UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 31, 2011

 

Oxford Industries, Inc.

(Exact name of registrant as specified in its charter)

 

Georgia

 

001-04365

 

58-0831862

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

222 Piedmont Avenue, N.E., Atlanta, GA

 

30308

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (404) 659-2424

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02

Results of Operations and Financial Condition.

 

On August 31, 2011, Oxford Industries, Inc. issued a press release announcing, among other things, its financial results for the second quarter of fiscal 2011, which ended on July 30, 2011. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information contained in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
Number

 

 

99.1

 

Press Release of Oxford Industries, Inc., dated August 31, 2011.

 

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.

 

 

 

OXFORD INDUSTRIES, INC.

 

 

 

 

August 31, 2011

/s/ Thomas C. Chubb III

 

Name:

Thomas C. Chubb III

 

Title:

President

 

2


Exhibit 99.1

 

Oxford Industries, Inc. Press Release

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

 

Contact:

Anne M. Shoemaker

Telephone:

(404) 653-1455

Fax:

(404) 653-1545

E-Mail:

ashoemaker@oxfordinc.com

 

 

FOR IMMEDIATE RELEASE

 

August 31, 2011

 

Oxford Industries Reports Second Quarter Results

 

Sales increase 26% on inclusion of Lilly Pulitzer, growth in Tommy Bahama —

Adjusted operating margin improves 190 basis points on improved sales mix and leverage —

— Adjusted EPS of $0.57 stronger than expected, Company increases full year guidance —

 

ATLANTA, GA — Oxford Industries, Inc. (NYSE:OXM) today announced financial results for its fiscal 2011 second quarter, which ended July 30, 2011. Consolidated net sales were $180.6 million in the second quarter of fiscal 2011 compared to $143.0 million in the second quarter of fiscal 2010. On an adjusted basis, earnings from continuing operations per diluted share were $0.57 compared to $0.32 in the second quarter of fiscal 2010. The adjusted earnings per share exclude the impact of the repurchase of a portion of the Company’s senior secured notes, purchase accounting charges and LIFO accounting adjustments. The Company noted that operating results for Lilly Pulitzer, which was acquired in December 2010, were not included in the Company’s prior year results.

 

On a U.S. GAAP basis, earnings from continuing operations per diluted share were $0.21 in the second quarter of fiscal 2011 compared to $0.28 in the same period of the prior year. For reference, tables reconciling U.S. GAAP to adjusted measures are included at the end of this release.

 

J. Hicks Lanier, Chairman and Chief Executive Officer, commented, “We are very pleased with the outstanding results we achieved during the second quarter which were driven by especially strong performances from our Tommy Bahama and Lilly Pulitzer businesses. Our direct to consumer business continued to deliver growth in both top-line revenue and margins. We were also pleased to have used excess cash to significantly reduce our outstanding debt and interest expense while maintaining a high level of liquidity which ensures that we will have ample financial flexibility going forward.”

 

Mr. Lanier concluded, “As we enter the second half of the year we are mindful of the macroeconomic uncertainty, but we are confident in the strength of our brands and the capability of our management team.”

 

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Operating Results

 

Tommy Bahama reported strong results with increases in both sales and operating income. Net sales for the second quarter of fiscal 2011 were $109.1 million compared to $99.3 million in the second quarter of fiscal 2010. The increase in net sales was attributable to higher retail sales, including improved comparable store sales and revenues associated with four additional retail stores, as well as growth in e-commerce sales. At the end of the second quarter, Tommy Bahama operated 90 retail stores compared to 86 on July 31, 2010.

 

Tommy Bahama’s operating income for the second quarter was $17.0 million compared to $14.2 million in the second quarter of fiscal 2010. The increase in operating income was due to higher sales and higher gross margins associated with an increased proportion of direct to consumer sales. These increases were partially offset by increased SG&A associated with the costs of operating the four additional retail stores and higher compensation costs.

 

Lilly Pulitzer continued its outstanding Spring/Summer season with increased sales in all channels of distribution including wholesale, retail and e-commerce. Lilly Pulitzer reported net sales of $24.8 million and operating income of $5.6 million for the second quarter of fiscal 2011. The Company noted that operating income was negatively impacted by a $0.6 million charge related to the change in the fair value of contingent consideration.

 

Ben Sherman reported net sales of $20.9 million for the second quarter of fiscal 2011 compared to $18.3 million in the second quarter of fiscal 2010. The increase was primarily due to the impact of currency exchange rate changes between the United States dollar and the British pound sterling. Ben Sherman reported an operating loss of $1.8 million in the second quarter of fiscal 2011 compared to an operating loss of $0.6 million in the second quarter of fiscal 2010. The lower operating results were primarily due to increased product sourcing costs.

 

Net sales for Lanier Clothes were $22.9 million in the second quarter of fiscal 2011, slightly ahead of the $22.7 million reported in the second quarter of fiscal 2010. Operating income in the second quarter of fiscal 2011 was $2.3 million compared to operating income of $2.8 million in the second quarter of fiscal 2010, with the decrease primarily due to higher SG&A.

 

Corporate and Other reported an operating loss of $5.4 million for the second quarter of fiscal 2011 compared to an operating loss of $5.2 million in the second quarter of fiscal 2010. Decreases in LIFO accounting charges were offset by higher incentive compensation costs.

 

Consolidated gross margins for the second quarter of fiscal 2011 increased by 170 basis points to 57.0% compared to 55.3% in the second quarter of fiscal 2010. Gross margins improved as a result of changes in the sales mix with the inclusion of the Lilly Pulitzer

 

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operating results, the increased proportion of direct to consumer sales at Tommy Bahama and the net impact of LIFO accounting. These increases were partially offset by lower gross margins in Ben Sherman due to increased product sourcing costs.

 

SG&A for the second quarter of fiscal 2011 was $88.3 million, or 48.9% of net sales, compared to $71.3 million, or 49.9% of net sales, in the second quarter of fiscal 2010.  The improvement in SG&A as a percentage of sales was primarily due to operating leverage gained on the higher sales base. The increase in total SG&A was primarily due to expenses associated with the inclusion of the Lilly Pulitzer business, higher incentive compensation costs and expenses associated with operating additional Tommy Bahama retail stores.

 

Royalties and other operating income for the second quarter of fiscal 2011 were $4.0 million compared to $3.7 million in the second quarter of fiscal 2010. The increase in royalties and other operating income was primarily due to royalty income associated with Lilly Pulitzer.

 

In May 2011, the Company repurchased, in a privately negotiated transaction, $40.0 million in aggregate principal amount of its 11.375% Senior Secured Notes due 2015 for $46.6 million, plus accrued interest, using cash on hand. The repurchase of the 11.375% Senior Secured Notes and related non-cash write-off of approximately $1.6 million of unamortized deferred financing costs and discount resulted in a loss of approximately $8.2 million.

 

Interest expense for the second quarter of fiscal 2011 was $4.3 million compared to $5.1 million in the second quarter of fiscal 2010. The decrease in interest expense was primarily due to the repurchase of the $40.0 million in aggregate principal amount of the Company’s 11.375% Senior Secured Notes.

 

For the first half of fiscal 2011, consolidated net sales grew 26.9% to $389.0 million compared to $306.6 million in the first half of fiscal 2010. Adjusted earnings per share from continuing operations almost doubled to $1.64 compared to $0.87 in the first half of fiscal 2010. On a U.S. GAAP basis, diluted net earnings per share from continuing operations were $1.25 compared to $0.80 in the first half of fiscal 2010.

 

Balance Sheet and Liquidity

 

Total inventories at the close of the second quarter of fiscal 2011 were $77.7 million, compared to $57.2 million at the close of the second quarter of fiscal 2010. The increase in inventory levels was primarily due to the addition of Lilly Pulitzer inventory and an increase at Tommy Bahama to support anticipated sales and additional retail stores. Receivables increased to $53.9 million at quarter end compared to $45.5 million at the end of last year’s second quarter primarily due to the addition of Lilly Pulitzer receivables.

 

After completion of the repurchase of notes described above, $110.0 million aggregate principal amount of 11.375% Senior Secured Notes remain outstanding. As of July 30,

 

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2011, the Company had no borrowings outstanding under its U.S. revolving credit facility and $37.8 million of cash and cash equivalents.

 

The Company’s capital expenditures for fiscal 2011, including $12.7 million incurred during the first half of fiscal 2011, are expected to be approximately $35 million. These expenditures will consist primarily of additional retail stores, retail store remodeling, information technology investments and distribution center enhancements.

 

Fiscal 2011 Outlook

 

For fiscal 2011, the Company now expects adjusted earnings from continuing operations per diluted share in a range of $2.20 to $2.30 and net sales of $735 to $750 million. This compares to the Company’s prior guidance of $2.15 to $2.25 in adjusted earnings from continuing operations per diluted share and net sales of $730 to $745 million.

 

For the third quarter, ending on October 29, 2011, the Company anticipates net sales in a range from $160 to $170 million and adjusted earnings from continuing operations per diluted share of $0.10 to $0.15. Because of the impact of seasonality to the Company’s business, sales and earnings in the third quarter are lower than other quarters.

 

Dividend

 

The Company also announced that its Board of Directors has approved a cash dividend of $0.13 per share payable on October 28, 2011 to shareholders of record as of the close of business on October 14, 2011. The Company has paid dividends every quarter since it became publicly owned in 1960.

 

Conference Call

 

The Company will hold a conference call with senior management to discuss its financial results at 4:30 p.m. EDT today. A live web cast of the conference call will be available on the Company’s website at www.oxfordinc.com. Please visit the website at least 15 minutes before the call to register for the teleconference web cast and download any necessary software. A replay of the call will be available through September 14, 2011.  To access the telephone replay, participants should dial (858) 384-5517. The access code for the replay is 4786833. A replay of the web cast will also be available following the teleconference on the Company’s website at www.oxfordinc.com.

 

About Oxford

 

Oxford Industries, Inc. is an international apparel design, sourcing and marketing company featuring a diverse portfolio of owned and licensed brands. Oxford’s brands include Tommy Bahama®, Lilly Pulitzer®, Ben Sherman®, Oxford Golf®, Arnold Brant® and Billy London®. The Company also holds exclusive licenses to produce and sell

 

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certain product categories under the Kenneth Cole®, Geoffrey Beene®, Dockers® and Ike Behar® labels. The Company operates retail stores, restaurants and Internet websites. The Company also has license arrangements with select third parties to produce and sell certain product categories under its Tommy Bahama, Lilly Pulitzer and Ben Sherman brands. Oxford’s wholesale customers include department stores, specialty stores, national chains, specialty catalogs and Internet retailers. Oxford’s stock has traded on the New York Stock Exchange since 1964 under the symbol OXM. For more information, please visit Oxford’s website at www.oxfordinc.com.

 

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

 

This press release may include statements that are forward-looking statements within the meaning of the federal securities laws. 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 forward-looking statements contained herein or on 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 the impact of economic conditions on consumer demand and spending, particularly in light of general economic uncertainty that continues to prevail, demand for our products, timing of shipments requested by our wholesale customers, expected pricing levels, competitive conditions, the timing and cost of planned capital expenditures, costs of products and raw materials we purchase, costs of labor, access to capital and/or credit markets, acquisition and disposition activities, expected outcomes of pending or potential litigation and regulatory actions and disciplined execution by key management. 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, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, 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. contained in our Annual Report on Form 10-K for the period ended January 29, 2011 under the heading “Risk Factors” and those described from time to time in our future reports filed with the SEC.

 

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

 

 

 

Second
Quarter
Fiscal

2011

 

Second
Quarter
Fiscal
2010

 

First
Half
Fiscal
2011

 

First
Half
Fiscal
 2010

 

Net sales

 

$

180,646

 

$

142,981

 

$

388,954

 

$

306,606

 

Cost of goods sold

 

77,709

 

63,963

 

168,357

 

137,881

 

Gross profit

 

102,937

 

79,018

 

220,597

 

168,725

 

SG&A

 

88,348

 

71,324

 

179,188

 

149,333

 

Amortization of intangible assets

 

300

 

238

 

598

 

478

 

Change in fair value of contingent consideration

 

600

 

 

1,200

 

 

 

 

89,248

 

71,562

 

180,986

 

149,811

 

Royalties and other operating income

 

4,022

 

3,723

 

8,813

 

7,236

 

Operating income

 

17,711

 

11,179

 

48,424

 

26,150

 

Interest expense, net

 

4,268

 

5,053

 

9,072

 

10,020

 

Loss on repurchase of 11.375% Senior Secured Notes

 

8,248

 

 

8,248

 

 

Earnings from continuing operations before income taxes

 

5,195

 

6,126

 

31,104

 

16,130

 

Income taxes

 

1,675

 

1,447

 

10,524

 

2,927

 

Earnings from continuing operations

 

3,520

 

4,679

 

20,580

 

13,203

 

 

 

 

 

 

 

 

 

 

 

Earnings from discontinued operations, net of taxes

 

(916

)

2,540

 

124

 

6,513

 

Net earnings

 

$

2,604

 

$

7,219

 

$

20,704

 

$

19,716

 

Earnings from continuing operations, net of taxes per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.21

 

$

0.28

 

$

1.25

 

$

0.80

 

Diluted

 

$

0.21

 

$

0.28

 

$

1.25

 

$

0.80

 

Earnings from discontinued operations, net of taxes per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.06

)

$

0.15

 

$

0.01

 

$

0.39

 

Diluted

 

$

(0.06

)

$

0.15

 

$

0.01

 

$

0.39

 

Net earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.44

 

$

1.25

 

$

1.19

 

Diluted

 

$

0.16

 

$

0.44

 

$

1.25

 

$

1.19

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

16,514

 

16,540

 

16,514

 

16,515

 

Dilution

 

17

 

12

 

15

 

12

 

Diluted

 

16,531

 

16,552

 

16,529

 

16,527

 

Dividends declared per common share

 

$

0.13

 

$

0.11

 

$

0.26

 

$

0.22

 

 

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par amounts)

 

 

 

July 30,
2011

 

January 29, 
2011

 

July 31,
2010

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,775

 

$

44,094

 

$

28,171

 

Receivables, net

 

53,902

 

50,177

 

45,545

 

Inventories, net

 

77,731

 

85,338

 

57,227

 

Prepaid expenses, net

 

16,337

 

12,554

 

15,213

 

Deferred tax assets

 

17,258

 

19,005

 

15,384

 

Assets related to discontinued operations, net

 

508

 

57,745

 

55,853

 

Total current assets

 

203,511

 

268,913

 

217,393

 

Property and equipment, net

 

86,889

 

83,895

 

72,923

 

Intangible assets, net

 

166,826

 

166,680

 

136,226

 

Goodwill

 

16,555

 

16,866

 

 

Other non-current assets, net

 

19,790

 

22,117

 

16,213

 

Total Assets

 

$

493,571

 

$

558,471

 

$

442,755

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Trade accounts payable and other accrued expenses

 

$

76,877

 

$

83,211

 

$

63,467

 

Accrued compensation

 

19,740

 

23,095

 

15,775

 

Short-term debt and current maturities of long-term debt

 

4,406

 

 

1,195

 

Liabilities related to discontinued operations

 

1,362

 

40,785

 

19,272

 

Total current liabilities

 

102,385

 

147,091

 

99,709

 

Long-term debt, less current maturities

 

108,088

 

147,065

 

146,736

 

Other non-current liabilities

 

54,169

 

55,441

 

46,400

 

Non-current deferred income taxes

 

30,322

 

28,846

 

28,143

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Common stock, $1.00 par value per common share

 

16,529

 

16,511

 

16,561

 

Additional paid-in capital

 

97,641

 

96,597

 

94,442

 

Retained earnings

 

107,160

 

90,739

 

35,437

 

Accumulated other comprehensive loss

 

(22,723

)

(23,819

)

(24,673

)

Total shareholders’ equity

 

198,607

 

180,028

 

121,767

 

Total Liabilities and Shareholders’ Equity

 

$

493,571

 

$

558,471

 

$

442,755

 

 

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

First Half
Fiscal 2011

 

First Half
Fiscal 2010

 

Cash Flows From Operating Activities:

 

 

 

 

 

Earnings from continuing operations

 

$

20,580

 

$

13,203

 

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

9,838

 

8,624

 

Amortization of intangible assets

 

598

 

478

 

Change in fair value of contingent consideration

 

1,200

 

 

Amortization of deferred financing costs and bond discount

 

906

 

977

 

Loss on repurchase of 11.375% Senior Secured Notes

 

8,248

 

 

Stock compensation expense

 

1,476

 

2,584

 

Loss on sale of property and equipment

 

22

 

(13

)

Deferred income taxes

 

3,040

 

(1,587

)

Changes in working capital, net of acquisitions and dispositions:

 

 

 

 

 

Receivables

 

(3,394

)

(1,272

)

Inventories

 

8,042

 

611

 

Prepaid expenses

 

(3,696

)

(4,758

)

Current liabilities

 

(12,215

)

1,665

 

Other non-current assets

 

1,502

 

519

 

Other non-current liabilities

 

(2,487

)

(3,054

)

Net cash provided by operating activities

 

33,660

 

17,977

 

Cash Flows From Investing Activities:

 

 

 

 

 

Purchases of property and equipment

 

(12,726

)

(3,370

)

Other

 

(398

)

99

 

Net cash used in investing activities

 

(13,124

)

(3,271

)

Cash Flows From Financing Activities:

 

 

 

 

 

Repayment of revolving credit arrangements

 

(18,309

)

(33,925

)

Proceeds from revolving credit arrangements

 

22,670

 

35,097

 

Repurchase of 11.375% Senior Secured Notes

 

(46,600

)

 

Proceeds from issuance of common stock

 

1,413

 

230

 

Dividends on common stock

 

(4,285

)

(3,638

)

Net cash used in financing activities

 

(45,111

)

(2,236

)

Cash Flows from Discontinued Operations:

 

 

 

 

 

Net operating cash flows provided by discontinued operations

 

14,313

 

7,559

 

Net investing cash flows provided by (used in) discontinued operations

 

3,744

 

(21

)

Net cash provided by discontinued operations

 

18,057

 

7,538

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(6,518

)

20,008

 

Effect of foreign currency translation on cash and cash equivalents

 

199

 

(125

)

Cash and cash equivalents at the beginning of year

 

44,094

 

8,288

 

Cash and cash equivalents at the end of the period

 

$

37,775

 

$

28,171

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest, net, including interest paid for discontinued operations

 

$

8,534

 

$

9,114

 

Cash paid for income taxes, including income taxes paid for discontinued operations

 

$

38,103

 

$

14,762

 

 

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OXFORD INDUSTRIES, INC.

OPERATING GROUP INFORMATION

(UNAUDITED)

(in thousands)

 

 

 

Second
Quarter
Fiscal 2011

 

Second
Quarter

Fiscal 2010

 

First
Half
Fiscal 2011

 

First
Half
Fiscal 2010

 

Net Sales

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$

109,143

 

$

99,349

 

$

232,046

 

$

208,454

 

Lilly Pulitzer

 

24,823

 

 

54,696

 

 

Ben Sherman

 

20,893

 

18,346

 

40,314

 

40,500

 

Lanier Clothes

 

22,942

 

22,736

 

55,915

 

53,164

 

Corporate and Other

 

2,845

 

2,550

 

5,983

 

4,488

 

Total

 

$

180,646

 

$

142,981

 

$

388,954

 

$

306,606

 

Operating Income

 

 

 

 

 

 

 

 

 

Tommy Bahama

 

$

16,987

 

$

14,172

 

$

40,757

 

$

32,033

 

Lilly Pulitzer

 

5,612

 

 

12,627

 

 

Ben Sherman

 

(1,756

)

(598

)

(2,582

)

(76

)

Lanier Clothes

 

2,263

 

2,809

 

6,988

 

7,168

 

Corporate and Other

 

(5,395

)

(5,204

)

(9,366

)

(12,975

)

Total Operating Income

 

$

17,711

 

$

11,179

 

$

48,424

 

$

26,150

 

 

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RECONCILIATION OF CERTAIN OPERATING RESULTS INFORMATION PRESENTED IN ACCORDANCE WITH U.S. GAAP TO CERTAIN OPERATING RESULTS INFORMATION,

AS ADJUSTED

 

Set forth below is our reconciliation of certain operating results information, presented in accordance with generally accepted accounting principles, or U.S. GAAP, to the operating results information, as adjusted, for certain historical periods. We believe that investors often look at ongoing operations as a measure of assessing performance and as a basis for comparing past results against future results. Therefore, we believe that presenting our operating results, as adjusted, provides useful information to investors because this allows investors to make decisions based on our ongoing operations. We use the operating results, as adjusted, to discuss our business with investment institutions, our board of directors and others. Further, we believe that presenting our results, as adjusted, provides useful information to investors because this allows investors to compare our results for the periods presented to other periods.

 

 

 

Second 
Quarter

Fiscal 
2011

 

Second 
Quarter

Fiscal 
2010

 

First
Half
Fiscal 
2011

 

First
Half
Fiscal 
2010

 

 

 

(in thousands, except per share amounts)

 

As reported

 

 

 

 

 

 

 

 

 

Net sales

 

$

180,646

 

$

142,981

 

$

388,954

 

$

306,606

 

Gross profit

 

$

102,937

 

$

79,018

 

$

220,597

 

$

168,725

 

Gross margin (1)

 

57.0

%

55.3

%

56.7

%

55.0

%

Operating income

 

$

17,711

 

$

11,179

 

$

48,424

 

$

26,150

 

Operating margin (2)

 

9.8

%

7.8

%

12.4

%

8.5

%

Earnings from continuing operations before income taxes

 

$

5,195

 

$

6,126

 

$

31,104

 

$

16,130

 

Earnings from continuing operations

 

$

3,520

 

$

4,679

 

$

20,580

 

$

13,203

 

Diluted earnings from continuing operations per common share

 

$

0.21

 

$

0.28

 

$

1.25

 

$

0.80

 

Weighted average common shares outstanding — diluted

 

16,531

 

16,552

 

16,529

 

16,527

 

Increase/(decrease) in earnings from continuing operations

 

 

 

 

 

 

 

 

 

LIFO accounting impact on gross profit (3)

 

$

388

 

$

976

 

$

(214

)

$

1,627

 

Purchase accounting charges:

 

 

 

 

 

 

 

 

 

Inventory write-up cost impacting gross profit (4)

 

$

 

$

 

$

996

 

$

 

Change in fair value of contingent consideration impacting operating income (5)

 

$

600

 

$

 

$

1,200

 

$

 

Loss on repurchase of 11.375% Senior Secured Notes (6)

 

$

8,248

 

$

 

$

8,248

 

$

 

Impact of income taxes (7)

 

$

(3,348

)

$

(312

)

$

(3,686

)

$

(520

)

Adjustment to earnings from continuing operations

 

$

5,888

 

$

664

 

$

6,544

 

$

1,107

 

As adjusted

 

 

 

 

 

 

 

 

 

Gross profit

 

$

103,325

 

$

79,994

 

$

221,379

 

$

170,352

 

Gross margin (1)

 

57.2

%

55.9

%

56.9

%

55.6

%

Operating income

 

$

18,699

 

$

12,155

 

$

50,406

 

$

27,777

 

Operating margin (2)

 

10.4

%

8.5

%

13.0

%

9.1

%

Earnings from continuing operations before income taxes

 

$

14,431

 

$

7,102

 

$

41,334

 

$

17,757

 

Earnings from continuing operations

 

$

9,408

 

$

5,343

 

$

27,124

 

$

14,310

 

Diluted earnings from continuing operations per common share

 

$

0.57

 

$

0.32

 

$

1.64

 

$

0.87

 

 

(More)

 



 

NOTES TO RECONCILIATION OF CERTAIN OPERATING RESULTS INFORMATION PRESENTED IN ACCORDANCE WITH U.S. GAAP TO CERTAIN OPERATING RESULTS INFORMATION, AS ADJUSTED

 


(1)

Gross margin is calculated as gross profit, as a percentage of net sales.

(2)

Operating margin is calculated as operating income, as a percentage of net sales.

(3)

LIFO accounting reflects the net impact on cost of goods sold in Corporate and Other resulting from LIFO accounting in each period.

(4)

Inventory write-up cost included in cost of goods sold includes the impact of purchase accounting adjustments resulting from the write-up of inventory at acquisition related to the December 2010 acquisition of Lilly Pulitzer, which is recognized in our statement of operations as the acquired inventory is sold. No additional amounts related to the inventory write-up are expected to be incurred in periods subsequent to the first quarter of fiscal 2011 as the entire $1.8 million recognized at acquisition has been expensed during the fourth quarter of fiscal 2010 and the first quarter of fiscal 2011. These charges were reflected in the Lilly Pulitzer operating group results of operations.

(5)

Change in fair value of contingent consideration reflects the statement of operations impact resulting from the change in fair value of contingent consideration pursuant to the earnout agreement with the sellers of Lilly Pulitzer. Pursuant to the purchase method of accounting, the fair value of contingent consideration, if any, is reflected in the opening balance sheet of the acquired company. This amount must be reassessed periodically and recorded at fair value. Changes in the estimated fair value of the contingent consideration, if any, is recognized in the statement of operations. The fair value is based on assumptions regarding the probability of the payment of the $20 million of contingent consideration, cash flows of the Lilly Pulitzer operations and discount rates, among other factors. Change in fair value of contingent consideration is expected to be recorded with the passage of time as the payment date of the contingent consideration approaches. Additionally, change in the fair value of contingent consideration will be recognized periodically as an increase or decrease in the expense as more information about certain assumptions included in the fair value calculation is obtained.

(6)

Loss on repurchase of 11.375% Senior Secured Notes reflects the loss attributable to the repurchase of $40.0 million aggregate principal amount of 11.375% Senior Secured Notes, including a $6.6 million premium on repurchase and a $1.6 million write-off of unamortized deferred financing costs and discount.

(7)

Impact of income taxes reflects the estimated net income tax impact of the adjustments above.

 

(More)

 



 

RECONCILIATION OF OPERATING INCOME (LOSS), IN ACCORDANCE WITH U.S. GAAP TO OPERATING INCOME (LOSS), AS ADJUSTED

 

Set forth below are our reconciliations, in thousands, of operating income (loss) for each operating group and in total, calculated in accordance with U.S. GAAP, to operating income (loss), as adjusted for certain historical periods. We believe that investors often look at ongoing operating group operating income (loss) as a measure of assessing performance and as a basis for comparing past results against future results. Therefore, we believe that presenting our operating income (loss), as adjusted, provides useful information to investors because this allows investors to make decisions based on our ongoing operating group results. We use the operating income (loss), as adjusted, to discuss our operating groups with investment institutions, our board of directors and others. Further, we believe that presenting our operating results, as adjusted, provides useful information to investors because this allows investors to compare our operating group operating income (loss) for the periods presented to other periods.

 

 

 

Second Quarter of Fiscal 2011

 

 

 

(in thousands)

 

 

 

Operating income 
(loss), as reported

 

LIFO accounting 
adjustments

 

Purchase 
accounting 
adjustments

 

Operating income 
(loss), as adjusted

 

 

 

 

 

(1)

 

(2)

 

 

 

Tommy Bahama

 

$

16,987

 

$

 

$

 

$

16,987

 

Lilly Pulitzer

 

5,612

 

 

600

 

6,212

 

Ben Sherman

 

(1,756

)

 

 

(1,756

)

Lanier Clothes

 

2,263

 

 

 

2,263

 

Corporate and Other

 

(5,395

)

388

 

 

(5,007

)

Total

 

$

17,711

 

$

388

 

$

600

 

$

18,699

 

 

 

 

Second Quarter of Fiscal 2010

 

 

 

(in thousands)

 

 

 

Operating income 
(loss), as reported

 

LIFO accounting 
adjustments

 

Operating income 
(loss), as adjusted

 

 

 

 

 

(1)

 

 

 

Tommy Bahama

 

$

14,172

 

$

 

$

14,172

 

Lilly Pulitzer

 

 

 

 

Ben Sherman

 

(598

)

 

(598

)

Lanier Clothes

 

2,809

 

 

2,809

 

Corporate and Other

 

(5,204

)

976

 

(4,228

)

Total

 

$

11,179

 

$

976

 

$

12,155

 

 

(More)

 



 

 

 

First Half of Fiscal 2011

 

 

 

(in thousands)

 

 

 

Operating income 
(loss), as reported

 

LIFO accounting 
adjustments

 

Purchase 
accounting 
adjustments

 

Operating income 
(loss), as adjusted

 

 

 

 

 

(1)

 

(2)

 

 

 

Tommy Bahama

 

$

40,757

 

$

 

$

 

$

40,757

 

Lilly Pulitzer

 

12,627

 

 

2,196

 

14,823

 

Ben Sherman

 

(2,582

)

 

 

(2,582

)

Lanier Clothes

 

6,988

 

 

 

6,988

 

Corporate and Other

 

(9,366

)

(214

)

 

(9,580

)

Total

 

$

48,424

 

$

(214

)

$

2,196

 

$

50,406

 

 

 

 

First Half of Fiscal 2010

 

 

 

(in thousands)

 

 

 

Operating income 
(loss), as reported

 

LIFO accounting 
adjustments

 

Operating income 
(loss), as adjusted

 

 

 

 

 

(1)

 

 

 

Tommy Bahama

 

$

32,033

 

$

 

$

32,033

 

Lilly Pulitzer

 

 

 

 

Ben Sherman

 

(76

)

 

(76

)

Lanier Clothes

 

7,168

 

 

7,168

 

Corporate and Other

 

(12,975

)

1,627

 

(11,348

)

Total

 

$

26,150

 

$

1,627

 

$

27,777

 

 


(1)

LIFO accounting adjustments reflect the impact of all LIFO accounting adjustments recorded during the period.

(2)

Purchase accounting adjustments consist of the $1.0 million cost of goods sold charge related to the write-up of inventory and $1.2 million of change in fair value of contingent consideration, both of which are included in Lilly Pulitzer. Both of these charges resulted from the application of the purchase method of accounting to the Lilly Pulitzer acquisition on December 21, 2010.

 

(More)

 



 

RECONCILIATION OF EARNINGS FROM CONTINUING OPERATIONS PER SHARE PRESENTED IN ACCORDANCE WITH U.S. GAAP TO EARNINGS FROM CONTINUING OPERATIONS PER SHARE, AS ADJUSTED

 

Set forth below is our reconciliation of reported earnings from continuing operations per diluted share for certain historical and future periods, each presented in accordance with generally accepted accounting principles, or U.S. GAAP, to the earnings per diluted share, as adjusted, for each respective period. We believe that investors often look at ongoing operations as a measure of assessing performance and as a basis for comparing past results against future results. Therefore, we believe that presenting our earnings per diluted share, as adjusted, provides useful information to investors because this allows investors to make decisions based on our ongoing operations. We use the earnings per diluted share, as adjusted, to discuss our business with investment institutions, our board of directors and others. Further, we believe that presenting earnings per diluted share, as adjusted, provides useful information to investors because this allows investors to compare our results for the periods presented to other periods. Note that columns may not add due to rounding.

 

 

 

Second
Quarter
Fiscal 2011

 

Second
Quarter
Fiscal 2011

 

Second
Quarter
Fiscal 2010

 

First
Half
Fiscal 2011

 

First
Half
Fiscal 2010

 

 

 

Actual

 

Guidance(1)

 

Actual

 

Actual

 

Actual

 

Earnings from continuing operations per diluted share:

 

 

 

 

 

 

 

 

 

 

 

U.S. GAAP basis

 

$0.21

 

$0.14 - $0.19

 

$0.28

 

$1.25

 

$0.80

 

Impact of purchase accounting (2)

 

$0.02

 

$0.02

 

 

$0.09

 

 

LIFO accounting adjustments (3)

 

$0.02

 

 

$0.04

 

($0.01)

 

$0.07

 

Loss on repurchase of 113/8% Senior Secured Notes (4)

 

$0.32

 

$0.32

 

 

$0.32

 

 

As adjusted

 

$0.57

 

$0.48 - $0.53

 

$0.32

 

$1.64

 

$0.87

 

 

 

 

Third
Quarter
Fiscal 2011

 

Third
Quarter
Fiscal 2010

 

Full
Year
Fiscal 2011

 

Full
Year
Fiscal 2010

 

 

 

Guidance (5)

 

Actual

 

Guidance (5)

 

Actual

 

Earnings from continuing operations per diluted share:

 

 

 

 

 

 

 

 

 

U.S. GAAP basis

 

$0.08 - $0.13

 

$0.08

 

$1.76 - $1.86

 

$0.98

 

Impact of purchase accounting (2)

 

$0.02

 

 

$0.13

 

$0.08

 

LIFO accounting adjustments (3)

 

 

($0.01)

 

($0.01)

 

$0.16

 

Loss on repurchase of 113/8% Senior Secured Notes (4)

 

 

 

$0.32

 

 

Restructuring and other charges (6)

 

 

 

 

$0.13

 

Change in estimate related to environmental reserve (7)

 

 

 

 

($0.09)

 

As adjusted

 

$0.10 - $0.15

 

$0.07

 

$2.20 - $2.30

 

$1.26

 

 

(More)

 



 

NOTES TO RECONCILIATION OF EARNINGS FROM CONTINUING OPERATIONS PER SHARE PRESENTED IN ACCORDANCE WITH U.S. GAAP TO EARNINGS FROM CONTINUING OPERATIONS PER SHARE, AS ADJUSTED

 


(1)

Second quarter fiscal 2011 guidance as issued on June 7, 2011.

(2)

Impact of purchase accounting reflects the impact, net of income taxes, on earnings from continuing operations per diluted share related to purchase accounting during each respective period. The purchase accounting adjustments reflect (a) a $0.6 million charge in each quarter of fiscal 2011 and $0.2 million in the fourth quarter of fiscal 2010, each related to the change in the fair value of contingent consideration, (b) additional cost of goods sold related to the purchase accounting write-up of acquired inventory of $1.0 million in the first quarter of fiscal 2011 and $0.8 million in the fourth quarter of fiscal 2010 and (c) $0.8 million of acquisition costs in the fourth quarter of fiscal 2010. The amounts ultimately recognized in the third quarter and fourth quarter of fiscal 2011 related to the change in fair value of contingent consideration may be materially different than these estimates depending upon our periodic assessment of the fair value of the contingent consideration.

(3)

LIFO accounting adjustments reflect the impact, net of income taxes, on earnings from continuing operations per diluted share related to LIFO accounting adjustments recorded during the historical periods. No estimate for future LIFO accounting adjustments are reflected in the guidance for any period presented.

(4)

The loss reflects the impact, net of income taxes, on earnings from continuing operations per diluted share related to the repurchase of $40 million aggregate principal amount of 11.375% Senior Secured Notes. The loss reflects payment of a $6.6 million premium on the repurchase and $1.6 million write-off of unamortized deferred financing costs and bond discount. The total loss from the repurchase of the 11.375% Senior Secured Notes was $8.2 million.

(5)

Third quarter fiscal 2011 and full year fiscal 2011 guidance as issued on August 31, 2011.

(6)

Restructuring and other charges reflects the impact, net of income taxes, on earnings from continuing operations per diluted share primarily related to Ben Sherman’s termination of certain retail store leases totaling $2.8 million and impairment of certain assets of $0.4 million each in fiscal 2010.

(7)

Change in estimate related to environmental reserve reflects the impact, net of income taxes, on earnings from continuing operations per diluted share related to a reduction in estimated costs to remediate a property with an existing environmental reserve liability.

 

(XXXX)