventories: Finished goods 53,820 55,733 45,749 Work in process 17,375 19,931 17,498 Fabric, trim & supplies 23,284 26,929 21,672 -------------------------------------- 94,479 102,593 84,919 Prepaid expenses 12,903 11,698 10,675 -------------------------------------- Total Current Assets 197,933 185,638 178,802 Property, Plant & Equipment 31,445 31,027 30,258 Other Assets 1,558 1,562 1,709 -------------------------------------- $230,936 $218,227 $210,769 ======== ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities: Notes payable $ 25,500 $ 18,500 $ 13,000 Trade accounts payable 29,740 34,629 31,591 Accrued compensation 9,710 11,304 8,863 Other accrued expenses 14,832 11,072 13,643 Dividends payable 1,552 1,433 1,432 Income taxes - - 25 Current maturities of long-term debt 4,864 4,865 4,690 -------------------------------------- Total Current Liabilities 86,198 81,803 73,244 -------------------------------------- Long-Term Debt, less current maturities 16,882 17,788 21,777 Deferred Income Taxes 3,702 3,304 2,595 Stockholders' Equity: Common stock 8,625 8,685 8,683 Additional paid-in capital 5,944 5,193 5,179 Retained earnings 109,585 101,454 99,291 ------------------------------------- 124,154 115,332 113,153 -------------------------------------- $230,936 $218,227 $210,769 ======== ======== ======== - ------------------------- See notes to consolidated financial statements. 5 OXFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED FEBRUARY 25, 1994 AND FEBRUARY 26, 1993 (UNAUDITED) Nine Months Ended ------------------------------ February 25, February 26, $ in thousands 1994 1993 - -------------- ------------ ------------ Cash Flows From Operating Activities - ------------------------------------ Net earnings $ 14,285 $ 11,190 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,122 4,683 Gain on sale of property, plant and equipment (102) (292) Changes in working capital: Receivables (21,401) (13,466) Inventories 8,114 (2,898) Prepaid expenses (1,205) (828) Trade accounts payable (4,889) (6,772) Accrued expenses and other current liabilities 2,303 1,207 Income taxes payable - (377) Deferred income taxes 398 453 Other noncurrent assets (26) (656) Net cash flows provided by (used in) -------- -------- operating activities 2,599 (7,756) Cash Flows From Investing Activities - ------------------------------------ Purchase of property, plant and equipment (5,610) (5,284) Proceeds from sale of property, plant and and equipment 204 1,400 -------- -------- Net cash used in investing activities (5,406) (3,884) Cash Flows From Financing Activities - ------------------------------------ Short-term borrowings 7,000 13,000 Payments on long-term debt (907) (919) Proceeds from exercise of stock options 805 236 Purchase and retirement of common stock (1,886) (2,449) Dividends on common stock (4,402) (4,053) -------- -------- Net cash provided by financing activities 610 5,815 Net change in Cash and Cash Equivalents (2,197) (5,825) Cash and Cash equivalents at Beginning of Period 3,254 8,409 -------- -------- Cash and Cash Equivalents at End of Period $ 1,057 $ 2,584 ======== ======== Supplemental Disclosure of Cash Flow Information - ------------------------------------------------ Cash paid (received) for: Interest $ 1,639 $ 1,647 Income taxes 10,599 8,671 See notes to consolidated financial statements. 6 OXFORD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS AND QUARTERS ENDED FEBRUARY 25, 1994 AND FEBRUARY 26, 1993 (UNAUDITED) 1. The foregoing unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of results to be expected for the year. 2. The financial information presented herein should be read in conjunction with the consolidated financial statements included in the Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 1993. 3. The Company is involved in certain legal matters primarily arising in the normal course of business. In the opinion of management, the Company's liability under any of these matters would not materially affect its financial condition or results of operations. 7 Item 2. Management's Discussion and Analysis of Financial - ---------------------------------------------------------- Condition and Results of Operations. - ------------------------------------ Results of Operations - --------------------- NET SALES Net sales for the third quarter of the 1994 fiscal year, which ended February 25, 1994, increased by 1.8% from net sales for the third quarter of the previous year. Net sales for the first nine months of the current year increased by 7.3% from net sales for the comparable period of the prior year. In the third quarter, there was a general slowing of retail activity as retailers were battered by winter storms and the California earthquake. The Company also experienced a general slowing in sales, but was more directly affected in the third quarter by replacing the loss of approximately $5,000,000 in sales to the now discontinued Sears Roebuck catalog operation, and an $8,000,000 decrease in shipments to JCPenny. The Company believes that last year's third quarter shipments to JCPenny were somewhat artificially large due to "pipeline filling." The Company overcame this combined $13,000,000 shortfall with substantial gains in the better catalog tier and the discounter tier. COST OF GOODS SOLD Cost of goods sold as a percentage of net sales was 79.6% for the third quarter of the current year and 80.4% for the third quarter of the previous year. For the first nine months of the current year, cost of goods sold as a percentage of net sales was 80.1% compared to 80.4% for the same period in the previous year. These continued consistent results represents stabilizing gross margins as a result of more favorable sourcing. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased by 0.6% to $21,200,000 in the third quarter of fiscal 1994 from $21,337,000 in the same period of fiscal 1993. Selling, general and administrative expenses increased by 3.4% to $67,885,000 in the first nine months of fiscal 1994 from $65,638,000 for the same period of fiscal 1993. Selling, general and administrative expenses as a percentage of net sales declined to 14.8% for the third quarter of fiscal 1994 from 15.2% for the third quarter of the prior year, and to 14.4% for the first nine months of fiscal 1994 from 14.9% for the first nine months of the previous year. These results represent strenuous efforts to contain costs in light of the competitive environment in which the Company operates. INTEREST EXPENSE Net interest expense as a percentage of net sales was 0.4% in both fiscal 1994 and fiscal 1993 for both the third quarter and the first nine months of the respective fiscal years. Average short-term borrowings and weighted average interest rates have remained relatively unchanged. 8 INCOME TAXES The Company's effective income tax rate was 40.5% for the third quarter of the current year and 39.5% for the third quarter of the previous year. For the first nine months of the current and previous years, the Company's effective income tax rate was 40.5% and 39.5%, respectively. The income tax rate has been increased to reflect enacted tax rates. In the first quarter of fiscal 1994, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The effect of this adoption was not material. FUTURE OPERATING RESULTS The Company is optimistic about the fourth quarter of fiscal 1994. While the fourth quarter percentage sales gains will be improved over those of the third quarter, they will not be as robust as those recorded in the first half. The Company expects that increased sales, improving gross margins and continued expense control will continue double-digit percentage increases in earnings per share in the fourth quarter. The Oxford Shirtings division of the Company has been licensed to produce and market dress shirts under the Tommy Hilfiger label. The first line will be fall 1994 and will afford the Company the opportunity to expand in the better branded dress shirt market. While the Company has and will continue to incur in fiscal 1994 expenses related to the start-up of this line, it will not realize revenues until fiscal 1995. The Company has also entered into license agreements with Farah, Incorporated (Farah), allowing the Company to license the Savane and PROCESS 2000 names for the sale of shirts. Under the terms of the agreement, Farah will furnish the Company with its proprietary PROCESS 2000 no wrinkle technology for use on shirts. Current plans call for the introduction of a small number of shirts for the Father's Day selling period, to be followed by a larger volume in the second half of calendar 1994. Liquidity and Capital Resources - -------------------------------- OPERATING ACTIVITIES During the first nine months of the current year, operating activities generated $2,599,000 in cash as compared to $7,756,000 of cash used in the first nine months of the prior year. The primary factors contributing to this increase were increased net earnings and decreased inventories offset by increased receivables. The decreased inventories is a return to a more normal level necessary to support anticipated sales. The increased receivables represent the increase in sales during the last two months of the third quarter of the current year. A number of the Company's menswear products have moved to automatic replenishment, which means the Company's shipping pattern has changed to one closer to the consumer selling cycle. The increased receivables also reflect this changed shipping pattern. INVESTING ACTIVITIES Investing activities used $5,406,000 in the first nine months of the current year and $3,884,000 in the same period of the prior year. Purchases consisted primarily of replacement of worn or obsolete machinery and equipment and upgrading management information systems. Proceeds from the sale of property, plant and equipment for the first nine months of the prior year of $1,400,000 were generated primarily from the sale of two previously idled facilities. 9 FINANCING ACTIVITIES Financing activities generated $610,000 in the first nine months of the current year and $5,815,000 in the first nine months of the prior year. The primary difference was decreased short-term borrowings in fiscal 1994. The Company purchased and retired 125,700 shares of its common stock during the nine months ended February 25, 1994. During the period after the end of the third quarter through April 4, 1994, no shares have been purchased and retired. Due to the exercise of employee stock options, a net of 65,404 shares of the Company's common stock have been issued during the nine months ended February 25, 1994, and 10,613 shares have been issued during the period after the end of the third quarter through April 4, 1994. On April 4, 1994, the Company's Board of Directors declared a cash dividend of $.18 per share payable June 4, 1994 to shareholders of record on May 16, 1994. WORKING CAPITAL Working capital decreased from $105,558,000 at the end of the third quarter of the previous year to $103,835,000 at the end of the 1993 fiscal year, and increased to $111,735,000 at the end of the third quarter of the current year. The ratio of current assets to current liabilities was 2.4 at the end of the third quarter of the previous year, and was 2.3 at the end of both the previous fiscal year and the third quarter of the current year. FUTURE LIQUIDITY AND CAPITAL RESOURCES The Company believes it has the ability to generate cash to meet its foreseeable needs. The sources of funds primarily include funds provided by operations and short-term borrowings. The uses of funds primarily include working capital requirements, capital expenditures, dividends and repayment of long-term debt. The Company regularly utilizes committed bank lines of credit and other uncommitted bank resources to meet working capital requirements. On February 25, 1994, the Company had lines of credit of $20,000,000 for which it pays commitment fees, and lines totalling $75,000,000 for which it does not pay commitment fees. Of the committed lines, $20,000,000 was in use at February 25, 1994, and of the uncommitted lines, $5,500,000 was in use at that date. Maximum short-term borrowings from all sources during the first nine months of the current year were $50,000,000. The Company anticipates continued use and availability of both committed and uncommitted short-term borrowing resources as working capital needs may require. The Company expects to continue to purchase shares of its common stock on the open market and in negotiated trades as conditions and opportunities warrant. The Company will also consider possible acquisitions of apparel- related businesses that are compatible with its long-term strategies. There are no present plans to borrow additional long-term funds, sell securities, or enter into off-balance sheet financing arrangements. 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------ (a) Exhibits. --------- 11 Statement re computation of per share earnings. (b) Reports on Form 8-K. -------------------- The Registrant did not file any reports on Form 8-K during the quarter ended February 25, 1994. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OXFORD INDUSTRIES, INC. ----------------------- (Registrant) /s/R. William Lee, Jr. -------------------------- Date: April 11, 1994 R. William Lee, Jr. --------------- Executive Vice President /s/Debra A. Pauli -------------------------- Date: April 11, 1994 Debra A. Pauli --------------- Controller (Chief Accounting Officer) 12 INDEX OF EXHIBITS EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NUMBER - ---------------------------------------------------- ---------- 11 Statement re computation of per share earnings 13
12 EXHIBIT 11 OXFORD INDUSTRIES, INC. COMPUTATION OF PER SHARE EARNINGS NINE MONTHS AND QUARTERS ENDED FEBRUARY 25, 1994 AND FEBRUARY 26, 1993 (UNAUDITED) Nine Months Ended Quarter Ended --------------------------------------------------------- February 25, February 26, February 25, February 26, 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Net Earnings $14,285,000 $11,190,000 $4,474,000 $3,459,000 Average Number of Shares Outstanding: Primary 8,791,693 8,878,100 8,806,881 8,874,627 Fully Diluted 8,815,537 8,888,380 8,832,192 8,874,627 As Reported* 8,596,912 8,689,263 8,605,122 8,672,059 Net Earnings per Common Share: Primary $1.62 $1.26 $0.50 $0.39 Fully Diluted $1.62 $1.26 $0.50 $0.39 As Reported* $1.66 $1.29 $0.52 $0.40 - ----------------------------- * Common stock equivalents (which arise solely from outstanding stock options) are not materially dilutive and, accordingly, have not been considered in the computation of net earnings per common share.