OXFORD INDUSTRIES, INC.
 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended May 28, 2004

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 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)
 
Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class   Name of each exchange on which registered

 
Common Stock, $1 par value   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE


(Title of Class)

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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes x  NO o

State the aggregate market value of the voting stock held by nonaffiliates of the Registrant: As of November 28, 2003, the aggregate market value of the voting stock held by nonaffiliates of the Registrant (based upon the closing price for the common stock on the New York Stock Exchange on that date) was approximately $449,820,000.

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

         
    Name of each Exchange   Number of shares outstanding
Title of each class
  on which registered
  as of August 6, 2004
Common Stock, $1 par value   NYSE   16,243,418

Documents incorporated by Reference

(1)   Sections of our Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004. (Incorporated in Part III of this Report).

 


 

PART I

Item 1. Business

BUSINESS AND PRODUCTS

Introduction and Background

Oxford Industries, Inc. was founded in 1942. We are a producer and marketer of branded and private label apparel for men, women and children. We provide retailers and consumers with a wide variety of apparel products and services to suit their individual needs.

Our brands include the following:

     
Tommy Bahama®
  Oxford Golf
Indigo Palms®
  Cattleman®
Island Soft®
  Cumberland Outfitters®
Ben Sherman®
  Ely®

We also hold exclusive licenses to produce and sell certain product categories under the following brands:

     
Tommy Hilfiger®
  Dockers®
Nautica®
  Cubavera®
Oscar de la Renta®
  Havanera®
Geoffrey Beene®
  Evisu®
Slates®
   

Tommy Hilfiger is licensed to us for men’s and women’s golf apparel, as well as men’s dress shirts. Nautica, Geoffrey Beene, Slates, Dockers, Cubavera, Havanera and Oscar de la Renta are all licensed for men’s tailored clothing. Evisu is licensed for men’s and women’s apparel and footwear.

Our customers are found in every major channel of distribution including:

     
National chains
  Department stores
Specialty catalogs
  Specialty stores
Mass merchants
  Internet retailers

Where we sell product under the same brand name to two or more customers, whether the brand is owned by us or a third party, we consider such sales to be “branded” sales. For example, we sell Tommy Bahama brand apparel to Nordstrom’s, Saks Fifth Avenue and many other customers. Where we sell product under a brand name exclusively to one customer, whether the brand is owned by us, the customer or a third party, we consider such sales to be “private label” sales. For example, we sell Mossimo® product only to Target Stores and consider such sales to be private label.

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Our business is operated through the following segments:

     
Segment
  Description of the Business
Menswear Group
  Produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportscoats, suit separates, walkshorts, golf apparel, jeans, swimwear, footwear and headwear.
 
   
Womenswear Group
  Produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear.
 
   
Tommy Bahama Group
  Produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture, and other products.

See Note “N” of “Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more details on each of our segments.

On June 13, 2003, we acquired all of the outstanding capital stock of Viewpoint International, Inc., which we operate as the Tommy Bahama Group. The purchase price for the Tommy Bahama Group consists of $240 million in cash, $10 million in our Common Stock and up to $75 million in contingent payments that are subject to the Tommy Bahama Group achieving certain performance targets. The $75 million in contingent payments may include, at the option of the selling stockholders during the first two years, up to $12.5 million in our Common Stock valued at $12.88 per share (see Note “O” of “Notes to Consolidated Financial Statements”). The transaction was financed by a $200 million private placement of senior notes completed on May 16, 2003 and a $275 million senior secured revolving credit facility closed on June 13, 2003.

On July 30, 2004, we acquired Ben Sherman Limited (“Ben Sherman”), which we operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The acquisition was financed with cash on hand and borrowings under our revolving credit facility. Founded in 1963, Ben Sherman has a long heritage as a modern, young men’s shirt brand that has evolved into an irreverent lifestyle brand for youthful thinking men and women.

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

We effected a two-for-one stock split in the form of a 100% stock dividend, payable December 1, 2003, to shareholders of record on November 17, 2003. Shareholders received one additional share of our common stock for each share of common stock held on the record date.

We are a Georgia corporation and our principal executive offices are located at 222 Piedmont Avenue, NE, Atlanta, Georgia 30308. Our telephone number is (404) 659-2424. Our website address is www.oxfordinc.com. Information on our website does not constitute part of this report.

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Our fiscal year ends on the Friday nearest May 31st. References to our fiscal years represent the following:

     
Fiscal Year
  Represents the 52 weeks ended
2004   May 28, 2004
2003   May 30, 2003
2002   May 31, 2002

SALES AND MARKETING

We sold our products to more than 8,000 active customers in fiscal 2004, fiscal 2003 and fiscal 2002. Our ten largest customers accounted for approximately 63%, 80%, and 72% of our net sales in fiscal 2004, fiscal 2003 and fiscal 2002, respectively. Our 50 largest customers accounted for 75%, 94% and 91% of our net sales in fiscal 2004, fiscal 2003 and fiscal 2002, respectively. The percentage of our net sales for our three largest customers in fiscal 2004, fiscal 2003 and fiscal 2002 are as follows:

                         
Customer
  Fiscal 2004
  Fiscal 2003
  Fiscal 2002
Target Corporation
    19 %     22 %     19 %
Wal-Mart Stores, Inc.
    11 %     15 %     13 %
Sears Roebuck & Co.*
    8 %     16 %     12 %

*   On June 17, 2002, Sears Roebuck & Co. acquired Lands’ End Inc., one of our major customers. All sales percentages have been recalculated to reflect the combination of these two customers.

We believe that our long-standing relationships with all of our major customers, including Target, Wal-Mart and Sears, are good.

We employ a sales force consisting of salaried and commissioned sales employees and independent commissioned sales representatives. We maintain apparel sales offices and showrooms in various locations, including Atlanta, New York, Hong Kong, Seattle and London. We also work with independent contractor sales representatives who maintain their own showrooms. Approximately 70% of our net sales in fiscal 2004 were generated by our salaried executives. The rest of our net sales are generated by independent contractor sales representatives. Substantially all net sales for fiscal 2004, fiscal 2003 and fiscal 2002 were to customers located within the United States.

Several of our product lines are designed and manufactured in anticipation of orders for sale to department and specialty stores and certain specialty chain and mail order customers. We make commitments for fabric and production in connection with these lines. In the case of imports, these commitments can be up to several months prior to the receipt of firm orders from customers. These lines include both popular and better price merchandise sold under brand and designer names or customers’ private labels. If orders do not materialize, we may incur expense to terminate our fabric and production commitments. This applies to branded and private label merchandise.

We work closely with many customers in the national chain and mass merchant tiers of distribution to develop product programs and secure orders prior to the commencement of production. The large volume orders typical in these tiers of distribution enable us to take advantage of relative

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efficiencies in planning raw materials purchasing and utilization of production facilities. These programs generally relate to private label merchandise.

As is customary in our industry, we carry necessary levels of inventory to meet anticipated delivery requirements of our customers. Also, as is customary in our industry, we extend credit terms to our customers, the majority of which range from 30 to 60 days.

MANUFACTURING, RAW MATERIALS, SOURCES OF SUPPLY AND LOGISTICS

Manufacturing and Raw Materials

We manufacture our products in our owned manufacturing facilities, through our joint venture partners and by sourcing these products from third party producers. In fiscal 2004, we manufactured approximately 11% of our products in our owned offshore manufacturing facilities and we sourced approximately 86% from our offshore joint ventures and third party producers with the balance being from domestic sources. We use numerous independent manufacturers, principally in Latin America and Asia, for the production and finishing of our garments. We typically conduct business with our producers on an order-by-order basis. Our manufacturing facilities, joint ventures and third party producers perform cutting, sewing and related operations to produce finished apparel products to the specifications and quality standards approved by us in advance. We inspect fabric and finished goods throughout the manufacturing process as part of our quality control program to ensure that consumers receive products that meet our high standards.

The use of third party producers enables us to reduce working capital relating to work-in-process inventories. In order to place orders and monitor production, we maintain buying offices in Hong Kong and Singapore. We monitor production in our offshore manufacturing locations by sending employees from our Hong Kong and Singapore offices, sending employees from the United States, employing local nationals and using unaffiliated buying agents. In any given offshore location, we may use one or more of these methods of monitoring production.

We are able to maintain a stable, efficient and flexible manufacturing network by having sufficient owned manufacturing facilities and contract facilities for which we are the primary or only customer and have substantial control of the facility’s capacity to cover our core, ongoing production needs. This core manufacturing capacity is supplemented by an extensive network of contract manufacturers for which we are not the primary customer. This second tier of manufacturing capacity enables us to handle short term increases in demand for production created by the seasonality of our business in certain products or large unexpected orders, products that require manufacturing capabilities not present in our core manufacturing such as leather or down-filled jackets and other manufacturing demand that cannot be met by our core capacity.

Package purchases are purchases which include both raw materials and cut and sew labor. We do not take ownership of package purchases until the goods are shipped. Cut-Make-Trim (CMT) contract purchases are purchases in which we supply the raw materials and purchase cut and sew labor from third party producers. In CMT purchases, we retain ownership of the raw materials throughout the manufacturing and finishing process. For fiscal 2004, package purchases represented 77% of sourced units and CMT purchases represented 23% of sourced units. These manufacturing and finishing facilities are assessed no less than once per year.

We require all third party producers who manufacture or finish products for us to abide by a stringent code of conduct that sets guidelines for employment practices such as wages and benefits,

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working hours, health and safety, working age and disciplinary practices, and for environmental, ethical and legal matters. We regularly assess manufacturing and finishing facilities to ensure that they are complying with our code of conduct. Our program includes periodic on-site facility inspections and continuous improvement activities. We also hire independent monitors to supplement our efforts. For information regarding long-lived assets, see Note “N” to “Consolidated Financial Statements.”

Sources of Supply

Our products are manufactured from cotton, linen, wool, silk, other natural fibers, synthetics and blends of these materials. The majority of the materials used in our manufacturing operations are purchased in the form of woven or knitted finished fabrics directly from numerous offshore fabric mills or from intermediary firms that purchase unfinished or “gray” fabric from mills and then re-sell such fabric after dyeing and finishing it. In addition, many of our buttons, zippers, thread and other trim items are also purchased from offshore suppliers. We do not have long-term raw materials contracts with any of our principal suppliers.

We regard our access to offshore sources of raw materials, finished goods and outside production as adequate for our needs. We are not dependent on any single source or third party producer. No single supplier or third party producer accounts for a material portion of our purchases or business. Alternative competitive sources are available, and we do not anticipate significant difficulty in meeting our supply and outside production requirements. There are occasions, however, where we are unable to take customer orders on short notice because of the minimum lead time required to produce a garment that is acceptable to the customer with respect to cost, quantity, quality and service. We are unable to quantify the value of potential orders declined due to the inability to meet the required lead time. We believe that our required lead times are competitive by industry standards.

Logistics

We operate eight dedicated distribution centers in the United States and we also outsource distribution activities to third party logistics providers. Distribution center activities include receiving finished goods from our plants and contractors, inspecting those products and shipping them to our customers. We continually explore opportunities in all of our regions to improve efficiencies in both our in-bound and out-bound logistics activities.

INTELLECTUAL PROPERTY

Brands

We position our apparel collections under six primary brands: Tommy Bahama, Indigo Palms, Island Soft, Ben Sherman, Oxford Golf and Ely & Walker.

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Tommy Bahama
Tommy Bahama is an aspirational lifestyle brand that defines elegant tropical living with men’s and women’s sportswear, swimwear, accessories and a complete home furnishings collection.

Indigo Palms
Indigo Palms is a collection of denim related sportswear that’s infused with an island attitude. Appealing to a modern, sophisticated, quality conscious customer, Indigo Palms offers the finest fabrics, treatments and styling in a luxurious yet casual collection for men and women.

Island Soft
Island Soft takes a sophisticated, more fashion-minded approach to sportswear. This upscale men’s collection offers a more dressed up alternative, featuring a group of innovative jacket/blazer hybrids, as well as trousers, shirts, sweaters and outerwear.

Ben Sherman
The Ben Sherman collection was established in 1963. It targets 19 to 35-year-old men and women. The Ben Sherman collection has a long heritage as a modern, young men’s shirt brand that has evolved into its current irreverent global lifestyle for youthful-thinking men and women.

Oxford Golf
The Oxford Golf line was launched in the Fall of 2003 by the Menswear Group. It appeals to a sophisticated golf apparel customer with a taste for high quality, attention to detail and beautiful styling.

Ely & Walker brands
Brands in this line include Ely, Cattleman, Ely Casuals®, and Cumberland Outfitters, which are targeted toward a western-style shirt and sportswear consumer.

Licenses

We have the right to use trademarks under license and design agreements with the trademarks’ owners. Principal trademarks we have the right to use are:

    Tommy Hilfiger for men’s dress shirts and men’s and women’s golf apparel;
 
    Nautica for men’s tailored suits, sportcoats and dress slacks;
 
    Oscar de la Renta for men’s tailored suits, sportcoats, vests, and dress and casual slacks;
 
    Geoffrey Beene for men’s tailored suits, sportcoats, vests and dress slacks;
 
    Slates and Dockers for men’s tailored sportcoats and suit separates;
 
    Cubavera and Havanera for men’s Latin-inspired tailored clothing; and
 
    Evisu for men’s and women’s apparel and footwear.

Although we are not dependent on any single license or design agreement, we believe our license and design agreements in the aggregate are of significant value to our business.

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The above mentioned license and design agreements will expire at various dates through our fiscal 2012 year. Many of our licensing agreements are eligible for renewal to extend the licenses through various dates from our fiscal 2004 through 2009 years.

As shown in the table below, we offer numerous products through license arrangements with companies to use our Tommy Bahama trademark. The licenses below expire at various dates and in some cases may be renewed or extended by the licensee at their options as long as they have met certain obligations and goals provided in our agreement.

     
Product Category
  Licensee
Women’s handbags and small leather goods
  Accessory Design Holdings, Inc.
Men’s and women’s watches
  Advance Watch Company, Ltd.
Men’s and women’s eyewear
  Altair Eyewear, Inc.
Women’s swimwear
  Apparel Ventures, Inc.
Sailing yachts
  Beneteau USA Inc.
Outdoor furniture
  Brown Jordan International, Inc.
Ceiling fans
  Emerson Air Comfort Products, a division of Emerson Electric Co.
Men’s and women’s fragrance
  Gemini Cosmetics, Inc.
Indoor furniture
  Lexington Furniture Industries, Inc.
Men’s and women’s neckwear
  Paradise Neckwear Company, LLC
Men’s and women’s shoes, belts and socks
  Paradise Shoe Company, LLC
Bed linens and accessories
  Sferra Bros. Ltd.
Rugs
  Shaw Industries, Inc.

Trademarks

We own trademarks, which are very important to our business. Our trademarks are subject to registrations and pending applications throughout the world for use on a variety of items of apparel, apparel-related products, home furnishings and beauty products, as well as in connection with retail services. We continue to expand our worldwide usage and registration of related trademarks. In general, trademarks remain valid and enforceable as long as the marks are used in connection with the products and services and the required registration renewals are filed. We regard the license to use the trademarks and our other proprietary rights in and to the trademarks as valuable assets in marketing our products and, on a worldwide basis, continuously seek to protect them against infringement. As a result of the appeal of our trademarks, our products have been the object of counterfeiting. We have an enforcement program to control the sale of counterfeit products in the United States and in major markets abroad.

In markets outside of the United States, our rights to some or all of our trademarks may not be clearly established. We may experience conflicts with various third parties which have acquired ownership rights in certain trademarks, which may impede our use and registration of our principal trademarks in international markets. While such conflicts are common and may arise again from time to time as we continue our international expansion, we intend on resolving such conflicts through both legal action and negotiated settlements with third-party owners of the conflicting trademarks.

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SEASONAL ASPECTS OF BUSINESS AND ORDER BACKLOG

Seasonal Aspects of Business

Although our various product lines are sold on a year-round basis, the demand for specific products or styles may be highly seasonal. For example, the demand for golf and Tommy Bahama products is higher in the spring and summer seasons. Products are sold prior to each of our retail selling seasons, including spring, summer, fall and holiday. As the timing of product shipments and other events affecting the retail business may vary, results for any particular quarter may not be indicative of results for the full year. The percentage of net sales distribution by quarter for fiscal 2004 were 22%, 23%, 25% and 30%, and the net earnings by quarter for fiscal 2004 were 17%, 17%, 24% and 42%.

Order Backlog

As of May 28, 2004 and May 30, 2003, we had booked orders amounting to $241.5 million and $124.8 million, respectively, substantially all of which will be or were shipped within six months after each such date. These numbers represent only store orders on hand and do not include private-label contract balances. The excluded private-label contract balances are the portion of our private-label customers’ seasonal commitments for which we have not yet received a specific purchase order that includes exact quantities and shipping dates. Once we receive a specific purchase order, the dollar value of such order is included in our booked orders. A significant portion of our business consists of at-once EDI “Quick Response” programs with large retailers. Replenishment shipments under these programs generally possess such an abbreviated order life as to exclude them from the order backlog completely. We therefore do not believe that this backlog information is indicative of sales to be expected for the following year.

COMPETITION

We sell our products in a highly competitive domestic market in which numerous United States-based and foreign manufacturers compete. No single manufacturer or small group of manufacturers dominates the apparel industry. We believe we are one of the largest designers, manufacturers, marketers and wholesalers of consumer apparel products in the United States, but there are other apparel firms with greater sales and financial resources.

Competition within the apparel industry is based upon styling, marketing, price, quality, customer service and, with respect to branded and designer product lines, consumer recognition and preference. We believe we compete effectively with other members of the industry with regard to all of these factors. Successful competition in styling and marketing is related to our ability to foresee changes and trends in fashion and consumer preference and to present appealing product programs to our customers. Successful competition in price, quality and customer service is related to our ability to maintain efficiency in production, sourcing and distribution. Successful competition with respect to branded and designer product lines is related to the high consumer recognition and loyalty that our owned and licensed brands enjoy.

Substantially all of the apparel sold by us and our principal competitors is produced outside the United States. Most of the apparel sold by us and some of our competitors is sold to customers on a landed, duty-paid basis after it is imported into the United States. Some of our private label competitors sell apparel to their customers, many of whom are also our customers, on a direct basis in which the customer takes ownership in the country of production. In this direct sourcing

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scenario, the customer handles the in-bound logistics and customs clearance. Direct sourcing presents a competitive challenge to us in our private label business as our customers purchase apparel directly from the third party producers instead of from us. We are not able to quantify the impact that direct sourcing has had on our net sales or margins, but as many of our major customers purchase an increasing percentage of their apparel on a direct basis the opportunities to sell on a delivered, duty paid basis are reduced.

We believe that the relative price advantage to retailers of direct sourcing is offset, to some extent, by several factors. First, our ownership or joint venture participation in, or long-term relationships with, foreign facilities enables us to offer the retailers better and more consistent quality, better adherence to delivery schedules and a more reliable flow of more accurate information than that which is available to them from many of the facilities that offer them direct sourcing. In addition, we believe the services we provide in the areas of product development and design and supply chain management offset, to some extent, the relative price advantage of direct sourcing. We continue to upgrade and streamline our supply chain management technology and information systems, which we believe will enable us to continue to effectively compete against the direct sourcing alternative. In addition, in recent years we have successfully transitioned some of our business to a direct sales basis. Direct sales represented approximately 4% of our net sales in fiscal 2004.

We believe that choosing the most competitive countries for the production of our products is critical to our competitiveness. The most competitive location to produce or source a particular product depends on a variety of factors. These factors include availability of globally competitive fabric and other raw materials, labor and manufacturing costs, ability to meet quality standards, required lead times, logistics and the impact of international trade rules and trade preference agreements and legislation on apparel exports from that country to the United States.

TRADE REGULATION

International trade agreements, trade preference arrangements and trade legislation are important because most apparel imports into the United States are highly restricted. There are two key types of restrictions. First, there are duties levied on the value of imported apparel. The duty rates on the cotton and wool product categories that cover the majority of our products range from 15 to 20%. Silk products represent a major portion of our Tommy Bahama line and are generally subject to duty rates less than 5%. Second, the United States has implemented restrictive quotas on the importation of many classifications of textiles and apparel products from most of the major apparel-producing countries, including most of the countries where we produce apparel and including the cotton and wool product categories that cover the majority of our products. These quota restraints place numerical limits on the quantity of garments that may be imported into the United States in a given year on a by country and by product category basis. The effect of these quotas is to limit the amount of apparel that can be sourced in the countries that offer the most competitive fabrics and most competitive apparel manufacturing. As a result, a substantial portion of cotton and wool apparel imported into the United States is sourced from countries that would not be the most competitive producers in the absence of quotas. Silk products are not subject to quota restraints.

Through December of 1994, these restraints were controlled pursuant to the Multi-Fiber Arrangement, or the MFA, an international textile trade agreement to which the United States was a party. During the Uruguay Round of the General Agreement of Tariffs and Trade, the United

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States and other countries negotiated a successor agreement to the MFA known as the Agreement on Textiles and Clothing, or the ATC, which became effective on January 1, 1995.

The ATC requires that importing countries gradually phase out over a ten-year period approximately half of the restrictive quotas on the importation of textiles and apparel products that were in place on December 31, 1994. The remaining quotas are to be eliminated on January 1, 2005. However, the ATC gives importing countries, such as the United States, significant discretion in determining when during the ten-year period quotas on particular products from particular countries will be eliminated. The United States has kept quotas on most of the products produced by us for the entire ten-year period. All quotas among World Trade Organization (“WTO”) member countries are scheduled to be eliminated on January 1, 2005.

When the ATC is fully implemented on January 1, 2005, the competitiveness of many countries as apparel sourcing locations will change significantly. Currently, we believe that the presence of quotas imposes a non-market restriction on where apparel is sourced and prevents a substantial portion of apparel destined for the United States market from being sourced in the countries that offer the most competitive fabric and the most competitive apparel garment manufacturing. We believe that generally the most competitive fabrics and apparel manufacturing, absent the non-market restrictions created by quotas, are in Asia and the Indian sub-continent. Consequently, we believe that the elimination of quotas will result in reduced apparel sourcing in the western hemisphere and increased apparel sourcing in Asia and the Indian sub-continent. The market forces that are likely to shift apparel sourcing out of the western hemisphere upon the elimination of quotas may be partially offset by the reduced or zero duty rates offered by free trade agreements and trade preference programs applicable to Israel, Jordan and various countries in Sub-Saharan Africa, the Caribbean Basin and Latin America. In addition, under the terms of China’s WTO accession agreement, the United States and other importing countries are permitted under certain circumstances to re-impose quotas on China after January 1, 2005. To the extent countries in Latin America and the Caribbean Basin lose competitiveness, we may reduce the number of owned and contract facilities that we use in that region.

Currently, there are various free trade agreements and trade preference legislation that provide apparel importers including us with relief from duties and quotas. These include, but are not limited to, the United States-Caribbean Basin Trade Partnership Act, the African Growth and Opportunity Act, the North American Free Trade Agreement, the Israel Free Trade Agreement and the Andean Trade Promotion and Drug Eradication Agreement. The proposed United States-Central American Free Trade Agreement, Chile Free Trade Agreement, Dominican Republic Free Trade Agreement and Free Trade of the Americas Agreement may also affect our manufacturing and sourcing agreements in the future to the extent any of them are implemented. We believe that by selecting the locations where we produce or source our products based in part on trade regulations, we are effective and will continue to be effective in using various trade preference agreements and legislation to our competitive advantage.

We believe that with respect to most of our production, we will continue to be able to source from the most competitive countries because of the flexibility of our manufacturing and sourcing base. This flexibility is provided by the fact that while we have long-term relationships with many of our contract manufacturers, we do not have long-term contractual commitments to them and are able to move our production to alternative locations if competitive market forces so dictate. In addition, it would be relatively inexpensive for us to shut down one or more of our owned factories if such action is required to meet the competitive demands of the marketplace. The relative ease with which we can exit our currently owned and contract manufacturing facilities, if necessary, provides

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us with the ability to shift our production relatively quickly as different countries become more productive.

EMPLOYEES

As of May 28, 2004, we employed 8,439 persons, of whom 3,088 were employed in the United States. Approximately 67% of our employees were hourly and incentive paid production workers. We believe our employee relations are excellent.

AVAILABLE INFORMATION

Our internet address is www.oxfordinc.com. Under “Investor Relations” on the home page of our website at www.oxfordinc.com, we have provided a link to the SEC’s website where, among other things, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available once we electronically file such material with, or furnish it to, the SEC.

In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC. Requests should be directed to:

Investor Relations Department
Oxford Industries, Inc.
222 Piedmont Avenue, N.E.
Atlanta, GA 30308
info@oxfordinc.com

The information on the website listed above, is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document. This website is and is only intended to be an inactive textual reference.

Item 2. Properties.

Our principal executive offices are located at 222 Piedmont Avenue, N.E. in Atlanta, Georgia.

Our manufacturing, distribution and administrative functions are conducted in both leased and owned facilities. We have:

  13 distribution centers;

  9 manufacturing facilities;

  13 administrative offices; and

  8 other facilities that combine distribution, manufacturing and administrative offices.

We also lease space for our restaurants, retail and outlet stores, showrooms, warehouses and office space in various domestic and international locations.

The leases for our non-retail or restaurant facilities provide for aggregate annual rentals of approximately $ 7.9 million in fiscal 2004. We anticipate that we will be able to extend those leases to the extent that they expire in the near future on terms satisfactory to us or, if necessary, locate substitute facilities on acceptable terms.

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As of May 28, 2004, the Company operated 42 retail stores or retail stores and restaurants, which provide for aggregate annual rentals of approximately $13 million. We anticipate that we will be able to extend those leases to the extent that they expire in the near future on satisfactory terms or relocate to desirable locations.

Item 3. Legal Proceedings.

From time to time, we are a party to litigation arising in the ordinary course of business. We are not currently a party to any litigation that we believe could reasonably be expected to have a material adverse effect on our financial position, results of operations or cash flows.

The Greenville, Georgia facility for Menswear Group, was found to have a boiler drainage sump that contained a hazardous waste, perchloroethylene. On July 20, 1994, Oxford entered into a consent order with the Georgia Environmental Protection Department, or EPD.

In December of 2001, the EPD visited the Greenville, Georgia facility to assess the site to see if the necessary baseline cleanup indicators had been met. The final report from the Hazardous Waste Management Branch of the EPD states that the Greenville, Georgia facility meets the required environmental indicators to make the determination that the groundwater contamination is controlled at this facility. Oxford must continue to monitor the facility every three (3) years. Oxford and the EPD have agreed to conduct sampling tests every three years of the monitoring wells located on the site. Oxford has provided a Groundwater Monitoring Plan to the EPD and the EPD has approved this plan.

Since 1994 Oxford has continued to comply with the conditions of the consent order.

Amounts incurred with respect to this matter since inception are immaterial and were charged to operations.

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

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity and Related Matters

Our Common Stock is listed and traded on the New York Stock Exchange under the symbol “OXM.” As of May 28, 2004, there were 480 record holders of our Common Stock.

The table below sets forth, for each of the periods indicated below, the high and low sales prices per share of our Common Stock (adjusted to reflect our two-for-one stock split on December 1, 2003) as reported on the New York Stock Exchange Composite Tape.

                 
    High
  Low
Fiscal 2004
               
Fourth Quarter
  $ 47.50     $ 35.00  
Third Quarter
  $ 44.69     $ 29.60  
Second Quarter
  $ 35.83     $ 28.65  

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    High
  Low
First Quarter
  $ 30.65     $ 19.52  
Fiscal 2003
               
Fourth Quarter
  $ 20.45     $ 11.52  
Third Quarter
  $ 13.27     $ 11.01  
Second Quarter
  $ 13.13     $ 9.75  
First Quarter
  $ 14.40     $ 10.30  

We paid a cash dividend of $0.12 per share on May 29, 2004, which was the 176th consecutive quarterly dividend we have paid since we became a public company in July 1960. Our future dividend policy will continue to depend on the following factors and other factors considered relevant by our Board of Directors:

    earnings,
 
    capital requirements,
 
    financial condition,
 
    restrictions imposed by agreements related to our indebtedness,
 
    availability of dividends from subsidiaries,
 
    receipt of funds in connection with repayment loans to subsidiaries or advances from operating subsidiaries, and
 
    tax laws.

During the fourth quarter of fiscal 2004, we did not repurchase any shares of our Common Stock.

Equity Compensation Plan Information

                         
                    Number of
                    securities
                    remaining available
    Number of           for future issuance
    securities to be           under equity
    issued upon   Weighted-average   compensation plans
    exercise of   exercise price of   (excluding
    outstanding   outstanding   securities
    options, warrants   options, warrants   reflected in column
Plan category
  and rights
  and rights
  (a))
Equity compensation plans approved by security holders*
    1,003,920     $ 19       1,547,766  
Equity compensation plans not approved by security holders
    0       0       0  
Total
    1,003,920     $ 19       1,547,766  

*   For descriptions of our equity compensation plans. See Note “I” to the Consolidated Financial Statements in Item 8 and “Executive Compensation — Stock-Based Plans” in Item 11.

Item 6. Selected Financial Data.

Oxford Industries, Inc. and Subsidiaries
SELECTED FINANCIAL DATA

                                         
    Year Ended
    May 28, 2004
  May 30, 2003
  May 31, 2002
  June 1, 2001
  June 2, 2000
    ($ and shares in thousands, except per share amounts)
Net sales
  $ 1,116,552     $ 764,602     $ 677,264     $ 812,495     $ 839,533  
Cost of goods sold
    776,108       604,891       544,016       663,484       685,841  
Gross profit
    340,444       159,711       133,248       149,011       153,692  
Selling, general and administrative expenses
    258,545       124,362       115,729       119,390       112,056  
Royalties and other operating income
    5,114                          

14


 

                                         
    Year Ended
    May 28, 2004
  May 30, 2003
  May 31, 2002
  June 1, 2001
  June 2, 2000
    ($ and shares in thousands, except per share amounts)
Operating income
    87,013       35,349       17,519       29,621       41,636  
Interest, net
    23,913       1,935       243       4,870       3,827  
Earnings before income taxes
    63,100       33,414       17,276       24,751       37,809  
Income taxes
    23,384       13,087       6,704       9,405       14,368  
Net earnings
    39,716       20,327       10,572       15,346       23,441  
Basic earnings per common share
    2.47       1.35       0.71       1.03       1.52  
Basic weighted average shares outstanding
    16,100       15,035       14,987       14,932       15,436  
Diluted earnings per common share
    2.38       1.34       0.70       1.03       1.51  
Diluted weighted average shares outstanding
    16,699       15,143       15,099       14,970       15,502  
Dividends
    7,285       6,314       6,304       6,249       6,444  
Dividends per share
    0.45       0.42       0.42       0.42       0.42  
Total assets
    694,817       494,365       250,513       263,240       334,058  
Long-term obligations
    198,814       198,586       139       399       40,513  
Shareholders’ equity
    238,977       189,365       175,201       168,940       164,314  
Capital expenditures
    14,143       2,051       1,528       4,332       5,927  
Depreciation and amortization
    18,411       5,937       8,888       9,249       9,393  
Amortization of deferred financing costs
    2,654       50                    
Book value per share at year-end
    14.74       12.59       11.66       11.41       10.74  
Return on average shareholders’ equity
    18.5 %     11.2 %     6.1 %     9.2 %     14.7 %
Return on average total assets
    6.7 %     5.5 %     4.1 %     5.1 %     7.0 %

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our “Consolidated Financial Statements” and the “Notes to Consolidated Financial Statements”contained in this report.

OVERVIEW

We are engaged in the design, production and sale of consumer apparel for men, women and children. Our principal markets and customers are located primarily in the United States. We manufacture our products in our owned manufacturing facilities, through our joint venture partners and by sourcing these products from third party producers. We distribute our products through our wholesale customers and through our own retail stores.

The most significant factor impacting our results of operations for the current year was the completion of the acquisition of Viewpoint International, Inc., which we operate as the Tommy Bahama Group. On June 13, 2003, we acquired all of the outstanding capital stock of Tommy Bahama. The purchase price of the transaction consists of $240 million in cash, $10 million in Oxford common stock and up to $75 million in contingent payments subject to the Tommy Bahama Group achieving certain performance targets. The $75 million in contingent payments may include, at the option of the selling stockholders for the first two years, up to $12.5 million in our Common Stock valued at $12.88 per share (see Note “O” of “Notes to Consolidated Financial Statements”). The transaction was financed by a $200 million private placement of senior unsecured notes completed on May 16, 2003 and a $275 million senior secured revolving credit facility closed on June 13, 2003. Tommy Bahama owns the Tommy Bahama lifestyle brand under which it markets a wide array of products and services including apparel, footwear, accessories, home furnishings and restaurants.

We effected a two-for-one stock split in the form of a 100% stock dividend, payable December 1, 2003, to shareholders of record on November 17, 2003. Shareholders received one additional

15


 

share of the Company’s common stock for each share of the Company’s common stock held on the record date. All share and per share amounts have been adjusted for the stock split.

On July 30, 2004, we acquired Ben Sherman Limited, which we will operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The acquisition was financed with cash on hand and borrowings under our new revolving credit facility.

In conjunction with the acquisition of Ben Sherman, our senior revolver was amended and restated on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million senior secured revolving credit facility to provide for seasonal working capital requirements and general corporate purposes.

RESULTS OF OPERATIONS

The following table sets forth the line items in the Consolidated Statements of Earnings data both in dollars and as a percentage of net sales. The table also sets forth the percentage change of the data as compared to the prior year. We have calculated all percentages set forth below based on actual data, but percentage columns may not add due to rounding. Certain prior year information has been restated to be consistent with fiscal year 2004 presentation. Fiscal 2002 and 2003 exclude the Tommy Bahama Group. Fiscal 2004 results include the Tommy Bahama Group from June 13, 2003 through May 28, 2004, or 50 of 52 weeks of the year.

                         
    Fiscal Year
    2004
  2003
  2002
    ($ in thousands)
   
Net sales
  $ 1,116,552     $ 764,602     $ 677,264  
Cost of goods sold
    776,108       604,891       544,016  
 
   
 
     
 
     
 
 
Gross profit
    340,444       159,711       133,248  
Selling, general & administrative
    251,836       124,285       113,630  
Amortization of intangibles
    6,709       77       2,099  
Royalties & other operating income
    5,114              
 
   
 
     
 
     
 
 
Operating income
    87,013       35,349       17,519  
Interest expense, net
    23,913       1,935       243  
 
   
 
     
 
     
 
 
Earnings before income taxes
    63,100       33,414       17,276  
Income taxes
    23,384       13,087       6,704  
 
   
 
     
 
     
 
 
Net earnings
  $ 39,716     $ 20,327     $ 10,572  
 
   
 
     
 
     
 
 
                                         
    Fiscal Year
  % Change
% of Net Sales
  2004
  2003
  2002
  '03-'04
  '02-'03
Net sales
    100.0 %     100.0 %     100.0 %     46.0 %     12.9 %
Cost of goods sold
    69.5 %     79.1 %     80.3 %     28.3 %     11.2 %
 
   
 
     
 
     
 
     
 
     
 
 
Gross profit
    30.5 %     20.9 %     19.7 %     113.2 %     19.9 %
Selling, general & administrative
    22.6 %     16.3 %     16.8 %     102.6 %     9.4 %
Amortization of intangibles
    0.6 %     N/A       0.3 %     N/A       (96.3 %)
Royalties & other operating income
    0.5 %     N/A       N/A       N/A       N/A  
 
   
 
     
 
     
 
     
 
     
 
 
Operating income
    7.8 %     4.6 %     2.6 %     146.2 %     101.8 %

16


 

                                         
    Fiscal Year
  % Change
% of Net Sales
  2004
  2003
  2002
  ’03-’04
  ’02-’03
Interest expense, net
    2.1 %     0.3 %     N/A       N/A       N/A  
 
   
 
     
 
     
 
     
 
     
 
 
Earnings before income taxes
    5.7 %     4.4 %     2.6 %     88.8 %     93.4 %
Income taxes
    2.1 %     1.7 %     1.0 %     78.7 %     95.2 %
 
   
 
     
 
     
 
     
 
     
 
 
Net earnings
    3.6 %     2.7 %     1.6 %     95.4 %     92.3 %
 
   
 
     
 
     
 
     
 
     
 
 

ACQUISITION

In May 2003, we completed a $200 million private placement of senior unsecured notes to finance the acquisition of the Tommy Bahama Group. The notes bear interest at 8.875%, have an 8-year life, and were sold at a discount of 0.713% to par, or $1.4 million, to yield an effective interest rate of 9.0%. The terms of the notes include certain limitations on additional indebtedness and certain other transactions. Additionally, we are subject to certain customary financial covenants. The net proceeds from the senior notes of $198.6 million were placed in escrow pending the closing of the acquisition. There was $7.1 million in debt issuance cost incurred in issuing the senior notes, which are being amortized over the life of the notes.

In June 2003, we acquired all of the outstanding capital stock of the Tommy Bahama Group for a purchase price consisting of $240 million in cash, $10 million worth of our Common Stock and up to $75 million in contingent payments subject to the Tommy Bahama Group achieving certain performance targets. The $75 million in contingent payments may include, at the option of the selling stockholders during the first two years, up to $12.5 million in our Common Stock valued at $12.88 per share (see Note “O” of “Notes to Consolidated Financial Statements").

In June 2003, we also entered into a $275 million senior secured revolving credit facility (senior revolver), which has a five year term and bears interest, at our option, at rates determined from time to time based upon (1) the higher of the federal funds rate or the applicable prime rate plus a spread or (2) London Interbank Offered Rate (“LIBOR”) plus a spread. Borrowings under the senior revolver are subject to a borrowing base calculation based on our accounts receivable, inventories and real property. There were $7.4 million in debt issuance costs incurred for the senior credit facility. We terminated our $65 million accounts receivable securitization program prior to entering into this credit facility.

For more information regarding the senior unsecured notes or senior revolver, please refer to the discussion regarding “Liquidity and Capital Resources.”

In June 2003, in connection with the completion of the Tommy Bahama acquisition, the net proceeds from our $200 million senior notes offering were released from escrow. We used the net proceeds from our senior notes offering, together with limited borrowings under our senior revolver and cash on hand, to finance the cash portion of the purchase price of the acquisition.

The purchase price allocation, inclusive of the allocation of contingent consideration of $22.8 million in the fourth quarter of fiscal 2004, resulted in goodwill of $109.6 million and other intangible assets including trade names, license agreements, customer relationships and covenants not to compete. Intangible assets with indefinite lives include trademarks valued at $127.8 million and will not be amortized. Intangible assets with finite lives include license agreements, customer relationships and covenants not to compete. The license agreements, customer relationships and covenants not to compete are valued at $25.6 million and are being amortized using useful lives of 4 to 15 years, using methods which reflect the pattern in which the economic benefits of the assets

17


 

are consumed or otherwise realized. Based on the purchase price allocation, $1.7 million was amortized for each quarter of this fiscal year, or $6.6 million for all of fiscal year 2004. Amortization expense is projected to be $5.6 million for fiscal year 2005, $4.2 million for fiscal year 2006, $3 million for fiscal year 2007, $2.2 million for fiscal 2008 and $1 million for fiscal 2009.

SEGMENT DEFINITION

During the second quarter of fiscal 2004, we reorganized the components of our business for purposes of allocating resources and assessing performance. As a result of this reorganization, the Oxford Shirt Group, Lanier Clothes and Oxford Slacks, which were previously reportable segments, were combined to become the Menswear Group. Prior year amounts were restated to conform to the current segment presentation. The Womenswear Group and the Tommy Bahama Group remain unchanged. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportscoats, suit separates, walkshorts, golf apparel, jeans, swimwear, footwear and headwear. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture, and other products. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis, which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Segment results are as follows:

                                         
    Fiscal Year
  Percent Change
    2004
  2003
  2002
  ’03 -’04
  ’02 -’03
    ($ in thousands)
Net Sales
                                       
Menswear Group
  $ 448,800     $ 455,516     $ 423,133       (1.5 )%     7.7 %
Womenswear Group
    297,865       308,762       253,723       (3.5 )%     21.7 %
Tommy Bahama Group
    369,148                   N/A       N/A  
Corporate and Other
    739       324       408       128.1 %     (20.6 )%
 
   
 
     
 
     
 
     
 
     
 
 
Total
  $ 1,116,552     $ 764,602     $ 677,264       46.0 %     12.9 %
 
   
 
     
 
     
 
     
 
     
 
 
                                         
    Fiscal Year
  Percent Change
    2004
  2003
  2002
  ’03 -’04
  ’02 -’03
    ($ in thousands)
Operating Income
                                       
Menswear Group
  $ 41,915     $ 27,837     $ 16,042       50.6 %     73.5 %
Womenswear Group
    11,583       17,321       9,538       (33.1 )%     81.6 %
Tommy Bahama Group
    50,644                   N/A       N/A  
Corporate and Other
    (17,129 )     (9,809 )     (8,061 )     (74.6 )%     (21.7 )%
 
   
 
     
 
     
 
     
 
     
 
 
Total
  $ 87,013     $ 35,349     $ 17,519       146.2 %     101.8 %
 
   
 
     
 
     
 
     
 
     
 
 

18


 

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

FISCAL 2004 COMPARED TO FISCAL 2003

Total Company

Net sales increased 46.0% from $764.6 million in fiscal 2003 to $1,116.6 million in fiscal 2004. We generated a 23.5% increase in the average selling price per unit and a 15.2% increase in unit sales. The increase in the average selling price per unit was due to the higher average selling price per unit of Tommy Bahama merchandise. The increase in unit sales was almost entirely due to the acquisition of the Tommy Bahama Group. Our pre-acquisition business experienced a 3.5% decline in the average selling price per unit and an increase of 1.3% in unit sales.

Cost of goods sold for fiscal 2004 was $776.1 million or 69.5% of net sales, compared to $604.9 million or 79.1% of net sales in fiscal 2003. The relative decline in cost of goods sold was primarily due to the acquisition of the Tommy Bahama Group with its relatively lower cost of goods sold. Our gross margins 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 (“SG&A”) increased from $124.3 million or 16.3% of net sales in fiscal 2003 to $251.8 million or 22.6% of net sales in fiscal 2004. The increase in SG&A was primarily due to the acquisition of the Tommy Bahama Group with its relatively higher SG&A expense structure, partially offset by the decline in SG&A due to the wind-down of Izod Club Golf (see Note “H” of “Notes to Consolidated Financial Statements”).

Amortization of intangible assets increased from $77 thousand in fiscal 2003 to $6.7 million in fiscal 2004. All of the increase in the amortization of intangible assets was due to the acquisition of the Tommy Bahama Group.

Royalties and other operating income is primarily licensing income from licensing the Tommy Bahama brand.

Interest expense increased from $1.9 million in fiscal 2003 to $23.9 million in fiscal 2004. The increase in interest expense was due to the interest on debt incurred to finance the acquisition of the Tommy Bahama Group and the amortization of deferred financing costs related to the acquisition.

The effective tax rate was approximately 37.1% in the fiscal 2004 and 39.2% in fiscal 2003. Variations in the effective tax rate are primarily attributable to the acquisition of the Tommy Bahama Group and the relative distribution of pre-tax earnings among the various taxing jurisdictions in which we operate.

Segment Results

Menswear Group

The Menswear Group reported a 1.5% decline in net sales from $455.5 million in fiscal 2003 to $448.8 million in fiscal 2004. The decline resulted from a 5.0% decline in the average selling price per unit partially offset by a 3.7% increase in unit sales. An increase in unit sales to the mass

19


 

merchant distribution channel was largely offset by a decline in sales to Sears and the wind-down of Izod Club Golf. The decline in shipments to Sears was due to initial shipments to stores in the prior year to establish base inventory levels of Lands’ End merchandise. The decline in the average selling price per unit was due to product/customer mix. Increased sales to mass merchants, with a lower average selling price per unit, replaced sales to distribution channels with a higher average selling price per unit. Operating income increased from $27.8 million in the prior year to $41.9 million in the current year. The improvement in operating income was due to lower inventory markdowns, improved manufacturing capacity utilization and reduced SG&A. The reduction in SG&A was primarily due to the wind-down of Izod Club Golf.

Womenswear Group

The Womenswear Group reported a 3.5% decline in net sales from $308.8 million in fiscal 2003 to $297.9 million in fiscal 2004. The decline in net sales resulted from a 3.5% decline in the average selling price per unit on flat unit sales. Sales to Kmart in fiscal 2003 were approximately $8.6 million compared to none in fiscal 2004. Our sales to Wal-Mart also declined in fiscal 2004. We believe that growth in sales and profitability with Wal-Mart over the next few quarters will be difficult to achieve due to its increasing emphasis on direct sourcing and its planned reduction in its offering of women’s apparel. These sales declines were partially offset by increased sales to other customers in the chain and mass merchant distribution channels. The decline in the average selling price per unit was primarily due to the product/customer mix within the mass merchant distribution channel. Operating income declined from $17.3 million in fiscal 2003 to $11.6 million in fiscal 2004. The impact of the decline in net sales on operating income was partially offset by improved manufacturing capacity utilization. SG&A was relatively unchanged.

Tommy Bahama Group

The Tommy Bahama Group reported net sales of $369.1 million for fiscal 2004. Operating results of Tommy Bahama have been included since the date of acquisition and represent the 50 weeks ending May 28, 2004. Sales were comprised of wholesale shipments to upscale department and specialty stores and retail sales through company-owned retail stores and retail/restaurant compounds. Licensing income product categories primarily include home furnishings, swimwear, shoes, neckwear and watches. At May 28, 2004, Tommy Bahama Group’s operations include 42 retail stores (including four outlets and seven retail/restaurant compounds). The Tommy Bahama Group reported operating income of $50.6 million, which includes $6.6 million in amortization of intangible assets due to acquisition accounting rules.

Corporate and Other

The Corporate and Other operating loss increased $7.3 million from $9.8 million in fiscal 2003 to $17.1 million in fiscal 2004. The increase in the operating loss was due to increased LIFO inventory accounting charges of $5.9 million and increased employment costs of $1.8 million. The operating loss in fiscal 2003 included $1.1 million of acquisition due diligence costs. The due diligence costs relate to Tommy Bahama initial negotiations that had been discontinued at that time.

FISCAL 2003 COMPARED TO FISCAL 2002

Total Company

20


 

Net sales for fiscal 2003 were $764.6 million, an increase of 12.9% from net sales of $677.3 million in fiscal 2002. The increase was due to a 24.3% increase in the number of units shipped offset by a 9.1% decline in the average selling price per unit. The increase in unit sales extended to all operating segments and was primarily due to growth in mass merchant and chain store channels of distribution, and included the rollout of Lands’ End apparel into selected Sears stores. The decline in the average selling price per unit was due to a shift in product mix towards a higher proportion of lower priced products as a result of the increase in shipments to the mass merchant distribution channel and continued year-to-year deflation in apparel prices.

Cost of goods sold for fiscal 2003 was $604.9 million, or 79.1% of net sales, compared to $544 million or 80.3% of net sales in fiscal 2002. The relative decline in cost of goods sold was due to the continuation of more cost-effective sourcing and improved manufacturing efficiencies. We were able to obtain product at a lower cost per unit while also satisfying quality standards and time constraints. Reductions in manufacturing capacity in Mexico and the Caribbean Basin and increased sales enabled us to more efficiently utilize our remaining capacity, which helped lower our manufacturing cost per unit.

SG&A increased $10.7 million or 9.4% from $113.6 million in fiscal 2002 to $124.3 million in fiscal 2003. As a percentage of net sales, SG&A declined from 16.8% in the prior year to 16.3% in the current year. SG&A, in fiscal 2003, included incentive compensation costs of $10.2 million compared to $2.2 million in the prior year, $2.6 million of costs to close the Izod Club Golf operations, which are detailed more fully in the Menswear Group segment discussion below, and $1.1 million of acquisition due diligence costs. The due diligence costs relate to earlier negotiations with the Tommy Bahama Group (which were discontinued at that time). Included in SG&A in fiscal 2002 were $2.4 million in losses from the sales of pre-petition Kmart receivables, approximately $1 million of financing costs reflected as SG&A expense for our accounts receivable securitization facility.

Amortization of intangible assets declined from $2.1 million in fiscal 2002 to $77,000 in fiscal 2003. Fiscal 2002 included a charge of approximately $2 million related to goodwill amortization. With the adoption of SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) in fiscal 2003, goodwill ceased to be amortized.

Interest expense increased from $0.2 million in fiscal 2002 to $1.9 million in fiscal 2003. In the prior year, approximately $1 million of financing costs for our trade receivable securitization facility was reflected as SG&A expense rather than interest expense. Fiscal 2003 interest expense includes acquisition interest expense of $1.8 million, of which $1 million related to a bridge financing commitment in connection with the acquisition of the Tommy Bahama Group. The bridge financing commitment was established to provide contingent financing in the event the placement of the senior notes was delayed. The bridge financing commitment was terminated upon successful completion of the senior notes offering. Costs incurred relating to this arrangement during the fourth quarter were reflected as additional interest expense.

The effective tax rate was approximately 39.2% for fiscal 2003 and 38.8% for fiscal 2002. Variations in the rate are primarily attributable to the relative distribution of pre-tax earnings among the various taxing jurisdictions in which we operate.

Segment Results

Menswear Group

The Menswear Group reported a net sales increase of 7.7% from $423.1 million in fiscal 2002 to $455.5 million in fiscal 2003. The increase resulted from a unit sales increase of 16.0% partially

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offset by a 7.2% decline in the average selling price per unit. The unit sales increase was primarily due to growth in the mass merchant and chain store channels of distribution and included the rollout of Lands’ End apparel into selected Sears stores, partially offset by a decline in shipments of golf products. The decline in the average selling price per unit was primarily due to a shift in product mix towards a higher proportion of lower priced products as a result of the increase in shipments to the mass merchant distribution channel and continued year-to-year deflation in apparel prices. Operating income increased from $16 million in fiscal 2002 to $27.8 million in fiscal 2003. The improvement in operating income was due to the increased sales volume, increased manufacturing efficiency and lower markdowns.

During fiscal 2002, we closed the Izod Club Golf’s European operation. Total costs incurred during the second quarter to close the European operation were approximately $1.3 million. Of the total costs incurred, approximately $0.8 million related to inventory markdowns and were recognized as additional cost of goods sold, and $0.5 million related primarily to severance costs and an increase in the allowance for doubtful accounts, which was recognized as additional SG&A. Substantially all of the costs were settled prior to year-end. Net sales for the European operation were $1.2 million in fiscal 2002 and $0.5 million in fiscal 2003.

During the year, we announced our decision to close our Izod Club Golf’s United States operation in fiscal 2004 upon completion of shipping the fall 2003 season. Total costs incurred during the fourth quarter related to the closure were approximately $3 million. Of the total costs incurred, approximately $0.9 million related to additional inventory markdowns associated with the closure, approximately $1.7 million related to a license termination fee which will be paid in four equal quarterly installments during calendar 2004, with the remaining $0.4 million related to severance and other miscellaneous costs. The costs associated with the inventory markdowns were recognized as additional cost of goods sold while all other costs incurred were recognized as additional SG&A expense. At May 30, 2003, substantially all of the amounts related to the severance had been paid, while the remaining amounts related to inventory markdowns and the termination fee will be reduced as the related inventory is sold and license fees are paid during the 2004 and 2005 fiscal years. Net sales for the United States operation were $24.5 million in fiscal 2002 and $18.1 million in fiscal 2003.

Womenswear Group

The Womenswear Group reported a sales increase of 21.7% from $253.7 million in fiscal 2002 to $308.8 million in fiscal 2003. The increase in net sales was due to a 29.3% increase in unit sales volume, partially offset by a 7.1% decline in the average selling price per unit. The increase in unit volume came primarily in the mass merchant distribution channel. The decline in the average selling price per unit was partially due to product mix within the mass merchant distribution channel and partially due to the continued deflation in apparel prices. Operating income increased 81.6% from $9.5 million in fiscal 2002 to $17.3 million in fiscal 2003. The increase in operating income was primarily due to the increased sales volume and increased leveraging of SG&A.

Corporate and Other

The Corporate and Other decline in operating income was primarily due to higher accrued incentive compensation costs due to improved financial performance of $3.3 million and acquisition due diligence costs of $1.1 million partially offset by LIFO accounting adjustments of $0.3 million. The LIFO adjustment is net of a $0.5 million charge which related to the LIFO accounting treatment of inventory markdowns taken in excess of the inventory’s LIFO cost

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associated with the decision to close our Izod Club Golf’s United States operation. Total inventory markdowns in excess of LIFO costs were $1.4 million. In fiscal 2002, Corporate and Other included $1 million of financing costs under our accounts receivable securitization facility and a reclassification of bad debt expense resulting in an increase in bad debt expense under Corporate and Other of approximately $1.4 million.

LIQUIDITY AND CAPITAL RESOURCES

Financing Arrangements

On May 16, 2003, we completed a $200 million private placement of senior unsecured notes to finance the acquisition of Tommy Bahama. The notes bear interest at 8.875%, have an 8-year life and were sold at a discount of 0.713%, or $1.4 million, to yield an effective interest rate of 9.0%. Interest is payable semi-annually with the principal amount due at maturity on June 1, 2011. The notes are guaranteed by all existing and future direct and indirect domestic wholly owned restricted subsidiaries of Oxford Industries, Inc. The senior notes indenture restricts our ability to incur additional indebtedness or liens, to enter into lease or hedging arrangements, to make investments and acquisitions, to sell assets, to pay dividends and to pay amounts due under the earnout agreement with the selling shareholders of the Tommy Bahama Group. The indenture also requires us to maintain a minimum consolidated fixed charge coverage ratio which is defined as the sum of consolidated net income, consolidated interest expense and non-cash charges to consolidated interest expense, calculated as applicable on a pro forma basis. We are in compliance with these covenants as of May 28, 2004.

On June 13, 2003, we entered into a $275 million senior secured revolving credit facility (senior revolver) with a syndicate of twelve financial institutions. The bank syndicate holds a security interest in substantially all of our United States assets. All domestic subsidiaries of the Company are a party to the credit agreement. The facility has a five-year term and bears interest, at our option, at rates determined from time to time based upon (1) the higher of the federal funds rate or the applicable prime rate plus a spread or (2) LIBOR plus a spread. Borrowing spreads and letter of credit fees are based upon a pricing grid which is tied to a fixed charge coverage ratio, defined as the ratio of earnings before interest, taxes, amortization and depreciation minus cash taxes and capital expenditures to the sum of scheduled principal payments, interest expense, cash earnout payments and cash dividends, calculated as applicable on a pro forma basis. The borrowing spread over the applicable prime rate can vary from 0.0% to 1.00% and the borrowing spread over LIBOR can vary from 1.25% to 2.50%. As of May 28, 2004, the interest rate on borrowings under the facility was 4.5% (based on prime of 4.0% plus a spread of 0.5%).

Borrowings under the senior revolver are subject to a borrowing base calculation based on our accounts receivable, inventories and real property and may be used for working capital, the issuance of letters of credit up to $175 million and general corporate purposes. The credit agreement restricts our ability to incur additional indebtedness or liens, to enter into lease or hedging arrangements, to make investments and acquisitions, to make capital expenditures, to sell assets, to pay dividends and to pay amounts due under the earnout agreement with the selling shareholders of the Tommy Bahama Group. The credit agreement also requires us to maintain a minimum ratio of earnings before interest, taxes, depreciation and amortization to total indebtedness, as well as a minimum fixed charge coverage ratio as described above. Failure to comply with the provisions of our credit agreement and indenture could result in an acceleration of the indebtedness and a demand for immediate repayment by our lenders. We are in compliance with these covenants as of May 28, 2004 (see next paragraph for amendment and restatement of

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senior facility). At May 28, 2004, gross collateral availability under the senior revolver totaled $245.5 million, against which approximately $99.5 million in letters of credit and no direct borrowings were outstanding.

In conjunction with our acquisition of Ben Sherman Limited on July 30, 2004, the senior revolver was amended and restated on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. Under the amended senior revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of our total debt to our earnings before interest, taxes, depreciation and amortization (EBITDA), calculated as applicable on a pro forma basis. The credit agreement also requires us to maintain certain financial ratios including the ratio of total debt to EBITDA, the ratio of senior debt to EBITDA, a fixed charge coverage ratio and an interest coverage ratio. Our borrowings under the amended senior revolver are no longer subject to a borrowing base calculation based on our accounts receivable, inventories and real property. A portion of the deferred financing fees will be written off in the first quarter of fiscal 2005 as a result of amending and restating the senior revolver.

On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million senior secured revolving credit facility to provide for seasonal working capital requirements and general corporate purposes. The facility is secured by substantially all of the United Kingdom assets of Ben Sherman and bears interest at the lender’s prime or base rate plus 1.20%. The facility is repayable on demand and requires the borrower to maintain certain financial ratios including a minimum interest coverage ratio, a minimum asset coverage ratio and a minimum level of earnings before interest, taxes and intangible asset amortization.

Operating Activities

The cash flow from operating activities is primarily due to net earnings and changes in working capital. Changes in working capital are primarily monitored by analysis of the investment in accounts receivable and inventories and by the amount of accounts payable. During fiscal 2004, we generated cash from operating activities of $62.9 million primarily from net earnings and noncash charges and a slight decrease in working capital after giving effect to the acquisition of the Tommy Bahama Group. Working capital changes included decreased inventories, increased trade payables and increased accrued expenses offset by increased accounts receivable. The inventory decline occurred in our pre-acquisition businesses. Trade payables increased primarily due to extended payment terms on letter of credit purchasing commitments with suppliers for finished goods. The increase in accrued expenses was primarily due to accrued interest on the senior notes. The accounts receivable increase was due to the increase in sales in the fourth quarter.

In fiscal 2003, we generated cash from operating activities of $27.6 million, primarily from net earnings, increased trade payables and increased accrued expenses, offset by increased accounts receivable and inventories. The increase in trade payables was primarily due to the increase in inventories. The increase in accrued expenses was primarily due to increased incentive compensation costs. The accounts receivable increase was due to a slight increase in sales in the fourth quarter and a slight increase in day’s sales outstanding over the prior year. The inventory increase was due to inventory required to support increased core replenishment programs.

Investing Activities

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During fiscal 2004, investing activities used $32.1 million in cash and principally represented the acquisition of the Tommy Bahama Group net of the reduction in restricted proceeds from the sale of the senior unsecured notes. Capital expenditures of $14.1 million were primarily related to new Tommy Bahama retail stores, computer equipment and software.

In fiscal 2003, investing activities used $206.1 million in cash. The increase in restricted cash in fiscal 2003 represents the net proceeds from the senior unsecured notes plus accrued interest contained in the escrow account for the acquisition of the Tommy Bahama Group. Capital expenditures were $2.1 million.

Financing Activities

During fiscal 2004, financing activities used $7.4 million in cash. This represents the amount of payments for long-term debt, payments for debt issuance costs and payments for dividends partially offset by proceeds from the issuance of common stock upon the exercise of employee stock options.

In fiscal 2003, financing activities generated $185 million in cash. This represents the net proceeds from the sale of the senior unsecured notes partially offset by payments for long-term debt, debt issuance costs and dividends.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U. S. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure 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 not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Financial Reporting Release No. 60, which was released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The detailed Summary of Significant Accounting Policies is included in the Notes to Consolidated Financial Statements contained in this report. The following is a brief discussion of the more significant accounting policies and methods we use.

Revenue Recognition and Accounts Receivable

We consider revenue realized or realizable and earned when the following criteria are met:

    persuasive evidence of an agreement exists,
 
    delivery has occurred,
 
    our price to the buyer is fixed and determinable, and
 
    collectibility is reasonably assured.

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Sales are recorded net of discounts, as well as provisions for estimated returns and allowances. We estimate returns and allowances on an ongoing basis considering historical and current trends and projected seasonal results. We record these costs as a reduction to net revenue. Our historical estimates of these sales reductions have not differed materially from actual results. For accounts receivable, we estimate the net collectibility, considering both historical and anticipated trends of trade discounts and co-op advertising deductions taken by our customers, allowances we provide to our retail customers for a variety of reasons, and the possibility of non-collection due to the financial position of our customers. Credit losses are charged to SG&A.

Inventories

For segment reporting, inventory is carried at the lower of FIFO cost or market. For wholesale inventory, we estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods to the recovery value expected to be realized through off-price channels yielding a normal gross margin when shipped. For Tommy Bahama retail inventory, we provide an allowance for shrinkage and goods expected to be sold below cost. If we incorrectly anticipate these trends or unexpected events occur, the results of operations could be materially affected. For consolidated financial reporting, significant portions of our inventory are valued at the lower of LIFO cost or market. LIFO inventory calculations are made on a legal entity basis, which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. As part of our LIFO accounting, markdowns for inventory valued at LIFO cost are deferred until the period in which the goods are sold. However, in non-routine circumstances, such as discontinuance of a product line, markdowns below the allocated LIFO reserve are not deferred. Both the LIFO reserve and the markdown deferral are reflected in Corporate and Other.

Goodwill

The evaluation of the recoverability of goodwill under SFAS 142 requires valuations of each applicable underlying business using fair value techniques and market comparable. These valuations can be significantly affected by estimates of future performance and discount rates over a relatively long period of time, market price valuation multiples and transactions in related markets. These estimates will likely change over time. Goodwill is required to be evaluated annually, or more frequently if events or changes in circumstances indicate that the carrying amount may exceed fair value. If this review indicates an impairment of goodwill balances, the amount of impairment will be recorded immediately and reported as a component of current operations. The business valuation reviews required by SFAS 142 were performed as of the end of the first quarter and indicated that no reduction of the carrying value of goodwill for our business units was required.

Intangible Assets Other than Goodwill

Intangible assets with finite lives are amortized while intangible assets with indefinite useful lives are not amortized, but tested at least annually for impairment. The valuation of the recoverability of indefinite lived intangibles can be significantly impacted by estimates of future cash flows and discount rates over a relatively long period of time, which will likely change over time. Intangible assets whose useful lives are finite are amortized over their useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized.

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Legal and Tax Contingencies

We are involved in tax and legal proceedings, claims and litigation arising in the ordinary course of business. We periodically assess our liabilities and contingencies in connection with these matters, based upon the latest information available. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we have recorded reserves in the consolidated financial statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, we are unable to make a reasonable estimate of a liability, if any. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

Cost of Goods Sold

We include in cost of goods sold all manufacturing and sourcing costs and expenses incurred prior to receipt of finished goods at our distribution facilities. These costs principally include product cost, inbound freight charges, purchasing costs, internal transfer costs, as well as insurance, duty, brokers’ fees and consolidators’ fees. Our gross margins 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

We include in SG&A, costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of warehousing, picking, packing, shipping and handling goods for delivery to customers. In addition, SG&A includes product design costs, selling costs, royalty costs, advertising, promoting and marketing expenses and general and administrative expenses.

Distribution Network Costs, Including Shipping and Handling

Distribution network costs, including shipping and handling, are included as a component of SG&A. Revenues received from customers for shipping and handling are included in net revenue.

Advertising

All costs associated with advertising, promoting and marketing of our products are expensed during the periods when the activities take place. Costs associated with cooperative advertising programs under which we agree to share costs of customers’ advertising and promotion expenditures are expensed when the related revenues are recognized. Advertising, promotion and marketing expenses are included in SG&A.

Seasonality

Although our various product lines are sold on a year-round basis, the demand for specific products or styles may be highly seasonal. For example, the demand for golf and Tommy Bahama products is higher in the spring and summer seasons. Products are sold prior to each of our retail selling seasons, including spring, summer, fall and holiday. As the timing of product shipments and other events affecting the retail business may vary, results for any particular quarter may not be indicative of results for the full year. The percentage of net sales distribution by quarter for fiscal 2004 were 22%, 23%, 25% and 30%, and the net earnings by quarter for fiscal 2004 were 17%, 17%, 24% and 42%.

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NEW ACCOUNTING STATEMENTS

Variable Interest Entities: In December 2002, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 requires that a variable interest entity be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. We determined that we had no interests in variable interest entities. Accordingly, the adoption of FIN 46 did not have a material impact on our financial position, results of operations or liquidity.

SUBSEQUENT EVENTS

On July 30, 2004, we acquired Ben Sherman Limited, which we will operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The acquisition was financed with cash on hand and borrowings under our new revolving credit facility.

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

On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million senior secured revolving credit facility to provide for seasonal working capital requirements and general corporate purposes.

FUTURE LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations is our primary source of liquidity. Our projected capital expenditures for fiscal 2005 are approximately $21 million. We anticipate that cash flows from operations supplemented with our amended and restated senior secured credit facility will be sufficient to fund our future liquidity requirements for fiscal 2005.

The following table summarizes our contractual cash obligations, as of May 28, 2004, by future period (see Notes “G,” “H,” and “O” of “Notes to Consolidated Financial Statements”):

                                         
    Payments due by Period
    Less than   1-3   3-5   After    
    1 year
  years
  years
  5 years
  Total
    ($ in thousands)
Contractual Obligations
                                       
Capital leases
  $ 98     $ 48     $ 6     $     $ 152  
Long-term debt
                      198,760       198,760  
Operating leases
    17,370       33,093       31,638       54,084       136,185  
Minimum royalty
    7,424       7,061                   14,485  
Letters of credit
    99,450                         99,450  
Contingent purchase price
    4,898       25,000       37,500             67,398  
 
   
 
     
 
     
 
     
 
     
 
 
Total
  $ 129,240     $ 65,202     $ 69,144     $ 252,844     $ 516,430  
 
   
 
     
 
     
 
     
 
     
 
 

We have no off-balance sheet arrangements.

FORWARD OUTLOOK

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We anticipate fiscal 2005 sales in the range of $1.285 billion to $1.325 billion and earnings per diluted share in the range of $2.70 to $2.85. For the first quarter, we anticipate sales in the range of $275 million to $285 million and earnings per diluted share in the range of $0.37 to $0.39. For the second quarter, we anticipate sales in the range of $305 million to $315 million and earnings per diluted share in the range of $0.48 to $0.52. For the second half, we anticipate sales in the range of $705 million to $725 million and diluted earnings per common share of between $1.85 to $1.95.

UNITED STATES SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are indicated by words or phrases such as “anticipate,” “estimate,” “project,” “expect,” “believe” and similar words or phrases. Such statements are based on our current expectations and are subject to certain risks and uncertainties. Such statements include but are not limited to statements about our expected business outlook, anticipated financial and operating results, the anticipated benefits of the Tommy Bahama Group acquisition, growth of particular product lines, strategies, contingencies, financing plans, working capital needs, sources of liquidity, estimated amounts and timing of capital expenditures and other expenditures, are based on current management expectations that involve certain risks which if realized, in whole or in part, could have a material adverse effect on Oxford’s business, financial condition and results of operations, including, without limitation:

    general economic cycles,
 
    competitive conditions in our industry,
 
    price deflation in the worldwide apparel industry,
 
    our ability to identify and respond to rapidly changing fashion trends and to offer innovative and upgraded products,
 
    the price and availability of raw materials,
 
    our dependence on and relationships with key customers,
 
    the ability of our third party producers to deliver quality products in a timely manner,
 
    potential disruptions in the operation of our distribution facilities,
 
    economic and political conditions in the foreign countries in which we operate or source our products,
 
    risk associated with changes in global currency exchange rates,
 
    regulatory risks associated with importing products,
 
    the impact of labor disputes and wars or acts of terrorism on our business,
 
    increased competition from direct sourcing,
 
    our ability to maintain our licenses,
 
    our ability to protect our intellectual property and prevent our trademarks, service marks and goodwill from being harmed by competitors’ products,
 
    our reliance on key management,
 
    our inability to retain current pricing on our products due to competitive or other factors,
 
    the impact of reduced travel to resort locations on our sales,
 
    risks related to our operation of restaurants under the Tommy Bahama name,
 
    the integration of Ben Sherman into our company,
 
    the expansion of our business through the acquisition of new businesses,

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    our ability to successfully implement our growth plans for acquired businesses,
 
    our ability to open new retail stores,
 
    unforeseen liabilities associated with the acquisition of acquired businesses, and
 
    the factors discussed in Exhibit 99.1 to the Company’s Form 8-K, filed July 16, 2003, under the heading “Risk Factors.”

Other risks or uncertainties may be detailed from time to time in our future SEC filings. 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. 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.

ADDITIONAL INFORMATION

For additional information concerning our operations, cash flows, liquidity and capital resources, this analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements contained in this report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Interest rate risk is managed through the maintenance of a portfolio of variable and fixed rate debt composed of short and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. We do not engage in hedging activities with respect to such risk.

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

At May 28, 2004, we had no variable rate debt. Our average variable rate borrowings for the twelve months ending May 28, 2004 were $10 million, with an average interest rate of 3.8 %. If the twelve-month average interest rate increased by 10%, our interest expense would have changed by $38 thousand.

Trade Policy Risk

Under the terms of bilateral agreements between most of the major apparel exporting countries and the United States, the importation of most categories of our products is subject to quotas limiting the quantity of such products that may be imported into the United States. Utilization of these quotas is typically controlled at origin by an export license or visa system administered by the exporting country and is monitored and enforced by United States Customs and Border Protection at the time of importation. Since we own or directly control only a small portion of the quota we need, we rely on our suppliers and vendors to secure the visas or licenses required to ship our products. If our suppliers and vendors fail to secure the necessary visas or licenses as agreed with us, our supply chain could be disrupted.

If an exporting country fails to properly administer its quota and issues visas or export licenses in excess of the quantity permitted under the terms of its bilateral agreement with the United States, the goods covered by such export license or visa could be denied entry into the United States. Such a denial could disrupt our supply chain.

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

The 1994 Agreement on Textiles and Clothing among World Trade Organization (“WTO”) countries mandates the elimination of textile and apparel product quotas for WTO countries, including the United States, on January 1, 2005. As a result, there will be changes in the international textile and apparel trade, which may significantly impact our sourcing patterns, could disrupt our supply chain and could put us at a disadvantage to our competitors.

Some of the impact of quota elimination may begin in the latter part of calendar 2004. Historically, exporting countries have been permitted under the terms of their bilateral agreements with the United States to borrow a limited amount of quota from the following year. Since there will be no quota in 2005, none is available for this type of borrowing in 2004. The unavailability of this type of quota borrowing could lead to quota shortages in the latter part of calendar 2004, which could cause disruption in our supply chain.

In addition, notwithstanding quota elimination, under the terms of China’s WTO accession agreement, the United States and other WTO members may re-impose quotas on specific categories of products in the event it is determined that imports from China have surged and are threatening to create a market disruption for such categories of products (so called “safeguard quota”). China is a major source of production for us, and the re-imposition of safeguard quotas on China following the elimination of the existing quota regime on January 1, 2005 could cause disruption in our supply chain.

Furthermore, under long-standing statutory authority applicable to imported goods in general, the United States may unilaterally impose additional duties: (i) when imported merchandise is sold at less than fair value and causes material injury, or threatens to cause material injury, to the domestic industry producing a comparable product (generally known as “anti-dumping” duties); or (ii) when foreign producers receive certain types of governmental subsidies, and when the importation of their subsidized goods causes material injury, or threatens to cause material injury, to the domestic industry producing a comparable product (generally known as “countervailing” duties). The imposition of anti-dumping or countervailing duties on products we import would increase the cost of those products to us. We may not be able to pass any such cost increase on to our customers.

There are numerous free trade agreements pending, including the United States-Central American Free Trade Agreement that, if adopted, could put us as a disadvantage to some of our competitors.

Foreign Currency Risk

We receive United States dollars for substantially all of our product sales. Substantially all inventory purchases from contract manufacturers throughout the world are also denominated in United States dollars; however, purchase prices for our products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies of the contract manufacturers, which may have the effect of increasing our cost of goods sold in the future. During the last three fiscal years, exchange rate fluctuations have not had a material impact on our inventory costs; however, due to the number of currencies involved and the fact that not all foreign

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currencies react in the same manner against the United States dollar, we cannot quantify in any meaningful way the potential effect of such fluctuations on future income.

We did not engage in hedging activities in fiscal 2004, 2003 or 2002 with respect to such exchange rate risk. These foreign currency risks are similar to those experienced by our competitors.

In connection with the acquisition of Ben Sherman, we entered into foreign exchange forward contracts to fix the currency exchange rate between the dollar and the pound sterling from the agreement date until the closing and funding of the acquisition. The contracts totaled £76 million at an average exchange rate of $1.8118 per £1.00.

Commodity Price Risk

We are subject to commodity price risk arising from price fluctuations in the market prices of sourced garments or the various raw materials components of our manufactured products. We are subject to commodity price risk to the extent that any fluctuations in the market prices of our purchased garments and raw materials are not reflected by adjustments in selling prices of our products or if such adjustments significantly trail changes in these costs. We neither enter into significant long-term sales contracts nor significant long-term purchase contracts. We do not engage in hedging activities with respect to such risk.

Inflation Risk

While the consumer price index has consistently indicated deflation in apparel prices from May 1998 through May 2003, this trend appears to be moderating within the last few months. While this deflationary trend has not affected the Tommy Bahama products, it has impacted our other businesses as evidenced by the declining average selling price per unit. Inflation/deflation risks are managed by each business unit through selective price increases when possible, productivity improvements and cost containment initiatives.

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Item 8. Financial Statements and Supplementary Data.

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

                     
Year Ended

May 28, 2004 May 30, 2003


($ in thousands, except
per share amounts)
ASSETS
Current Assets:
               
 
Cash and cash equivalents
  $ 47,569     $ 24,091  
 
Receivables, less allowance for doubtful accounts of $3,448 in 2004 and $3,505 in 2003
    176,367       110,304  
 
Inventories
    116,410       104,334  
 
Prepaid expenses
    16,475       12,631  
     
     
 
   
Total current assets
    356,821       251,360  
Property, plant and equipment, net
    51,826       21,971  
Restricted cash in escrow
          204,986  
Goodwill
    115,426       5,839  
Intangibles, net
    147,333       682  
Other assets, net
    23,411       9,408  
Deferred income taxes
          119  
     
     
 
   
Total Assets
  $ 694,817     $ 494,365  
     
     
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
               
 
Trade accounts payable
  $ 100,813     $ 59,031  
 
Accrued compensation
    33,113       23,556  
 
Additional acquisition cost payable
    22,779        
 
Other accrued expenses
    30,440       15,063  
 
Dividends payable
    1,946       1,579  
 
Income taxes payable
    4,294       2,551  
 
Current maturities of long-term debt
    98       134  
     
     
 
   
Total current liabilities
    193,483       101,914  
Notes payable
    198,760       198,581  
Other long-term debt, less current maturities
    54       5  
Noncurrent liabilities
    11,124       4,500  
Deferred income taxes
    52,419        
Commitments and contingencies (Note H)
               
Shareholders’ Equity:
               
 
Preferred stock*
           
 
Common stock**
    16,215       15,044  
 
Additional paid-in capital
    23,673       7,237  
 
Retained earnings
    199,089       167,084  
     
     
 
Total Shareholders’ Equity
    238,977       189,365  
     
     
 
Total Liabilities and Shareholders’ Equity
  $ 694,817     $ 494,365  
     
     
 


 *  Par Value of $1 per share; authorized 30,000,000 preferred shares; none outstanding.
 
**  Par value of $1 per share; authorized 60,000,000 common shares; issued and outstanding 16,215,358 in 2004 and 15,043,498 in 2003.

The accompanying notes are an integral part of these consolidated financial statements.

33


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

                         
Year Ended

May 28, 2004 May 30, 2003 May 31, 2002



($ in thousands, except per share amounts)
Net sales
  $ 1,116,552     $ 764,602     $ 677,264  
Cost of goods sold
    776,108       604,891       544,016  
     
     
     
 
Gross profit
    340,444       159,711       133,248  
Selling, general and administrative
    251,836       124,285       113,630  
Amortization of intangibles
    6,709       77       2,099  
     
     
     
 
      258,545       124,362       115,729  
Royalties and other operating income
    5,114              
     
     
     
 
Operating income
    87,013       35,349       17,519  
Interest expense, net
    23,913       1,935       243  
     
     
     
 
Earnings before income taxes
    63,100       33,414       17,276  
Income taxes
    23,384       13,087       6,704  
     
     
     
 
Net earnings
  $ 39,716     $ 20,327     $ 10,572  
     
     
     
 
Basic earnings per common share
  $ 2.47     $ 1.35     $ 0.71  
     
     
     
 
Diluted earnings per common share
  $ 2.38     $ 1.34     $ 0.70  
     
     
     
 
Basic weighted average shares outstanding
    16,099,851       15,034,720       14,987,356  
     
     
     
 
Diluted weighted average shares outstanding
    16,698,744       15,143,290       15,098,554  
     
     
     
 
Dividends per share
  $ 0.45     $ 0.42     $ 0.42  
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

34


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

                                   
Additional
Common Paid-In Retained
Stock Capital Earnings Total




($ in thousands, except per share amounts)
Balance, June 1, 2001
  $ 14,812     $ 4,335     $ 149,793     $ 168,940  
 
Net earnings
                10,572       10,572  
 
Exercise of stock options, net
    218       2,765       (990 )     1,993  
 
Cash dividends, $0.42 per share
                (6,304 )     (6,304 )
     
     
     
     
 
Balance, May 31, 2002
  $ 15,030     $ 7,100     $ 153,071     $ 175,201  
 
Net earnings
                20,327       20,327  
 
Exercise of stock options, net
    14       137             151  
 
Cash dividends, $0.42 per share
                (6,314 )     (6,314 )
     
     
     
     
 
Balance, May 30, 2003
  $ 15,044     $ 7,237     $ 167,084     $ 189,365  
 
Net earnings
                39,716       39,716  
 
Exercise of stock options, net
    395       7,212       (426 )     7,181  
 
Shares issued for acquisition
    776       9,224             10,000  
 
Cash dividends, $0.45 per share
                (7,285 )     (7,285 )
     
     
     
     
 
Balance, May 28, 2004
  $ 16,215     $ 23,673     $ 199,089     $ 238,977  
     
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

35


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

                             
Year Ended

May 28, 2004 May 30, 2003 May 31, 2002



($ in thousands)
Cash Flows From Operating Activities:
                       
Net earnings
  $ 39,716     $ 20,327     $ 10,572  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
 
Depreciation
    11,702       5,860       6,789  
 
Amortization of intangible assets
    6,709       77       2,099  
 
Amortization of deferred financing costs and bond discount
    2,654       50        
 
Loss (gain) on sale of property, plant and equipment
    (637 )     462       (31 )
 
Equity income
    (321 )            
 
Deferred income taxes
    (2,379 )     (2,371 )     2,844  
Changes in working capital:
                       
 
Receivables
    (36,354 )     (7,106 )     (52,499 )
 
Inventories
    15,992       (19,793 )     62,829  
 
Prepaid expenses
    1,973       (1,143 )     (673 )
 
Trade accounts payable
    18,228       15,711       (11,467 )
 
Accrued expenses and other current liabilities
    4,411       13,617       (4,867 )
 
Income taxes payable
    879       2,551       (2,924 )
Other noncurrent assets
    (5,171 )     (649 )     (285 )
Other non current liabilities
    5,500              
     
     
     
 
   
Net cash provided by operating activities
    62,902       27,593       12,387  
Cash Flows From Investing Activities:
                       
 
Acquisition — net of cash acquired
    (222,737 )            
 
Decrease (increase) in restricted cash in escrow
    204,986       (204,986 )      
 
Investment in deferred compensation plan
    (1,842 )            
 
Purchases of property, plant and equipment
    (14,143 )     (2,051 )     (1,528 )
 
Proceeds from sale of property, plant and equipment
    1,675       947       1,097  
     
     
     
 
   
Net cash used in investing activities
    (32,061 )     (206,090 )     (431 )
Cash Flows From Financing Activities:
                       
 
Long-term debt repayments
    (210 )     (255 )     (268 )
 
Proceeds from issuance of notes
          198,581        
 
Note issue costs
    (7,416 )     (7,167 )      
 
Proceeds from issuance of common stock
    7,181       151       1,993  
 
Dividends on common stock
    (6,918 )     (6,313 )     (6,275 )
     
     
     
 
   
Net cash (used in) provided by financing activities
    (7,363 )     184,997       (4,550 )
Net change in cash and cash equivalents
    23,478       6,500       7,406  
Cash and cash equivalents at the beginning of year
    24,091       17,591       10,185  
     
     
     
 
Cash and cash equivalents at the end of year
  $ 47,569     $ 24,091     $ 17,591  
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

36


 

Supplemental schedule of noncash investing and financing activities:

      At May 28, 2004, we accrued $22,779 of additional acquisition cost (see Note “O”).

Supplemental disclosure of Cash Flow Information

                           
Cash paid for:
                       
 
Interest, net
  $ 13,124     $ 1,457     $ 103  
 
Income taxes
  $ 22,461     $ 12,353     $ 5,716  

37


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended May 28, 2004, May 30, 2003 and May 31, 2002

Note A.     Summary of Significant Accounting Policies:

 
1.     Principal Business Activity

      We are a producer and wholesaler of branded and private label apparel for men, women and children and operator of apparel stores and restaurants. We provide retailers and consumers with a wide variety of apparel and related products and services to suit their individual needs.

 
2.     Principles of Consolidation

      Our consolidated financial statements include the accounts of Oxford Industries, Inc. and its wholly owned domestic and foreign subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The equity method of accounting is used for investments in companies where we have a 20% to 50% ownership interest. We do not exercise control over the investees, nor does the Company have substantive participating rights. Accordingly, the investees are not variable interest entities and these investments are accounted for under the equity method of accounting.

 
3.     Fiscal Period

      Our fiscal year ends on the Friday nearest May 31. The fiscal year includes operations for a 52-week period in fiscal 2004, 2003 and 2002

 
4.     Revenue Recognition and Accounts Receivable

      We consider revenue realized or realizable and earned when the following criteria are met:

  •  persuasive evidence of an agreement exists,
 
  •  delivery has occurred,
 
  •  our price to the buyer is fixed and determinable, and
 
  •  collectibility is reasonably assured.

      Sales are recorded net of discounts, and provisions for estimated returns and allowances. We estimate returns and allowances on an ongoing basis considering historical and current trends and projected seasonal results. We record these amounts as a reduction to net revenue. Our historical estimates of these sales reductions have not differed materially from actual results. For accounts receivable, we estimate the net collectibility considering both historical and anticipated trends of trade discounts and co-op advertising deductions taken by our customers, allowances we provide to our retail customers for a variety of reasons, historical write-offs and the possibility of non-collection due to the financial condition of our customers. Any trade accounts receivable that are not collectible are written off to selling, general and administrative expenses.

 
5.     Cash and Cash Equivalents

      We consider cash equivalents to be short-term investments with original maturities of three months or less.

 
6.     Inventories

      For segment reporting, inventory is carried at the lower of FIFO cost or market. For wholesale inventory, we estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods to the recovery value expected to be realized through

38


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

off-price channels yielding a normal gross margin when shipped. For Tommy Bahama retail inventory, we provide an allowance for shrinkage and goods expected to be sold below cost. If we incorrectly anticipate these trends or unexpected events occur, the results of operations could be materially affected. For consolidated financial reporting, significant portions of our inventories are valued at the lower of LIFO cost or market. LIFO inventory calculations are made on a legal entity basis which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. As part of our LIFO accounting, markdowns for inventory valued at LIFO cost are deferred until the period in which the goods are sold. However, in non routine circumstances, such as discontinuance of a product line, markdowns below the allocated LIFO reserve are not deferred. Both the LIFO reserve and the markdown deferral are reflected in Corporate and Other.

 
7.     Property, Plant and Equipment, net

      Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is calculated using both straight-line (primarily buildings) and accelerated methods over the estimated useful lives of the assets as follows:

     
Buildings and improvements
  7 – 40 years
Machinery and equipment
  3 – 15 years
Fixtures and equipment
  3 – 10 years
Software
  3 – 4 years
Autos and trucks
  2 – 6 years
Leasehold improvements
  Lesser of remaining life of the asset or lease term

      Property, plant and equipment are reviewed periodically for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. If expected future undiscounted cash flows from operations are less than their carrying amounts, an asset is determined to be impaired and a loss is recorded for the amount by which the carrying value of the asset exceeds its fair value.

 
8.     Income Taxes

      We recognize deferred tax liabilities and assets based on the difference between financial and tax bases of assets and liabilities using enacted tax rates expected to apply to taxable income in the period in which such amounts are expected to be realized or settled. Our policy is to recognize net deferred tax assets, whose realization is dependent on taxable earnings in future years, when a greater than 50 percent probability exists that the tax benefits will actually be realized sometime in the future.

 
9.     Financial Instruments

      Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and notes payable. Given their short-term nature, the fair values of financial instruments other than notes payable closely approximate their carrying values. The fair value of our notes payable was approximately $211 million at May 28, 2004, based on then-current market rates.

 
10.     Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date

39


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 
11.     Foreign Currency Translation

      Our functional currency for our owned foreign manufacturing facilities is the United States dollar. We remeasure those assets and liabilities denominated in foreign currencies using exchange rates in effect on the balance sheet date. Fixed assets and the related depreciation or amortization charges are recorded at the exchange rates in effect on the date we acquired the assets. Revenues and expenses denominated in foreign currencies are remeasured using average exchange rates for all periods presented. We recognize the resulting foreign exchange gains and losses as a component of cost of goods sold in the consolidated statements of earnings. These gains and losses are immaterial for all periods presented.

 
12.     Advertising

      All costs associated with advertising, promoting and marketing of our products are expensed during the periods when the activities take place. Costs associated with cooperative advertising programs under which we agree to share costs of customers’ advertising and promotion expenditures are expensed when the related revenues are recognized. Advertising, promotion and marketing expenses are included in selling, general and administrative expenses. The total advertising costs in fiscal 2004, 2003 and 2004 were $15.4 million, $8.2 million and $8.6 million, respectively.

 
13.     Stock Based Compensation

      As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock Based Compensation”, we account for employee stock compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“Opinion 25”).

      Under Opinion 25, no compensation expense is recognized because the exercise price of our employee stock options equals the market price of the underlying stock on the date of the grant.

      The effect of applying the fair value method of SFAS 123 to our stock option plans does not result in net earnings and net earnings per share that are materially different from the amounts reported in our consolidated financial statements as demonstrated below (amounts in thousands except per share data):

                         
Year Ended

2004 2003 2002



Net earnings as reported
  $ 39,716     $ 20,327     $ 10,572  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
    (664 )     (386 )     (324 )
     
     
     
 
Pro forma net earnings
  $ 39,052     $ 19,941     $ 10,248  
Basic earnings per common share as reported
  $ 2.47     $ 1.35     $ 0.71  
Pro forma basic earnings per common share
  $ 2.43     $ 1.33     $ 0.69  
Diluted earnings per common share as reported
  $ 2.38     $ 1.34     $ 0.70  
Pro forma diluted earnings per common share
  $ 2.34     $ 1.32     $ 0.68  
     
     
     
 

40


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
14.     Unamortized Debt Issuance Costs

      Unamortized debt issuance costs related to our long term debt are amortized on a straight line method, which approximates an effective interest method over the life of the related debt. Amortization expense totaled $2.5 million and $50,000 in fiscal years 2004 and 2003, respectively, and is included in interest expense in the accompanying consolidated statements of earnings.

 
15.     Change in Accounting Principle

      In 2002, we changed our method of calculating LIFO inventories by reducing the overall number of inventory pools from five to three. We made the change to better match costs with revenues and to provide for a LIFO adjustment more representative of our actual inflation on our inventories. The effect of the change on the results of operations for 2002 was to reduce net earnings by $3 million or $.20 per share diluted.

 
16.     Goodwill

      The evaluation of the recoverability of goodwill under SFAS 142 requires valuations of each applicable underlying business using fair value techniques and market comparables. These valuations can be significantly affected by estimates of future performance and discount rates over a relatively long period of time, market price valuation multiples and transactions in related markets. These estimates will likely change over time. Goodwill is required to be evaluated annually, or more frequently if events or changes in circumstances indicate that the carrying amount may exceed fair value. If this review indicates an impairment of goodwill balances, the amount of impairment will be recorded immediately and reported as a component of current operations. The business valuation reviews required by SFAS 142 were performed as of the end of the first quarter and indicated that no reduction of the carrying value of goodwill for our business units was required.

 
17.     Intangible Assets Other than Goodwill

      Intangible assets with finite lives are amortized while intangible assets with indefinite useful lives are not amortized, but tested at least annually for impairment. The valuation of the recoverability of indefinite lived intangibles can be significantly impacted by estimates of future cash flows and discount rates over a relatively long period of time, which will likely change over time. Intangible assets whose useful lives are finite are amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized.

 
18.     Legal and Tax Contingencies

      We are involved in tax and legal proceedings, claims and litigation arising in the ordinary course of business. We periodically assess our liabilities and contingencies in connection with these matters, based upon the latest information available. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we have recorded reserves in the consolidated financial statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, we are unable to make a reasonable estimate of a liability, if any. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

 
19.     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

41


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in the spring and summer seasons. Products are sold prior to each of our retail selling seasons, including spring, summer, fall and holiday. As the timing of product shipments and other events affecting the retail business may vary, results for any particular quarter may not be indicative of results for the full year. The percentage of net sales distribution by quarter for fiscal 2004 were 22%, 23%, 25% and 30%, and the net earnings by quarter for fiscal 2004 were 17%, 17%, 24% and 42%.

 
20.             Cost of Goods Sold

      We include in cost of goods sold all manufacturing and sourcing costs and expenses incurred prior to receipt of finished goods at our distribution facilities. These costs principally include product cost, inbound freight charges, purchasing costs, internal transfer costs, as well as insurance, duty, brokers’ fees and consolidators’ fees. Our gross margins may not be directly comparable to those of our competitors, as income statement classifications of certain expenses may vary by company.

 
21.             Selling, General and Administrative Expenses

      We include in selling, general and administrative expenses, costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of inspection, stocking, warehousing, picking and packing, shipping and handling goods for delivery to customers. In addition, selling, general and administrative expenses include product design costs, selling costs, royalty costs, advertising, promotion and marketing expenses and general and administrative expenses.

 
22.             Distribution Network Costs, Including Shipping and Handling

      Distribution network costs, including shipping and handling, are included as a component of selling, general and administrative expenses. Revenues received from customers for shipping and handling are included in net revenue. In fiscal 2004, 2003 and 2002, distribution network costs, including shipping and handling, were $23.5 million, $16.6 million and $15.4 million, respectively.

 
23.             New Accounting Standards

      During fiscal 2004, we adopted Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 requires that a variable interest entity be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. We determined that we had no interests in variable interest entities. Accordingly, the adoption of FIN 46 did not have a material impact on our financial position, results of operations or liquidity.

 
Note B. Sale of Accounts Receivable:

      During our fiscal 2003, we had a $65 million asset backed revolving securitization facility (“securitization facility”) under which we sold a defined pool of our accounts receivable to a wholly-owned special purpose subsidiary. The securitization facility was accounted for as secured borrowing. We had no borrowings under the securitization facility on May 30, 2003. We terminated the accounts receivable securitization facility in June 2003, in connection with a new senior revolving credit facility established to finance the acquisition of the Tommy Bahama Group (See Note “O”).

42


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note C.     Inventories:

      The components of inventories are summarized as follows:

                 
May 28, 2004 May 30, 2003


($ in thousands)
Finished goods
  $ 85,492     $ 64,695  
Work in process
    9,925       11,981  
Fabric, trim and supplies
    20,993       27,658  
     
     
 
    $ 116,410     $ 104,334  
     
     
 

      The excess of replacement cost over the carrying value of inventories based upon the LIFO method was $35.5 million at May 28, 2004 and $34.9 million at May 30, 2003. At May 28, 2004 and May 30, 2003, 85% and 97%, respectively, of our inventories were valued under the LIFO method.

      During fiscal 2004 and 2003 inventory quantities were reduced in certain pools, which resulted in a liquidation of LIFO inventory layers carried at lower costs which prevailed in prior years. The effect of the liquidation in fiscal 2004 was to decrease cost of goods sold by approximately $98,000 and to increase net earnings by $62,000. The effect of the liquidation in fiscal 2003 was to decrease cost of goods sold by approximately $69,000 and to increase net earnings by $42,000.

Note D.     Property, Plant and Equipment, Net:

      Property, plant and equipment, carried at cost, are summarized as follows:

                 
May 28, 2004 May 30, 2003


($ in thousands)
Land
  $ 2,075     $ 2,253  
Buildings
    28,980       31,285  
Machinery and equipment
    71,010       60,890  
Leasehold improvements
    26,719       4,974  
     
     
 
      128,784       99,402  
     
     
 
Less accumulated depreciation and amortization
    (76,958 )     (77,431 )
     
     
 
    $ 51,826     $ 21,971  
     
     
 

      Machinery and equipment includes machinery, office fixtures, equipment, software, autos and trucks.

      Depreciation expense in fiscal 2004, 2003 and 2002 was $11.7 million, $5.9 million and $6.8 million, respectively.

Note E.     Restricted Cash:

      As of May 30, 2003, we had $205 million in restricted cash, which was held in escrow. The cash was primarily received from our senior note offering completed on May 16, 2003 (See Note “G”). The proceeds from our senior note offering were restricted and could only be used to complete the acquisition of the Tommy Bahama Group, which was completed on June 13, 2003 (See Note “O”).

Note F.     Goodwill and Intangibles:

      On June 1, 2002, we adopted SFAS 142. This statement requires that goodwill, including previously existing goodwill and intangible assets with indefinite useful lives, not be amortized, but instead tested for

43


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

impairment at adoption and at least annually thereafter. We performed our initial test upon adoption and have performed our annual impairment review in subsequent years as of the end of our first quarter.

      The fair value of our goodwill is determined using a discounted cash flow methodology. Goodwill in the accompanying balance sheet is net of accumulated amortization of $7.9 million.

      Had we adopted SFAS 142 as of June 3, 2000, the effects on income would have been as follows.

                         
May 28, 2004 May 30, 2003 May 31, 2002



Net earnings (as reported)
  $ 39,716     $ 20,327     $ 10,572  
Effect of ceasing goodwill amortization
                1,237  
     
     
     
 
Pro forma net earnings
  $ 39,716     $ 20,327     $ 11,809  
Pro forma basic net earnings per share
  $ 2.47     $ 1.35     $ 0.79  
Pro forma diluted net earnings per share
  $ 2.38     $ 1.34     $ 0.78  

      Intangible assets by category are summarized below:

                         
Intangibles, Accumulated Intangibles,
Intangibles at Cost Amortization Net




Trademarks
  $ 128,233     $ 77     $ 128,156  
Licensee agreements
    8,649       2,573       6,076  
Customer relationships
    16,700       3,944       12,756  
Covenant not to compete
    460       115       345  
     
     
     
 
    $ 154,042     $ 6,709     $ 147,333  
     
     
     
 

      Amortization expense was $6.7 million in fiscal 2004. Amortization expense is projected to be $5.6 million for fiscal year 2005, $4.2 million for fiscal year 2006, $3 million for fiscal year 2007, $2.2 million for fiscal 2008 and $1 million for fiscal 2009.

Note G.     Notes Payable and Long-Term Debt:

      On May 16, 2003, we completed a $200 million private placement of senior unsecured notes. The proceeds from the private placement were used to fund our acquisition of the Tommy Bahama Group (see Note “O”). The notes bear interest as 8.875%, have an 8-year life and were sold at a discount of 0.713% ($1.4 million) to yield an effective interest rate of 9.0%. The terms of the notes provide certain limitations on additional indebtedness, and certain other transactions. Additionally, we are subject to certain financial covenants.

      At May 30, 2003, we had $145.5 million in uncommitted lines of credit, of which $125 million was reserved exclusively for letters of credit. We did not pay any commitment fees for these available lines of credit. At May 30, 2003, there were no direct borrowings and approximately $77 million in letters of credit outstanding under these lines. These lines of credit were refinanced under our new senior credit facility which was established with the acquisition of the Tommy Bahama Group (see Note “O”).

      On June 13, 2003, we entered into a $275 million senior secured revolving credit facility (senior revolver), which has a five year term and bears interest, at our option, at rates determined from time to time based upon (1) the higher of the federal funds rate or the applicable prime rate plus a spread or (2) LIBOR plus a spread. Borrowings under the senior revolver are subject to a borrowing base calculation based on our accounts receivable, inventories and real property, and are secured by substantially all of our United States-based assets. At May 28, 2004, we had no direct borrowings and

44


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

approximately $99.5 million in letters of credit outstanding under this credit facility resulting in excess availability of $146 million.

      A summary of debt is as follows:

                 
May 28, 2004 May 30, 2003


($ in thousands)
Notes payable at a fixed rate of 8.875%, due in 2011
  $ 198,760     $ 198,581  
Other debt
    152       139  
     
     
 
Total notes payable and long-term debt
    198,912       198,720  
Less current maturities
    (98 )     (134 )
     
     
 
Total long-term portion
  $ 198,814     $ 198,586  
     
     
 

      The aggregate maturities of debt are as follows:

         
Fiscal Year ($ in thousands)


2005
  $ 98  
2006
    32  
2007
    16  
2008
    6  
Thereafter
    198,760  
     
 
    $ 198,912  
     
 

Note H.     Commitments and Contingencies:

      We have operating lease agreements for buildings, sales offices and equipment with varying terms to 2014. The total rent expense under all leases was $23.7 million in 2004, $5.4 million in 2003 and $5.6 million in 2002.

      The aggregate minimum rental commitments for all non-cancelable operating leases with original terms in excess of one year are as follows:

         
Fiscal Year ($ in thousands)


2005
  $ 17,370  
2006
    16,865  
2007
    16,228  
2008
    16,108  
2009
    15,530  
Thereafter
    54,084  
     
 
    $ 136,185  
     
 

45


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      We are also obligated under certain apparel license and design agreements to make future minimum payments as follows:

         
Fiscal Year ($ in thousands)


2005
  $ 7,424  
2006
    6,230  
2007
    831  
     
 
    $ 14,485  
     
 

      We are involved in certain legal matters primarily arising in the normal course of business. In our opinion, our liability under any of these matters would not materially affect our financial position, results of operations or cash flows.

      We discovered a past unauthorized disposal of a substance believed to be dry cleaning fluid on one of our properties. We believe that remedial action will be required, including continued investigation, monitoring and treatment of groundwater and soil. Based on advice from our environmental experts, we provided $4.5 million for this remediation in the fiscal year ended May 31, 1996. We believe this estimate of our potential liability continues to be reasonable given recent discussions with our environmental experts.

      During fiscal 2003, we closed our Izod Club Golf European operation. During the second quarter of fiscal 2003, our costs to close the operation were approximately $1.3 million, of which approximately $0.8 million related to inventory markdowns and were recognized as additional cost of goods sold, and $0.5 million related primarily to severance costs and an increase in the allowance for doubtful accounts and was recognized as additional SG & A. Substantially all of the costs were settled during fiscal 2003. Net sales for our Izod Club Golf European operation was $0.5 million in fiscal 2003.

      During fiscal 2003, we announced our decision to close our Izod Club Golf United States operation in fiscal 2004 upon completion of shipping the Fall 2003 season. Total costs incurred during the fourth quarter of fiscal 2003, were approximately $3.5 million, of which approximately $3 million was recognized by the Menswear Group and the remaining $0.5 million was recognized in Corporate and Other. Of the total costs incurred,

  •  Approximately $1.4 million was related to inventory markdowns in excess of the related LIFO cost,
 
  •  Approximately $1.7 million was related to a license termination fee, which is being paid in four equal quarterly installments during calendar 2004, and
 
  •  The remaining $0.4 million were related to severance and other miscellaneous costs.

      The costs associated with the inventory markdowns was recognized as additional cost of goods sold while all other costs incurred were recognized as additional SG & A expense. At May 30, 2003, substantially all of the amounts related to the severance had been paid. During fiscal 2004, all inventory was liquidated and two installments of the termination fee were paid. The remaining fees will be paid during fiscal 2005. Net sales for our Izod Club Golf United States operation in fiscal 2004, 2003 and 2002 were $6.5 million, $18.1 million and $24.5 million, respectively.

Note I.     Stock Options:

      At May 28, 2004, 1,353,650 shares of Common Stock were authorized and reserved for issuance under our 1997 stock option plan. The options granted under the stock option plans expire ten years from the date of grant. Options granted vest over five years.

46


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Pro forma information regarding net earnings and net earnings per share is required by SFAS 123 and has been determined as if we had accounted for our employee stock option plans under the fair value method of that statement. The fair value of these options was estimated at the date of the grant using the Black-Scholes option pricing model with the following assumption ranges: Risk-free interest rates between 4.565% and 6.510%, dividend yields between 1.28% and 4.87%, volatility factors between 0.2814 and 0.3525, and expected lives of ten years.

      A summary of the status of our stock option plans and changes during the years ended are presented below:

                                                 
Year Ended:

2004 2003 2002



Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price






Outstanding, beginning of year
    967,160     $ 12       798,000     $ 12       928,200     $ 12  
Granted
    463,500       30       234,000       12       224,400       11  
Exercised
    (414,640 )     14       (13,540 )     9       (318,140 )     9  
Forfeited
    (12,100 )     14       (51,300 )     13       (36,460 )     12  
     
     
     
     
     
     
 
Outstanding, end of year
    1,003,920     $ 19       967,160     $ 12       798,000     $ 12  
Options exercisable, end of year
    123,920               344,820               216,620          
     
             
             
         

      The following table summarizes information about stock options outstanding as of May 28, 2004.

                                         
Number of Exercise Grant Date Number
Date of Option Grant Shares Price Fair Value Exercisable Expiration Date






Jul. 13, 1998
    26,900     $ 17.83     $ 5.16       26,900       July 13, 2008  
Jul. 12, 1999
    76,120       13.94       4.70       39,440       July 12, 2009  
Jul. 10, 2000
    109,030       8.63       2.03       28,470       July 10, 2010  
Jul. 16, 2001
    136,180       10.73       3.18       17,040       July 16, 2011  
Jul. 15, 2002
    194,190       11.73       3.25       12,070       July 15, 2012  
Aug. 18, 2003
    230,500       26.44       11.57             Aug. 18, 2013  
Nov. 17, 2003
    40,000       32.15       14.81             Nov. 17, 2013  
Dec. 16, 2003
    191,000       32.75       14.17             Dec. 16, 2013  
     
     
     
     
     
 
      1,003,920                       123,920          
     
                     
         

      We have a Restricted Stock Plan for issuance of up to 200,000 shares of Common Stock. At May 28, 2004, 5,884 shares were outstanding under this plan. The plan allows us to compensate our key employees with shares of Common Stock containing restrictions on sale and other restrictions in lieu of cash compensation.

Note J.     Significant Customers:

      We sell our merchandise in all major retail distribution channels across the United States and extend credit based on an evaluation of the customer’s financial condition. Credit risk is impacted by conditions or occurrences within the economy and the retail industry and is principally dependent on each customer’s financial condition. A decision by the controlling owner of a group of stores or any substantial customer to

47


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

decrease the amount of merchandise purchased from us or to cease carrying our products could have a material adverse effect. Two customers, in the aggregate, constituted approximately $53.9 million of trade accounts receivable outstanding at May 28, 2004. Three customers, in the aggregate, constituted approximately $62.2 million of trade accounts receivable outstanding at May 30, 2003.

      We monitor credit levels and the financial condition of our customers on a continuous basis to minimize credit risk. We believe that adequate provision for credit loss has been made in the Consolidated Financial Statements.

      Our top two customers represented 19% and 11% of our net sales in fiscal 2004. Our top three customers represented 22%, 16%, and 15% in fiscal 2003 and 19%, 13% and 10% of our total sales in fiscal 2002. We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses.

      In fiscal 2004, two customers represented 19% and 11% of the Menswear Group sales, three customers represented 51%, 34% and 10% of the Womenswear Group sales and one customer represented 16% of the Tommy Bahama Group sales.

      In fiscal 2003, two customers represented 26% and 12% of the Menswear Group sales and two customers represented 48% and 34% of the Womenswear Group sales.

      In fiscal 2002, two customers represented 19% and 13% of the Menswear Group sales and two customers represented 44% and 32%of the Womenswear Group sales.

Note K.     Benefit Plans:

      We have tax-qualified voluntary retirement savings plans covering substantially all full-time United States employees. If a participant decides to contribute, a portion of the contribution is matched by us. Our total expense under these plans in fiscal 2004, 2003 and 2002 were $1.8 million, $1.1 million and $1.1 million, respectively.

      We have a non-qualified deferred compensation plan offered to a select group of management and highly compensated employees. The plan provides the participants with the opportunity to defer a specified percentage of their cash compensation. We match a portion of the contribution. Participants may elect to defer up to 10% of their annual base salary and up to 25% of their bonus. We fund these deferred compensation liabilities by making contributions to a rabbi trust, which had assets of approximately $2.8 million at May 28, 2004, and approximately $1.5 million at May 30, 2003.

      The Tommy Bahama Group sponsors and maintains a non-qualified deferred compensation plan for eligible executives. Participants may elect to defer up to 100% of compensation in a given plan year. Any amounts deferred under the non-qualified deferred compensation plan are subject to a Company matching contribution equal to the contribution that would have been received had the deferrals been made under the Company’s 401(k) Plan (without reference to any statutory or other limits). The matching contribution is equal to 50% of the first 12% of compensation deferred. Matching contributions become vested after two years of continuous service. Participants may direct how their accounts under the non-qualified deferred compensation plan are to be invested. Our total expense for deferred compensation plans in fiscal 2004, 2003 and 2002 was $253,000, $156,000 and $170,000, respectively.

48


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
Note L. Income Taxes:

      The provision (benefit) for income taxes includes the following:

                           
2004 2003 2002



($ in thousands)
Current:
                       
 
Federal
  $ 22,526     $ 12,725     $ 2,944  
 
State
    2,002       1,645       120  
 
Foreign
    1,235       1,088       781  
     
     
     
 
      25,763       15,458       3,845  
Deferred
    (2,379 )     (2,371 )     2,859  
     
     
     
 
    $ 23,384     $ 13,087     $ 6,704  
     
     
     
 

      Reconciliations of the United States federal statutory income tax rates and the Company’s effective tax rates are summarized as follows:

                         
2004 2003 2002



Statutory rate
    35.0 %     35.0 %     35.0 %
State income taxes — net of federal income tax benefit
    1.8       2.6       1.9  
Non-deductible expenses and other, net
    0.3       1.6       1.9  
     
     
     
 
Effective rate
    37.1 %     39.2 %     38.8 %
     
     
     
 

      Deferred tax assets and liabilities are comprised of the following:

                 
May 28, 2004 May 30, 2003


($ in thousands)
Deferred Tax Assets:
               
Inventories
  $ 1,515     $ 1,933  
Accrued compensation and benefits
    4,549       2,663  
Allowance for doubtful accounts
    1,375       1,341  
Depreciation and amortization
    5,172       1,718  
Noncurrent liabilities
    1,721       1,721  
Other, net
    2,148       1,338  
     
     
 
Deferred Tax Assets
    16,480       10,714  
Deferred Tax Liabilities:
               
Acquired intangible assets
    56,146        
Foreign
    3,054       2,561  
Other, net
    1,970       1,063  
     
     
 
Deferred Tax Liabilities
    61,170       3,624  
     
     
 
Net Deferred Tax (Liability) Asset
  $ (44,690 )   $ 7,090  
     
     
 

49


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
Note M. Earnings Per Share:
                             
May 28, 2004 May 30, 2003 May 31, 2002



(In thousands, except share and per share
amounts)
Net earnings available to common stockholders (numerator):
  $ 39,716     $ 20,327     $ 10,572  
     
     
     
 
Shares (denominator):
                       
 
Weighted average shares outstanding
    16,099,851       15,034,720       14,987,356  
Dilutive securities:
                       
 
Options
    477,581       108,570       111,198  
 
Earnout contingently issuable shares
    121,312              
     
     
     
 
   
Total assuming conversion
    16,698,744       15,143,290       15,098,554  
     
     
     
 
Per share amounts:
                       
 
Basic earnings per common share
  $ 2.47     $ 1.35     $ 0.71  
 
Diluted earnings per common share
  $ 2.38     $ 1.34     $ 0.70  

  •  Earnout contingently issuable shares represent 485,248 shares payable to selling shareholders based on achievement of performance targets as of May 28, 2004 (see Note “O”).
 
  •  Stock options to purchase 177,000 shares of our Common Stock at $17.83 per share were outstanding during fiscal 2003. However, these were not included in the computation of diluted earnings per share because the inclusion of such shares would have had an antidilutive effect.
 
  •  Stock options to purchase 381,400 shares of our Common Stock at prices ranging from $13.94 to $17.83 per share were outstanding during fiscal 2002. However, these were not included in the computation of diluted earnings per share because the inclusion of such shares would have had an antidilutive effect.
 
Note N. Segments:

      During the second quarter of fiscal 2004, we reorganized the components of our business for purposes of allocating resources and assessing performance. As a result of this reorganization, the Oxford Shirt Group, Lanier Clothes and Oxford Slacks, which were previously reportable segments, were combined to become the Menswear Group. Prior year amounts were restated to conform to the current segment presentation. The Womenswear Group and the Tommy Bahama Group remain unchanged. The Menswear Group produces branded and private label dress shirts, sport shirts, dress slacks, casual slacks, suits, sportscoats, suit separates, walkshorts, golf apparel, jeans, swimwear, footwear and headwear. The Womenswear Group produces private label women’s sportswear separates, coordinated sportswear, outerwear, dresses and swimwear. The Tommy Bahama Group produces lifestyle branded casual attire, operates retail stores and restaurants, and licenses its brands for accessories, footwear, furniture, and other products. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis which do not correspond to our segment definitions. Therefore, LIFO inventory accounting adjustments are not allocated to the operating segments. Total assets for Corporate and Other included the LIFO inventory reserve of $35.5 million, $34.9 million and $35.2 million at May 28, 2004, May 30, 2003 and May 31, 2002, respectively.

50


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                         
Tommy
Menswear Womenswear Bahama Corporate
Group Group Group and Other Total





($ in thousands)
2004
                                       
Net sales
  $ 448,800     $ 297,865     $ 369,148     $ 739     $ 1,116,552  
Depreciation and amortization of intangibles
    3,559       440       13,974       489       18,462  
Operating Income
    41,915       11,583       50,644       (17,129 )     87,013  
Interest expense, net
                                    23,913  
Earnings before income taxes
                                    63,100  
Total assets
    171,718       95,866       390,961       36,272       694,817  
Purchases of property, plant and equipment
    1,831       71       12,033       208       14,143  
Goodwill
    1,847       3,992       109,587             115,426  
2003
                                       
Net sales
  $ 455,516     $ 308,762     $     $ 324     $ 764,602  
Depreciation and amortization of intangibles
    4,328       958             701       5,987  
Operating income
    27,837       17,321             (9,809 )     35,349  
Interest expense, net
                                    1,935  
Earnings before income taxes
                                    33,414  
Total assets
    183,834       86,118             224,413       494,365  
Purchases of property, plant and equipment
    1,713       82             256       2,051  
Goodwill
    1,847       3,992                   5,839  
2002
                                       
Net sales
  $ 423,133     $ 253,723     $     $ 408     $ 677,264  
Depreciation and amortization of intangibles
    4,965       2,982             941       8,888  
Operating income
    16,042       9,538             (8,061 )     17,519  
Interest expense, net
                                    243  
Earnings before income taxes
                                    17,276  
Total assets
    179,695       75,585             (4,767 )     250,513  
Purchases of property, plant and equipment
    1,321       82             125       1,528  
Goodwill
    1,847       3,992                   5,839  

51


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Information for the net book value of property plant and equipment by geographic area is presented below:

                 
Year Ended

May 28, 2004 May 30, 2003


United States
  $ 42,866     $ 11,277  
Latin America
    8,452       9,928  
Other foreign
    508       766  
     
     
 
Total
  $ 51,826     $ 21,971  
     
     
 

52


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
Note O. Tommy Bahama Group Acquisition:

      On June 13, 2003, we acquired all of the capital stock of Viewpoint International, Inc., which we operate as the Tommy Bahama Group. The purchase price for the acquisition of the Tommy Bahama Group consists of $240 million in cash, $10 million in our Common Stock (776,400 shares), and up to $75 million in contingent payments that are subject to the Tommy Bahama Group achieving certain performance targets. Such performance targets are based on earnings before interest and taxes after deduction of a capital charge based on net tangible assets and are as follows:

  •  Year 1-$42.3 million, which will be prorated to $40.8 million based on the closing of the acquisition 13 days into the year;
 
  •  Year 2-$50 million;
 
  •  Year 3-$58.1 million; and
 
  •  Year 4-$69.7 million;

      For each of the four years following the acquisition, the selling stockholders of the Tommy Bahama Group will receive an annual basic contingent payment if their earnings are greater than 90% of the applicable target described above and will receive the maximum annual basic contingent payment of $12.5 million if their earnings are 100% or greater than the applicable target. If their earnings are between 90% and 100% of the applicable target, the annual basic contingent payment will be calculated on a straight line basis from $0 to $12.5 million. Up to 50% of any annual basic contingent payment may be paid in shares of our Common Stock at our option, and in the case of payments in the first two years, at the option of the selling stockholders of the Tommy Bahama Group. Shares of our Common Stock issued at our option will be valued at the average price on the New York Stock Exchange (or other applicable exchange) for the ten full trading days prior to the applicable payment date. Shares of our Common Stock issued at the option of the selling stockholders will be valued at $12.88 per share. All earnout payments to be paid to selling shareholders will be treated as additional purchase price and recorded as goodwill. The Year 1 contingent payment was earned in full and $22.8 million has been accrued as additional acquisition cost payable in the financial statements. The contingent payment will be made by issuing 485,248 shares of our Common Stock and approximately $5 million of cash in the first half of fiscal 2005.

      Additionally, if, at the end of the four year period, cumulative earnings exceed the cumulative targets, the selling stockholders will receive 33.33% of the cumulative excess up to a maximum cumulative additional contingent payment of $25 million. Any cumulative additional contingent payment will be paid in cash.

      Approximately 5% of the total value of all consideration that becomes due and payable under the earnout agreement has been designated to be paid toward an Employee Cash Bonus Plan to be distributed to employees of Tommy Bahama under the terms of the plan. The estimated amount of the earnout payments designated toward the Employee Cash Bonus Plan of approximately $1.4 million was charged to selling, general and administrative expense in the fourth quarter of fiscal 2004.

      This acquisition helped us achieve one of our key strategic objectives of owning a major lifestyle brand. The acquisition of the Tommy Bahama Group provides for strategic benefits through growth opportunities and further diversification of our business over distribution channels, price points, product categories and target customers. The Tommy Bahama Groups results of operations from June 14, 2003 through May 28, 2004 are included in our consolidated statement of earnings in the Consolidated Financial Statements.

      In connection with the Tommy Bahama Group acquisition, we entered into a $275 million senior secured revolving credit facility, which has a five year term and bears interest, at our option, at rates

52


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

determined from time to time based upon (1) the higher of the federal fund rate or the applicable prime rate plus a spread or (2) LIBOR plus a spread. Borrowings under the senior secured revolving credit facility are subject to a borrowing base calculation based on our accounts receivable, inventories and real property.

      Upon completion of the Tommy Bahama Group acquisition, the net proceeds from our $200 million senior notes offering were released from escrow. We used the net proceeds from our senior notes offering, together with limited borrowings under our senior secured revolving credit facility and cash on hand, to finance the cash portion of the purchase price for the Tommy Bahama Group acquisition. We also terminated our previously existing accounts receivable securitization facility in June 2003, in connection with the senior revolving credit facility.

      The purchase price, including of contingent consideration of $22.8 million allocated to goodwill during the fourth quarter, was allocated to the net assets of the Tommy Bahama Group, which are based on their estimated fair values. Additional contingent consideration will be recorded and allocated to goodwill when earned by the sellers. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

           
Market value of stock issued
  $ 10,000  
Cash consideration paid
    241,696  
Direct merger costs
    3,366  
Year one contingent consideration
    22,779  
     
 
 
Total purchase price
  $ 277,841  
 
Cash
  $ 22,145  
Accounts receivable
    29,521  
Inventories
    27,697  
Other current assets
    6,015  
Goodwill
    109,586  
Intangibles
    153,360  
Property, plant and equipment
    28,087  
Other assets
    2,470  
Current liabilities
    (45,626 )
Noncurrent liabilities
    (1,253 )
Deferred taxes
    (54,161 )
     
 
Fair value of net assets acquired
  $ 277,841  
     
 

      The components of the Intangibles listed in the above table are as follows:

                 
Amount Life


Trademarks
  $ 127,800       Indefinite  
License agreements
    8,400       5 years  
Customer relationships
    16,700       15 years  
Covenant not to compete
    460       4 years  
     
         
Total
  $ 153,360          
     
         

53


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The pro forma financial information presented below gives effect to the Tommy Bahama Group acquisition as if it had occurred as of the beginning of fiscal 2004 and fiscal 2003. The information presented below is for illustrative purposes only and is not indicative of results that would have been achieved if the acquisition had occurred as of the beginning of fiscal 2004 and 2003 or results which may be achieved in the future.

                 
Year Ended

May 28, 2004 May 30, 2003


Net Sales
  $ 1,128,284     $ 1,094,643  
Net Earnings
  $ 40,299     $ 34,668  
Net Earnings Per Share
               
Basic
  $ 2.50     $ 2.19  
Diluted
  $ 2.41     $ 2.18  
 
Note P. Stock Split:

      We effected a two-for-one stock split in the form of a 100% stock dividend, payable December 1, 2003, to shareholders of record on November 17, 2003. All share and per share data appearing in the Consolidated Financial Statements and related notes have been retroactively adjusted for this stock split.

 
Note Q. Related Party Transactions:

      During fiscal 2004, the Tommy Bahama Group purchased approximately $2.8 million of inventory and recorded approximately $1 million in royalty income from Paradise Shoe Company, LLC, an entity in which we own a 50% interest for which we account for under the equity method. Paradise Shoe holds an exclusive license to produce and market men’s and women’s shoes, belts and socks under the Tommy Bahama brand. The net amount due from Paradise Shoe at May 28, 2004 was approximately $625,000.

      During fiscal 2004, the Menswear Group purchased approximately $8.6 million of inventory from Jiangsu Oxford Sainty Garment Manufacturing Limited, in which we own a 49% interest that we account for under the equity method.

 
Note R. Consolidating Financial Data of Subsidiary Guarantors:

      The notes discussed in Note “G” were issued by Oxford Industries, Inc. Not all of our subsidiaries guarantee the notes. Each subsidiary guarantor is wholly owned by Oxford Industries, Inc. and organized in the United States. All guarantees are full and unconditional. Non-guarantors consist of subsidiaries of Oxford Industries, Inc. which are organized outside the United States. Our consolidated balance sheets at May 28, 2004 and May 30, 2003, and our consolidated statements of earnings and cash flow for the years ended May 28, 2004, May 30, 2003 and May 31, 2002 are set forth below. We have used the equity method with respect to investment in subsidiaries.

54


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Oxford Industries, Inc.

CONSOLIDATED BALANCE SHEET

May 28, 2004
                                         
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





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

55


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Oxford Industries, Inc.

CONSOLIDATED BALANCE SHEET

May 30, 2003
                                         
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Assets
Current Assets:
                                       
Cash and cash equivalents
  $ 23,022     $ 218     $ 720     $ 131     $ 24,091  
Receivables
    (20,430 )     125,045       39,801       (34,112 )     110,304  
Inventories
    94,868       6,578       2,887       1       104,334  
Prepaid expenses
    11,339       774       520       (2 )     12,631  
     
     
     
     
     
 
Total current assets
    108,799       132,615       43,928       (33,982 )     251,360  
Property, plant and equipment, net
    15,744       713       5,514             21,971  
Deferred income taxes
    119                         119  
Goodwill
    1,847       3,992                   5,839  
Intangibles, net
    287       395                   682  
Restricted cash in escrow
    204,986                         204,986  
Other assets, net
    54,392       711       1,872       (47,567 )     9,408  
     
     
     
     
     
 
Total Assets
  $ 386,174     $ 138,426       51,314     $ (81,549 )   $ 494,365  
     
     
     
     
     
 
 
Liabilities and Shareholders’ Equity
Current Liabilities:
                                       
Trade accounts payable
  $ 63,259     $ 6,092     $ 23,680     $ (34,000 )   $ 59,031  
Accrued compensation
    19,579       1,304       2,673             23,556  
Other accrued expenses
    15,124       (530 )     469             15,063  
Dividends payable
    1,579                         1,579  
Income taxes payable
    (7,733 )     9,352       932             2,551  
Current maturities of long-term debt
    124       10                   134  
     
     
     
     
     
 
Total current liabilities
    91,932       16,228       27,754       (34,000 )     101,914  
Long term debt, less current portion
    198,586                         198,586  
Deferred taxes
    3,197       (3,212 )     15              
Noncurrent liabilities
    (72,706 )     73,029       4,161       16       4,500  
Total Shareholders’/invested equity
    165,165       52,381       19,384       (47,565 )     189,365  
     
     
     
     
     
 
Total Liabilities and Shareholders’ Equity
  $ 386,174     $ 138,426     $ 51,314     $ (81,549 )   $ 494,365  
     
     
     
     
     
 

56


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Oxford Industries, Inc.

CONSOLIDATED STATEMENT OF EARNINGS

Year Ended May 28, 2004
                                         
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





Net Sales
  $ 693,222     $ 440,055     $ 37,672     $ (54,397 )   $ 1,116,552  
Cost of goods sold
    544,861       231,699       85       (537 )     776,108  
     
     
     
     
     
 
Gross Profit
    148,361       208,356       37,587       (53,860 )     340,444  
Selling, general and administrative
    125,167       156,801       30,842       (54,265 )     258,545  
Royalties and other income
    32       5,042       40             5,114  
     
     
     
     
     
 
Operating Income
    23,226       56,597       6,785       405       87,013  
Interest (income) expense, net
    25,127       (1,523 )     (95 )     404       23,913  
Income from equity investment
    42,503       38             (42,541 )      
     
     
     
     
     
 
Earnings Before Income Taxes
    40,602       58,158       6,880       (42,540 )     63,100  
Income Taxes
    889       21,234       1,261             23,384  
     
     
     
     
     
 
Net Earnings
  $ 39,713     $ 36,924     $ 5,619     $ (42,540 )   $ 39,716  
     
     
     
     
     
 

Oxford Industries, Inc.

CONSOLIDATED STATEMENT OF EARNINGS

Year Ended May 30, 2003
                                         
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





Net Sales
  $ 703,620     $ 78,545     $ 39,247     $ (56,810 )   $ 764,602  
Cost of goods sold
    550,966       52,313       1,595       17       604,891  
     
     
     
     
     
 
Gross Profit
    152,654       26,232       37,652       (56,827 )     159,711  
Selling, general and administrative
    131,200       12,286       37,645       (56,769 )     124,362  
     
     
     
     
     
 
Operating Income
    21,454       13,946       7       (58 )     35,349  
Interest (income) expense, net
    3,232       (1,141 )     (97 )     (59 )     1,935  
Income from equity investment
    10,596       65             (10,661 )      
     
     
     
     
     
 
Earnings Before Income Taxes
    28,818       15,152       104       (10,660 )     33,414  
Income Taxes
    8,494       3,506       1,087             13,087  
     
     
     
     
     
 
Net Earnings
  $ 20,324     $ 11,646     $ (983 )   $ (10,660 )   $ 20,327  
     
     
     
     
     
 

57


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Oxford Industries, Inc.

CONSOLIDATED STATEMENT OF EARNINGS

Year Ended May 31, 2002
                                         
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





Net Sales
  $ 616,686       76,160     $ 39,555     $ (55,137 )   $ 677,264  
Cost of goods sold
    494,058       50,657       925       (1,624 )     544,016  
     
     
     
     
     
 
Gross Profit
    122,628       25,503       38,630       (53,513 )     133,248  
Selling, general and administrative
    114,427       17,673       36,587       (52,958 )     115,729  
     
     
     
     
     
 
Operating Income
    8,201       7,830       2,043       (555 )     17,519  
Interest (income) expense, net
    2,094       (1,169 )     (126 )     (556 )     243  
Income from equity investment in subsidiaries
    7,223       38             (7,261 )        
     
     
     
     
     
 
Earnings Before Income Taxes
    13,330       9,037       2,169       (7,260 )     17,276  
Income Taxes
    2,758       3,150       796             6,704  
     
     
     
     
     
 
Net Earnings
  $ 10,572     $ 5,887     $ 1,373     $ (7,260 )   $ 10,572  
     
     
     
     
     
 

Oxford Industries, Inc.

CONSOLIDATED STATEMENT OF CASH FLOW

Year ended May 28, 2004
                                           
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Cash Flows From Operating Activities
                                       
Net earnings
  $ 39,713     $ 36,924     $ 5,619     $ (42,540 )   $ 39,716  
Adjustments to reconcile net earnings to net cash used in operating activities:
                                       
 
Depreciation and amortization
    3,883       16,702       480             21,065  
 
Equity income
    (40 )     (281 )                 (321 )
 
(Gain)/loss on sale of property, plant and equipment
    22       (39 )     (620 )           (637 )
Deferred income taxes
    1,051       (2,701 )     21       (750 )     (2,379 )
Changes in working capital
    (85,551 )     114,461       (5,477 )     (18,304 )     5,129  
Income from equity investment in subsidiaries
    (42,503 )     (38 )           42,541        

58


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                             
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Other assets, net
    (500 )     (3,463 )     271       (1,479 )     (5,171 )
Other noncurrent assets
    2,925       2,575                   5,500  
     
     
     
     
     
 
   
Net cash (used in) provided by operating activities
    (81,000 )     164,140       294       (20,532 )     62,902  
Cash Flows from Investing Activities
                                       
 
Acquisitions
    (245,062 )                 22,325       (222,737 )
 
Decrease in restricted cash
    204,986                         204,986  
 
Investment in deferred compensation plan
          (1,842 )                 (1,842 )
 
Purchases of property, plant and equipment
    (2,068 )     (11,875 )     (200 )           (14,143 )
 
Proceeds from sale of property, plant and equipment
    98       1,099       1,051       (573 )     1,675  
     
     
     
     
     
 
   
Net cash (used in) provided by investing activities
    (42,046 )     (12,618 )     851       21,752       (32,061 )
Cash Flows from Financing Activities
                                       
 
Principal payments of long-term debt
    (129 )     144             (225 )     (210 )
 
Proceeds from issuance of common stock
    7,181                         7,181  
 
Debt issue costs
    (7,416 )                       (7,416 )
 
Change in intercompany payable
    152,712       (150,446 )     (1,141 )     (1,125 )      
 
Dividends on common stock
    (6,918 )                       (6,918 )
     
     
     
     
     
 
   
Net cash (used in) provided by financing activities
    145,430       (150,302 )     (1,141 )     (1,350 )     (7,363 )
Net change in Cash and Cash Equivalents
    22,384       1,220       4       (130 )     23,478  
Cash and Cash Equivalents at the
                                       
 
Beginning of Period
    23,021       218       720       132       24,091  
     
     
     
     
     
 
Cash and Cash Equivalents at the
                                       
 
End of Period
  $ 45,405     $ 1,438     $ 724     $ 2     $ 47,569  
     
     
     
     
     
 

59


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

OXFORD INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CASH FLOW

Year Ended May 30, 2003
                                             
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Cash Flows From Operating Activities
                                       
Net earnings
  $ 20,324     $ 11,646     $ (983 )   $ (10,660 )   $ 20,327  
Adjustments to reconcile net earnings to net cash used in operating activities:
                                       
 
Depreciation and amortization
    4,550       728       656       53       5,987  
 
(Gain) /loss on sale of property, plant and equipment
    345       (4 )     120       1       462  
Deferred income taxes
    647       (965 )           (2,053 )     (2,371 )
Changes in working capital
    7,373       (4,948 )     (274 )     1,686       3,837  
Income from equity investment in subsidiaries
    (10,596 )     (65 )           10,661        
Other assets, net
    46       1       (645 )     (51 )     (649 )
     
     
     
     
     
 
   
Net cash (used in) provided by operating activities
    22,689       6,393       (1,126 )     (363 )     27,593  
Cash Flows from Investing Activities
                                       
 
Increase in restricted cash
    (204,986 )                       (204,986 )
 
Purchases of property, plant and equipment
    (1,924 )     (144 )     (76 )     93       (2,051 )
 
Proceeds from sale of property, plant and equipment
    577       139       358       (127 )     947  
     
     
     
     
     
 
   
Net cash (used in) provided by investing activities
    (206,333 )     (5 )     282       (34 )     (206,090 )

60


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                             
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Cash Flows from Financing Activities
                                       
 
Principal payments of long-term debt
    (216 )     (39 )                 (255 )
 
Proceeds from the issuance of notes
    198,581                         198,581  
 
Proceeds from issuance of common stock
    152       5             (6 )     151  
 
Debt issue costs
    (7,167 )                       (7,167 )
 
Change in intercompany payable
    5,414       (6,330 )     916              
 
Dividends on common stock
    (6,312 )                 (1 )     (6,313 )
     
     
     
     
     
 
   
Net cash (used in) provided by financing activities
    190,452       (6,364 )     916       (7 )     184,997  
Net change in Cash and Cash Equivalents
    6,808       24       72       (404 )     6,500  
Cash and Cash Equivalents at the
                                       
 
Beginning of Period
    16,214       194       648       535       17,591  
     
     
     
     
     
 
Cash and Cash Equivalents at the
                                       
 
End of Period
  $ 23,022     $ 218     $ 720     $ 131     $ 24,091  
     
     
     
     
     
 

Oxford Industries, Inc.

CONSOLIDATED COMBINED STATEMENT OF CASH FLOW

Year Ended May 31, 2002
                                           
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Cash Flows From Operating Activities
                                       
Net earnings
  $ 10,572     $ 5,887     $ 1,373     $ (7,260 )   $ 10,572  
Adjustments to reconcile net earnings to net cash used in operating activities:
                                       
 
Depreciation and amortization
    5,609       3,352       648       (721 )     8,888  
 
(Gain)/loss on sale of property, plant and equipment
    (37 )     4       3       (1 )     (31 )
Changes in working capital
    92,160       8,782       (1,032 )     (109,511 )     (9,601 )
Deferred income taxes
    1,318       (951 )           2,477       2,844  
Income from equity investment in subsidiaries
    (7,223 )     (37 )           7,260        
Other noncurrent assets
    (21 )     7,002       (267 )     (6,999 )     (285 )
     
     
     
     
     
 
Net cash provided by (used in) operating activities
    102,378       24,039       725       (114,755 )     12,387  

61


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                             
Oxford
Industries Subsidiary Subsidiary Consolidating Consolidated
(Parent) Guarantors Non-Guarantors Adjustments Total





($ in thousands)
Cash Flows from Investing Activities
                                       
 
Purchases of property, plant and equipment
    (1,235 )     (71 )     (223 )     1       (1,528 )
 
Proceeds from sale of property, plant and equipment
    347       10       19       721       1,097  
     
     
     
     
     
 
   
Net cash (used in) provided by investing activities
    (888 )     (61 )     (204 )     722       (431 )
Cash Flows from Financing Activities
                                       
Proceeds from short term debt
          (56,000 )           56,000        
Principal payments of long-term debt
    (7,232 )     (36 )     (684 )     7,684       (268 )
 
Change in intercompany payable
    (88,697 )     38,644             50,053        
 
Proceeds from issuance of common stock
    1,993                         1,993  
 
Dividends on common stock
    1,011       (7,287 )           1       (6,275 )
     
     
     
     
     
 
   
Net cash (used in) provided by financing activities
    (92,925 )     (24,679 )     (684 )     113,738       (4,550 )
Net change in Cash and Cash Equivalents
    8,565       (701 )     (163 )     (295 )     7,406  
Cash and Cash Equivalents at the
                                       
 
Beginning of Period
    7,649       895       811       830       10,185  
     
     
     
     
     
 
Cash and Cash Equivalents at the
                                       
 
End of Period
  $ 16,214     $ 194     $ 648     $ 535     $ 17,591  
     
     
     
     
     
 
 
Note S. Subsequent Events:

      On July 30, 2004, we acquired Ben Sherman Limited, which we will operate as part of our Menswear Group. Ben Sherman is a London-based designer, distributor and marketer of branded sportswear, accessories, and footwear. The purchase price for Ben Sherman was £80 million, or approximately $145 million, plus associated expenses. The transaction was financed with cash on hand and borrowings under our revolving credit facility.

      In association with the Ben Sherman acquisition, the senior revolver was amended and restated on July 28, 2004 and increased to $280 million with a syndicate of eight financial institutions. The maturity date was extended to July 28, 2009. Under the amended senior revolver, borrowing spreads and letter of credit fees are based upon a pricing grid, which is tied to a ratio of our total debt to our earnings before interest, taxes, depreciation and amortization (“EBITDA”), calculated as applicable on a pro forma basis. The credit agreement also requires us to maintain certain financial ratios including the ratio of total debt to EBITDA, the ratio of senior debt to EBITDA, a fixed charge coverage ratio and an interest coverage ratio. Our borrowings under the amended senior revolver are no longer subject to a borrowing base calculation based on our accounts receivable, inventory and real property.

      On July 30, 2004, our Ben Sherman subsidiary entered into a £12 million senior secured revolving credit facility to provide for seasonal working capital requirements and general corporate purposes. The facility is secured by substantially all of the United Kingdom assets of Ben Sherman and bears interest at

62


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the lender’s prime or base rate plus 1.20%. The facility is repayable on demand and requires the borrower to maintain certain financial ratios including a minimum interest coverage ratio, a minimum asset coverage ratio and a minimum level of earnings before interest, taxes, and amortization of intangibles.

 
Note T. Summarized Quarterly Data (unaudited):

      Following is a summary of the quarterly results of operations for the years ended May 28, 2004 and May 30, 2003:

                                         
Fiscal Quarter

First Second Third Fourth Total





($ in thousands, except per share amounts)
2004
                                       
Net sales
  $ 242,105     $ 253,883     $ 281,418     $ 339,146     $ 1,116,552  
Gross profit
    70,891       76,832       87,068       105,653       340,444  
Net earnings
    6,842       6,840       9,540       16,494       39,716  
Basic earnings per common share
    0.44       0.43       0.59       1.02       2.47  
Diluted earnings per common share
    0.42       0.41       0.58       0.97       2.38  
2003
                                       
Net sales
  $ 172,139     $ 185,421     $ 208,969     $ 198,073     $ 764,602  
Gross profit
    38,462       37,186       42,913       41,150       159,711  
Net earnings
    4,510       4,263       6,927       4,627       20,327  
Basic earnings per common share
    0.30       0.29       0.46       0.31       1.35  
Diluted earnings per common share
    0.30       0.29       0.46       0.30       1.34  

63


 

OXFORD INDUSTRIES, INC. AND SUBSIDIARIES

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

      The management of Oxford Industries, Inc. is responsible for the integrity and objectivity of the consolidated financial statements and other financial information presented in this report. These statements have been prepared in conformity with accounting principles generally accepted in the United States consistently applied and include amounts based on the best estimates and judgments of management.

      Oxford maintains a system of internal accounting controls designed to provide reasonable assurance, at a reasonable cost, that assets are safeguarded against loss or unauthorized use and that the financial records are adequate and can be relied upon to produce financial statements in accordance with accounting principles generally accepted in the United States. The internal control system is augmented by written policies and procedures, an internal audit program and the selection and training of qualified personnel. This system includes policies that require adherence to ethical business standards and compliance with all applicable laws and regulations.

      The consolidated financial statements for the years ended May 28, 2004, May 30, 2003 and May 31, 2002, have been audited by Ernst & Young LLP, independent auditors. In connection with its audit, Ernst & Young LLP develops and maintains an understanding of Oxford’s accounting and financial controls and conducts tests of Oxford’s accounting systems and other related procedures as it considers necessary to render an opinion on the financial statements.

      The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with Oxford’s management, internal auditors and independent auditors to review matters relating to the quality of financial reporting and internal accounting controls, and the independent nature, extent and results of the audit effort. The Committee recommends to the Board appointment of the independent auditors. Both the internal auditors and the independent auditors have access to the Audit Committee, with or without the presence of management.

  /s/ BEN B. BLOUNT, JR.
 
  Ben B. Blount, Jr.
  Executive Vice President-Finance, Planning and
  Administration and Chief Financial Officer

64


 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Oxford Industries, Inc.

      We have audited the accompanying consolidated balance sheets of Oxford Industries, Inc. and subsidiaries as of May 28, 2004 and May 30, 2003, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended May 28, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oxford Industries, Inc. and subsidiaries at May 28, 2004 and May 30, 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 28, 2004, in conformity with United States generally accepted accounting principles.

      As discussed in Note A, the Company changed its method of calculating LIFO inventories in the year ended May 31, 2002.

/s/ Ernst & Young LLP

Atlanta, Georgia

July 23, 2004

65


 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Effective May 22, 2002, we appointed Ernst & Young LLP (“Ernst & Young”) as our independent auditors. The decision to replace Arthur Andersen LLP (“Andersen”) as our independent public accountants was approved by our Board of Directors upon the recommendation of our Audit Committee.

During our fiscal 2002 year and through the date of the Form 8-K filed on May 22, 2002, there were no disagreements between us and Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to Andersen’s satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their reports.

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within our two most recent fiscal years or through the date of the Form 8-K filed on May 22, 2002.

During our fiscal 2002 year and through the date of the Form 8-K filed on May 22, 2002, we did not consult Ernst & Young with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or any other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. We changed our internal controls over financial reporting during fiscal 2004 when we integrated the Tommy Bahama Group’s accounting offices, which we believe enhanced our efficiencies and increased our internal controls. Other than the integration of the Tommy Bahama Group’s accounting and credit functions, there was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

66


 

PART III

Item 10. Directors and Executive Officers of the Registrant.

Information required by this item covering our directors is incorporated by reference to the information presented under the heading “Election of Directors - - Directors and Nominees” in the Company’s Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004. Information regarding our executive officers is set forth below.

             
Name
  Age
  Office Held
J. Hicks Lanier
    64     Chairman of the Board, Chief Executive Officer
S. Anthony Margolis
    62     Group Vice President
Ben B. Blount, Jr
    65     Executive Vice President and Chief Financial Officer
Michael J. Setola
    46     President
Knowlton J. O’Reilly
    64     Group Vice President

Messrs. J. Hicks Lanier, S. Anthony Margolis, Ben B. Blount, Jr. and Knowlton J. O’Reilly are also directors. The Board of Directors of the Company elects executive officers annually.

Mr. J. Hicks Lanier has been Chief Executive Officer of the Company since 1977. In 1981, he was elected Chairman of the Board of the Company. He is also a director of SunTrust Banks, Inc., Crawford & Company, West Point Stevens, Inc., and Genuine Parts Company.

Mr. S. Anthony Margolis has served as Group Vice President since 2003. Prior to joining the Company, Mr. Margolis had been the Chief Executive Officer and President of Viewpoint International, Inc. since 1992.

Mr. Ben B. Blount, Jr. has served as Executive Vice President and Chief Financial Officer since 1995. On June 30, 2004, the Company announced that Mr. Blount will retire on October 4, 2004, at which time he will also resign from the Company’s Board of Directors.

Mr. Michael J. Setola has served as President since 2003. Prior to joining the Company, Mr. Setola had been the Chairman and Chief Executive Officer of Salant Corporation since 1998.

Mr. Knowlton J. O’Reilly has served as Group Vice President since 1978.

We adopted a code of business conduct and ethics applicable to our senior financial officers (including our principal executive officer, principal financial officer and controller), known as the Ethical Conduct Policy for Senior Financial Officers. The Ethical Conduct Policy for Senior Financial Officers is available on our website. In the event that we amend or waive any of the provisions of the Ethical Conduct Policy for Senior Financial Officers applicable to our principal executive officer, principal financial officer or controller, we intend to disclose the same on our website at www.oxfordinc.com.

Item 11. Executive Compensation.

67


 

Incorporated by reference to the information presented under the heading “Executive Compensation and Other Information” in our Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Incorporated by reference to the information presented under the heading “Beneficial Ownership of Common Stock” in our Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004.

Item 13. Certain Relationships and Related Transactions.

Incorporated by reference to the information presented under the heading “Executive Compensation and Other Information — Compensation Committee Interlocks and Insider Participation” in our Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004.

Item 14. Principal Accounting Fees and Services.

Incorporated by reference to the information presented under the heading “Fees Paid To Auditors” in our Proxy Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after May 28, 2004.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) 1. Financial Statements

     The following consolidated financial statements are included in Item 8:

    Consolidated Balance Sheets at May 28, 2004 and May 30, 2003.
 
    Consolidated Statements of Earnings for the years ended May 28, 2004, May 30, 2003 and May 31, 2002.
 
    Consolidated Statements of Shareholders’ Equity for the years ended May 28, 2004, May 30, 2003 and May 31, 2002.
 
    Consolidated Statements of Cash Flows for the years ended May 28, 2004, May 30, 2003 and May 31, 2002.
 
    Notes to Consolidated Financial Statements for the years ended May 28, 2004, May 30, 2003 and May 31, 2002.

     2. Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

68


 

3. Exhibits

     
3(a)
  Articles of Incorporation of the Company. Incorporated by reference to Exhibit 3(a) to the Company’s Form 10-Q for the fiscal quarter ended August 29, 1997.
3(b)
  Bylaws of the Company. Incorporated by reference to Exhibit 3(b) to the Company’s Form 10-K for the fiscal year ended May 28, 1999.
10(a)
  1997 Stock Option Plan. Incorporated by reference to Exhibit 10(a) to the Company’s Form 10-K for the fiscal year ended May 31, 2002.
10(b)
  1997 Restricted Stock Plan. Incorporated by reference to Exhibit 10(b) to the Company’s Form 10-K for the fiscal year ended May 31, 2002.
10(c)
  Non-qualified Deferred Compensation Plan. Incorporated by reference to Exhibit 10(c), to the Company’s Form 10-K for the fiscal year ended June 1, 2001.
10(d)
  Executive Medical Reimbursement Plan. Incorporated by reference to Exhibit 10(d), to the Company’s Form 10-K for the fiscal year ended June 1, 2001.
10(e)
  1992 Stock Option Plan. Incorporated by reference to Exhibit 10(h), to the Company’s Form 10-K for the fiscal year ended June 1, 2001
10(f)
  Earnout Agreement dated June 13, 2003 between the former stockholders of Viewpoint International, Inc. and Oxford Industries, Inc. Incorporated to Exhibit 10(j), from the Company’s Form 8-K filed on June 26, 2003.
10(g)
  Registration Rights Agreement between the former stockholders of Viewpoint International, Inc. Incorporated by reference to Exhibit 10(m), to the Company’s Form 8-K filed on June 26, 2003.
10(h)
  Indenture Agreement dated May 16, 2003 among the Guarantors, Oxford Industries Inc. and SunTrust Bank, Inc. Incorporated by reference to Exhibit 10(n) from the Company’s Form 10-K for the fiscal year ended May 30, 2003.
10(i)
  Supplemental Indenture Agreement No. 1 dated June 13, 2003 among the Guarantors, Oxford Industries Inc. and SunTrust Bank, Inc.*
10(j)
  Supplemental Indenture Agreement No. 2 dated July 28, 2004 among the Guarantors, Oxford Industries Inc. and SunTrust Bank, Inc.*

69


 

     
10(k)
  Amended and Restated Credit Agreement dated July 28, 2004 between Oxford Industries, Inc., certain of its domestic subsidiaries, and SunTrust Bank, Inc. as administrative agent, and various financial institutions of lenders and issuing banks.*
16
  Letter of Arthur Andersen LLP regarding change in certifying accountant. Incorporated by reference to Exhibit 16.1 the Company’s Form 10-K for the fiscal year ended May 31, 2002.
21
  List of Subsidiaries.*
23
  Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.*
24
  Powers of Attorney.*
31(a)
  Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31(b)
  Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32(a)
  Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32(b)
  Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*   filed herewith

We agree to file upon request of the Securities and Exchange Commission a copy of all agreements evidencing long-term debt of ours omitted from this report pursuant to Item 601(b)(4)(iii) of Regulation S-K.

Shareholders may obtain copies of Exhibits without charge upon written request to the Corporate Secretary, Oxford Industries, Inc., 222 Piedmont Avenue, N.E., Atlanta, Georgia 30308.

(b) We filed the following Form 8-K’s during the last quarter of the period covered by this report.

A report on Form 8-K was filed on June 21, 2004 for Item 9. Regulation FD disclosure in connection with the press release dated June 21, 2004 announcing the Company entering into an agreement to acquire Ben Sherman Limited.

A report on Form 8-K was filed on May 27, 2004 for Item 7. Financial statements and exhibits in connection with the press release dated May 27, 2004 regarding earnings guidance by the Company for its fiscal 2005 year.

A report on Form 8-K was filed on April 1, 2004 for Item 7. Financial statements and exhibits in connection with the press release dated April 1, 2004 regarding earnings guidance by the Company for the third quarter of its fiscal 2004 year.

70


 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
  Oxford Industries, Inc.
 
   
  /s/ J. Hicks Lanier
 
 
  J. Hicks Lanier
Chairman and Chief Executive Officer
 
   
Date: August 10, 2004
   

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

         
Signature
  Capacity
  Date
/s/ J. Hicks Lanier

J. Hicks Lanier
  Chief Executive Officer and Director   August 10, 2004
/s/ Ben B. Blount, Jr.

Ben B. Blount, Jr.
  Executive Vice President,
Chief Financial Officer and Director
  August 10, 2004
/s/ K. Scott Grassmyer

K. Scott Grassmyer
  Controller   August 10, 2004
*

Cecil D. Conlee
  Director   August 10, 2004
*

Thomas Gallagher
  Director   August 10, 2004
*

J. Reese Lanier
  Director   August 10, 2004
*

S. Anthony Margolis
  Director   August 10, 2004
*

Knowlton J. O’Reilly
  Director   August 10, 2004

71


 

         
Signature
  Capacity
  Date
*

Clarence B. Rogers, Jr.
  Director   August 10, 2004
*

Robert E. Shaw
  Director   August 10, 2004
*

Clarence H. Smith
  Director   August 10, 2004
*

E. Jenner Wood
  Director   August 10, 2004
*

Helen B. Weeks
  Director   August 10, 2004

* By   /s/  Dominic C. Mazzone
Dominic C. Mazzone,
as Attorney-in-Fact
 

72

EXHIBIT 10(I) SUPPLEMENTAL INDENTURE NO. 1 SUPPLEMENTAL INDENTURE No. 1 (this "Supplemental Indenture"), dated as of June 13, 2003, by and among Oxford Industries, Inc., a Georgia corporation (the "Company"), the Company's subsidiaries listed on Schedule A hereto (each, a "New Guarantor"), the Company's subsidiaries listed on Schedule B hereto (the "Existing Delaware Guarantors"), the Company's subsidiaries listed on Schedule C hereto (the "Existing Georgia Guarantors"), Oxford of South Carolina, a South Carolina corporation ("Oxford of South Carolina" and, together with the Existing Delaware Guarantors and the Existing Georgia Guarantors, the "Existing Guarantors") and Sun Trust Bank, as trustee under the Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company, the Existing Guarantors and the Trustee are parties to an indenture (the "Indenture"), dated as of May 16, 2003 providing for the issuance of 8 7/8% Senior Notes due 2011 (the "Securities"); WHEREAS, the Indenture provides that, without the consent of any Holders, the Company and the Existing Guarantors, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into indentures supplemental thereto or agreements or other instruments with respect to any Guarantee, in form and substance satisfactory to the Trustee, for the purpose of adding a Guarantor; WHEREAS, each New Guarantor wishes to guarantee the Securities pursuant to the Indenture; WHEREAS, pursuant to the Indenture the Company, the Existing Guarantors, the New Guarantors and the Trustee have agreed to enter into this Supplemental Indenture for the purposes stated herein; and WHEREAS, all things necessary have been done to make this Supplemental Indenture, when executed and delivered by the Company, the Existing Guarantors, and each New Guarantor, the legal, valid and binding agreement of the Company, the Existing Guarantors, and each New Guarantor, in accordance with its terms. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, each New Guarantor, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows: (1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (2) Guarantee. Each New Guarantor hereby agrees to guarantee the Indenture and the Securities related thereto pursuant to the terms and conditions of Article Thirteen of the Indenture, such Article Thirteen being incorporated by reference herein as if set forth at length

herein (each such guarantee, a "Guarantee") and such New Guarantor agrees to be bound as a Guarantor under the Indenture as if it had been an initial signatory thereto. (3) Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. (4) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. (5) Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. (6) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company, the New Guarantors and the Existing Guarantors. 2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. OXFORD INDUSTRIES, INC. By: /s/ Thomas C. Chubb, III ------------------------------------------- Name: Thomas C. Chubb, III Title: Vice President -- Law and Administration, Secretary and General Counsel EACH GUARANTOR LISTED ON SCHEDULE A HERETO By: /s/ Thomas C. Chubb, III ------------------------------------------- Name: Thomas C. Chubb, III Title: Secretary EACH GUARANTOR LISTED ON SCHEDULE B HERETO By: /s/ Thomas C. Chubb, III ------------------------------------------- Name: Thomas C. Chubb, III Title: President EACH GUARANTOR LISTED ON SCHEDULE C HERETO By: /s/ Thomas C. Chubb, III ------------------------------------------- Name: Thomas C. Chubb, III Title: Secretary OXFORD OF SOUTH CAROLINA By: /s/ Thomas C. Chubb, III ------------------------------------------- Name: Thomas C. Chubb, III Title: Secretary

SUNTRUST BANK, as Trustee By: /s/ Muriel Shaw --------------------------------------------- Authorized Signatory

EXHIBIT 10(J) SUPPLEMENTAL INDENTURE NO. 2 SUPPLEMENTAL INDENTURE No. 2 (this "Supplemental Indenture No. 2"), dated as of July 28, 2004, by and among Oxford Industries, Inc., a Georgia corporation (the "Company"), the Company's subsidiaries listed on Schedule A hereto (each, a "New Guarantor"), the Company's subsidiaries listed on Schedule B hereto (collectively, the "Existing Guarantors"), and Sun Trust Bank, as trustee under the Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company, the Existing Guarantors and the Trustee are parties to an indenture, dated as of May 16, 2003 (the "Original Indenture"), as supplemented by a supplemental indenture, dated as of June 13, 2003 (the "Supplemental Indenture No. 1," and together with the Original Indenture, the "Indenture"), providing for the issuance of 8 7/8% Senior Notes due 2011 (the "Securities"); WHEREAS, the Indenture provides that, without the consent of any Holders, the Company and the Existing Guarantors, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into indentures supplemental thereto or agreements or other instruments with respect to any Guarantee, in form and substance satisfactory to the Trustee, for the purpose of adding a Guarantor; WHEREAS, each New Guarantor wishes to guarantee the Securities pursuant to the Indenture; WHEREAS, pursuant to the Indenture, the Company, the Existing Guarantors, the New Guarantors and the Trustee have agreed to enter into this Supplemental Indenture No. 2 for the purposes stated herein; and WHEREAS, all things necessary have been done to make this Supplemental Indenture No. 2, when executed and delivered by the Company, the Existing Guarantors, and each New Guarantor, the legal, valid and binding agreement of the Company, the Existing Guarantors, and each New Guarantor, in accordance with its terms. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, each New Guarantor, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows: (1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (2) Guarantee. Each New Guarantor hereby agrees to guarantee the Indenture and the Securities related thereto pursuant to the terms and conditions of Article Thirteen of the Indenture, such Article Thirteen being incorporated by reference herein as if set forth at length

herein (each such guarantee, a "Guarantee") and such New Guarantor agrees to be bound as a Guarantor under the Indenture as if it had been an initial signatory thereto. (3) Governing Law. THIS SUPPLEMENTAL INDENTURE NO. 2 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. (4) Counterparts. The parties may sign any number of copies of this Supplemental Indenture No. 2. Each signed copy shall be an original, but all of them together represent the same agreement. (5) Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. (6) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture No. 2 or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company, the New Guarantors and the Existing Guarantors. [Signature page to follow.]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 2 to be duly executed and attested, all as of the date first above written. Dated: July 28, 2004 OXFORD INDUSTRIES, INC. By: /s/ J. Reese Lanier, Jr. ------------------------------------------- Name: J. Reese Lanier, Jr. Title: Vice President and Treasurer EACH GUARANTOR LISTED ON SCHEDULE A HERETO By: /s/ J. Reese Lanier, Jr. ------------------------------------------- Name: J. Reese Lanier, Jr. Title: Vice President and Treasurer EACH GUARANTOR LISTED ON SCHEDULE B HERETO By: /s/ J. Reese Lanier, Jr. ------------------------------------------- Name: J. Reese Lanier, Jr. Title: Vice President and Treasurer SUNTRUST BANK, as Trustee By: /s/ Muriel Shaw ------------------------------------------- Authorized Signatory

EXHIBIT 10(K) AMENDED AND RESTATED CREDIT AGREEMENT among OXFORD INDUSTRIES, INC. and certain of its Domestic Subsidiaries party hereto as Borrowers, The Domestic Subsidiaries of the Borrowers party hereto as Guarantors, The financial institutions party hereto as Lenders, The financial institutions party hereto as Issuing Banks, and SUNTRUST BANK, as Administrative Agent SUNTRUST ROBINSON HUMPHREY (a division of SunTrust Capital Markets, Inc.), as Lead Arranger BANK OF AMERICA, N.A. and THE CIT GROUP/COMMERCIAL SERVICES, INC., as Co-Syndication Agents, GENERAL ELECTRIC CAPITAL CORPORATION, as Documentation Agent July 28, 2004

TABLE OF CONTENTS PAGE ---- ARTICLE 1. DEFINITIONS, ACCOUNTING PRINCIPLES AND OTHER INTERPRETIVE MATTERS............... 3 Section 1.1 Definitions............................................................. 3 Section 1.2 Accounting Principles................................................... 28 Section 1.3 Other Interpretive Matters.............................................. 28 ARTICLE 2. THE LOANS AND THE LETTERS OF CREDIT............................................. 28 Section 2.1 Extension of Credit..................................................... 28 Section 2.2 Manner of Borrowing and Disbursement of Loans........................... 29 Section 2.3 Interest................................................................ 34 Section 2.4 Fees.................................................................... 36 Section 2.5 Prepayment/Reduction of Commitment...................................... 38 Section 2.6 Repayment............................................................... 39 Section 2.7 Revolving Loan Notes; Loan Accounts..................................... 40 Section 2.8 Manner of Payment....................................................... 41 Section 2.9 Reimbursement........................................................... 44 Section 2.10 Pro Rata Treatment...................................................... 45 Section 2.11 Application of Payments................................................. 45 Section 2.12 Use of Proceeds......................................................... 46 Section 2.13 All Obligations to Constitute One Obligation............................ 47 Section 2.14 Maximum Rate of Interest................................................ 47 Section 2.15 Letters of Credit....................................................... 47 Section 2.16 Bank Products........................................................... 53 Section 2.17 Increased Revolving Loan Commitments.................................... 54 ARTICLE 3. GUARANTY........................................................................ 55 Section 3.1 Guaranty................................................................ 55 ARTICLE 4. CONDITIONS PRECEDENT............................................................ 60 Section 4.1 Conditions Precedent to Initial Advance................................. 60 Section 4.2 Conditions Precedent to Each Advance.................................... 64 Section 4.3 Conditions Precedent to Each Letter of Credit........................... 65 Section 4.4 Post Closing Covenants.................................................. 66 ARTICLE 5. REPRESENTATIONS AND WARRANTIES.................................................. 67

TABLE OF CONTENTS (CONTINUED) PAGE ---- Section 5.1 General Representations and Warranties.................................. 67 Section 5.2 Representations and Warranties Relating to Accounts..................... 77 Section 5.3 [Reserved].............................................................. 77 Section 5.4 Survival of Representations and Warranties, etc......................... 77 ARTICLE 6. GENERAL COVENANTS............................................................... 77 Section 6.1 Preservation of Existence and Similar Matters........................... 77 Section 6.2 Compliance with Applicable Law.......................................... 78 Section 6.3 Maintenance of Properties............................................... 78 Section 6.4 Accounting Methods and Financial Records................................ 78 Section 6.5 Insurance............................................................... 78 Section 6.6 Payment of Taxes and Claims............................................. 79 Section 6.7 Visits and Inspections.................................................. 79 Section 6.8 Conduct of Business..................................................... 79 Section 6.9 ERISA................................................................... 79 Section 6.10 Lien Perfection......................................................... 80 Section 6.11 Location of Collateral.................................................. 80 Section 6.12 Protection of Collateral................................................ 80 Section 6.13 Assignments and Records of Accounts..................................... 81 Section 6.14 Administration of Accounts.............................................. 81 Section 6.15 Account Control Agreements; Securities Account Control Agreements....... 82 Section 6.16 Further Assurances...................................................... 82 Section 6.17 Broker's Claims......................................................... 83 Section 6.18 Indemnity............................................................... 83 Section 6.19 Environmental Matters................................................... 84 Section 6.20 Key Man Life Insurance.................................................. 85 Section 6.21 Formation of Subsidiaries............................................... 86 Section 6.22 License Agreements...................................................... 86 Section 6.23 In-Transit Inventory.................................................... 86 Section 6.24 Holding Company Dividends............................................... 87 ARTICLE 7. INFORMATION COVENANTS........................................................... 87 -ii-

TABLE OF CONTENTS (CONTINUED) PAGE ---- Section 7.1 Quarterly Financial Statements and Information.......................... 87 Section 7.2 Annual Financial Statements and Information; Certificate of No Default.. 88 Section 7.3 Performance Certificates................................................ 88 Section 7.4 Access to Accountants................................................... 88 Section 7.5 Additional Reports...................................................... 89 Section 7.6 Notice of Litigation and Other Matters.................................. 90 ARTICLE 8. NEGATIVE COVENANTS.............................................................. 92 Section 8.1 Indebtedness............................................................ 92 Section 8.2 Guaranties.............................................................. 94 Section 8.3 Liens................................................................... 94 Section 8.4 Restricted Payments and Purchases....................................... 94 Section 8.5 Investments............................................................. 95 Section 8.6 Affiliate Transactions.................................................. 96 Section 8.7 Liquidation; Change in Ownership, Name, or Year; Disposition or Acquisition of Assets; Etc.............................................. 96 Section 8.8 Total Debt to EBITDA Ratio.............................................. 98 Section 8.9 Total Senior Debt to EBITDA Ratio....................................... 99 Section 8.10 Fixed Charge Coverage Ratio............................................. 99 Section 8.11 Interest Coverage Ratio................................................. 100 Section 8.12 Capital Expenditures.................................................... 100 Section 8.13 Limitation on Leases.................................................... 100 Section 8.14 Sales and Leasebacks.................................................... 100 Section 8.15 Amendment and Waiver.................................................... 101 Section 8.16 ERISA Liability......................................................... 101 Section 8.17 Prepayments............................................................. 101 Section 8.18 Negative Pledge......................................................... 101 Section 8.19 Inconsistent Agreements................................................. 101 ARTICLE 9. DEFAULT......................................................................... 102 Section 9.1 Events of Default....................................................... 102 Section 9.2 Remedies................................................................ 105 -iii-

TABLE OF CONTENTS (CONTINUED) PAGE ---- ARTICLE 10. THE ADMINISTRATIVE AGENT....................................................... 106 Section 10.1 Appointment and Authorization........................................... 106 Section 10.2 Interest Holders........................................................ 106 Section 10.3 Consultation with Counsel............................................... 107 Section 10.4 Documents............................................................... 107 Section 10.5 Administrative Agent and Affiliates..................................... 107 Section 10.6 Responsibility of the Administrative Agent.............................. 107 Section 10.7 Action by Administrative Agent.......................................... 107 Section 10.8 Notice of Default....................................................... 108 Section 10.9 Responsibility Disclaimed............................................... 108 Section 10.10 Indemnification......................................................... 109 Section 10.11 Credit Decision......................................................... 109 Section 10.12 Successor Administrative Agent.......................................... 110 Section 10.13 Administrative Agent May File Proofs of Claim........................... 110 Section 10.14 Collateral.............................................................. 111 Section 10.15 Release of Collateral................................................... 111 Section 10.16 Additional Agents....................................................... 112 ARTICLE 11. MISCELLANEOUS.................................................................. 112 Section 11.1 Notices................................................................. 112 Section 11.2 Expenses................................................................ 113 Section 11.3 Waivers................................................................. 115 Section 11.4 Set-Off................................................................. 115 Section 11.5 Assignment.............................................................. 116 Section 11.6 Counterparts............................................................ 118 Section 11.7 Governing Law........................................................... 118 Section 11.8 Severability............................................................ 118 Section 11.9 Headings................................................................ 119 Section 11.10 Source of Funds......................................................... 119 Section 11.11 Entire Agreement........................................................ 119 Section 11.12 Amendments and Waivers.................................................. 119 Section 11.13 Other Relationships..................................................... 120 -iv-

TABLE OF CONTENTS (CONTINUED) PAGE ---- Section 11.14 Pronouns................................................................ 121 Section 11.15 Disclosure.............................................................. 121 Section 11.16 Replacement of Lender................................................... 121 Section 11.17 Confidentiality......................................................... 121 Section 11.18 Assignment as of the Agreement Date..................................... 122 Section 11.19 Amendment and Restatement............................................... 124 Section 11.20 USA Patriot Act Notice.................................................. 125 ARTICLE 12. YIELD PROTECTION............................................................... 126 Section 12.1 Eurodollar Rate Basis Determination..................................... 126 Section 12.2 Illegality.............................................................. 126 Section 12.3 Increased Costs......................................................... 127 Section 12.4 Effect On Other Advances................................................ 128 Section 12.5 Capital Adequacy........................................................ 129 ARTICLE 13. JURISDICTION, VENUE AND WAIVER OF JURY TRIAL; ADMINISTRATIVE BORROWER; JOINT AND SEVERAL OBLIGATIONS.................................................. 129 Section 13.1 Jurisdiction and Service of Process..................................... 129 Section 13.2 Consent to Venue........................................................ 130 Section 13.3 Waiver of Jury Trial.................................................... 130 Section 13.4 The Administrative Borrower............................................. 130 Section 13.5 All Obligations to Constitute Joint and Several Obligations............. 130 Section 13.6 Revival and Reinstatement of Obligations................................ 134 -v-

EXHIBITS Exhibit A - Form of Account Control Agreement Exhibit B - Form of Administrative Questionnaire Exhibit C - Form of Assignment and Assumption Agreement Exhibit D - Form of Increased Revolving Loan Commitment Activation Notice Exhibit E - Form of Notice of Conversion/Continuance Exhibit F Form of Request for Advance Exhibit G - Form of Request for Issuance of Letter of Credit Exhibit H - Form of Revolving Loan Note Exhibit I - Form of Securities Account Control Agreement Exhibit J - Form of Daily Letter of Credit Report Exhibit K - Form of New Lender Supplement Exhibit L - Form of Loan Certificate Exhibit M - Form of Guaranty Supplement Exhibit N - Form of Performance Certificate SCHEDULES Schedule 1(a) - Revolving Commitment Ratios Schedule 1(b) - Liens Schedule 2.15 - Existing Letters of Credit Schedule 4.1(a)(viii) - Properties Not Subject to Landlord Waiver Agreement Schedule 5.1(c)-1 - Subsidiaries Schedule 5.1(c)-2 - Partnerships/Joint Ventures Schedule 5.1(d) - Outstanding Capital Stock Ownership Schedule 5.1(h) - Material Contracts; Collective Bargaining Schedule 5.1(i) - Taxes Schedule 5.1(l) - Investments/Guaranties as of the Agreement Date Schedule 5.1(m) - Litigation Schedule 5.1(o) - Intellectual Property; Licenses and Certifications Schedule 5.1(u) - Insurance Schedule 5.1(v) - Brokers' Fees Schedule 5.1(w)-1 - Leased Real Property Schedule 5.1(w)-2 - Owned Real Property Schedule 5.1(x)-1 - Environmental Matters - Hazardous Materials Schedule 5.1(x)-2 - Environmental Matters - Compliance Schedule 5.1(x)-3 - Environmental Matters - Notices Schedule 5.1(x)-4 - Environmental Matters - Handling of Hazardous Materials Schedule 5.1(x)-5 - Environmental Matters - Actions and Orders Schedule 5.1(x)-6 - Environmental Matters - Releases Schedule 6.11 - Location of Collateral Schedule 6.15 - Bank Accounts

TABLE OF CONTENTS (CONTINUED) PAGE ---- Schedule 6.22 - License Agreements Schedule 8.6 - Affiliate Transactions -2-

AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated as of July 28, 2004, is by and among Oxford Industries, Inc., a Georgia corporation, Oxford of South Carolina, Inc., a South Carolina corporation, and Viewpoint International, Inc., a Delaware corporation, as Borrowers, the Domestic Subsidiaries of the Borrowers party hereto as Guarantors, the financial institutions party hereto as Lenders, the financial institutions party hereto as Issuing Banks, and SunTrust Bank, as Administrative Agent. W I T N E S S E T H: WHEREAS, a credit facility was extended to the Borrowers pursuant to the terms and conditions of that certain Credit Agreement dated as of June 13, 2003 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the "Existing Credit Agreement"), by and among the Borrowers, certain subsidiaries of the Borrowers party thereto as Guarantors (as defined in the Existing Credit Agreement), certain financial institutions party thereto as Lenders (as defined in the Existing Credit Agreement), the financial institutions party thereto as Issuing Banks (as defined in the Existing Credit Agreement), Merrill Lynch Capital (a division of Merrill Lynch Business Financial Services Inc.), as Syndication Agent (as defined in the Existing Credit Agreement), and SunTrust Bank, as Administrative Agent; WHEREAS, in connection with the Existing Credit Agreement, Borrowers and certain of their subsidiaries executed and delivered the Security Documents (as defined in the Existing Credit Agreement) in favor of the Administrative Agent to secure the payment and performance of the Obligations (as defined under the Existing Credit Agreement); WHEREAS, the Parent (as defined below), the Target (as defined below) and the Sellers (as defined below) are parties to the Acquisition Agreement (as defined below); WHEREAS, pursuant to the Acquisition Agreement, the Parent will acquire all of the Equity Interests (as defined below) of the Target; WHEREAS, in connection with the Acquisition Agreement, the Borrowers have requested that the Existing Credit Agreement be amended, modified and restated, pursuant to the terms and conditions set forth herein; WHEREAS, certain Lenders (as defined in the Existing Credit Agreement) do not desire to be a party to this Agreement and therefore such Lenders, as assignors, and SunTrust Bank, as assignee, have entered into an Assignment and Acceptance of even date herewith, pursuant to which such Lenders have assigned all of their respective Revolving Loan Commitments (as defined in the Existing Credit Agreement) held by

them under the Existing Credit Agreement to SunTrust Bank, and SunTrust Bank has assumed each of such Lenders' Revolving Loan Commitments (as defined in the Existing Credit Agreement) thereunder; WHEREAS, upon the execution and delivery of this Agreement, pursuant to Section 11.18 of this Agreement, to the extent necessary to achieve the allocation of the Revolving Loan Commitments, SunTrust Bank has assigned a portion of its Revolving Loan Commitment to the other Lenders party hereto; and WHEREAS, each Borrower Party (as defined herein) acknowledges and agrees that the security interests and Liens (as defined in the Existing Credit Agreement) granted to the Administrative Agent pursuant to the Existing Credit Agreement and the other Security Documents (as defined in the Existing Credit Agreement), shall remain outstanding and in full force and effect, without interruption or impairment of any kind, in accordance with the Existing Credit Agreement and shall continue to secure the Obligations (as defined herein); WHEREAS, each Borrower Party acknowledges and agrees that (a) the Obligations (as defined herein) represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the Obligations (as defined in the Existing Credit Agreement) arising in connection with the Existing Credit Agreement and other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith; (b) the Borrower Parties intend that the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith and the collateral pledged thereunder shall secure, without interruption or impairment of any kind, all existing Obligations (as defined in the Existing Credit Agreement) under the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith, as they may be amended, restated, renewed, extended, consolidated and modified hereunder, together with all other obligations hereunder; (c) all Liens (as defined in the Existing Credit Agreement) evidenced by the Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith are hereby ratified, confirmed and continued; and (d) the Loan Documents (as defined herein) are intended to restate, renew, extend, consolidate, amend and modify the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith; provided that the parties hereto acknowledge and agree that US Ben Sherman Holdco (as defined herein) shall not be a Guarantor (as defined herein) and shall not be a party to the Security Agreement (as defined herein), Pledge Agreement (as defined herein) or Intellectual Property Security Agreement (as defined herein) and the Parent shall be required to pledge only 65% of its Equity Interest in US Ben Sherman Holdco under the Pledge Agreement; WHEREAS, each Borrower Party intends that (a) the provisions of the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit 2

Agreement) executed in connection therewith, to the extent restated, renewed, extended, consolidated, amended and modified hereby and by the other Loan Documents (as defined herein), be hereby superseded and replaced by the provisions hereof and of the other Loan Documents (as defined herein); (b) the Revolving Loan Notes (as defined herein) restate, renew, extend, consolidate, amend, modify, replace, are substituted for and supersede in their entirety, but do not extinguish, the Obligations (as defined in the Existing Credit Agreement) arising under the Revolving Loan Notes (as defined in the Existing Credit Agreement) issued pursuant to the Existing Credit Agreement; and (c) by entering into and performing their respective obligations hereunder, this transaction shall not constitute a novation; NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement is hereby amended and restated as follows: ARTICLE 1. DEFINITIONS, ACCOUNTING PRINCIPLES AND OTHER INTERPRETIVE MATTERS Section 1.1 Definitions. For the purposes of this Agreement: "Account Debtor" shall mean any Person who is obligated to make payments under an Account. "Account Control Agreement" shall mean any agreement executed by a depository bank and the Administrative Agent, for the benefit of the Lender Group, and acknowledged and agreed to by the applicable Borrower Party, in the form of Exhibit A or such other form acceptable to the Administrative Agent in its sole discretion, as such agreement may be amended, restated, supplemented or otherwise modified from time to time. "Accounts" shall mean all "accounts," as such term is defined in the UCC, of each Borrower Party whether now existing or hereafter created or arising, including, without limitation, (i) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by chattel paper (as defined in the UCC) or instruments (as defined in the UCC)), (including any such obligations that may be characterized as an account or contract right under the UCC), (ii) all of each Borrower Party's rights in, to and under all purchase orders or receipts for goods or services, (iii) all of each Borrower Party's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (iv) all rights to payment due to a Borrower Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation 3

incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Borrower Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Borrower Party), (v) all health care insurance receivables and (vi) all collateral security of any kind, given by any Account Debtor or any other Person with respect to any of the foregoing. "ACH Transactions" means any cash management or related services including the automated clearinghouse transfer of funds by the Administrative Agent (or any affiliate of the Administrative Agent) for the account of the Borrowers pursuant to agreement or overdrafts. "Act" shall have the meaning specified in Section 11.20. "Acquisition" shall mean the acquisition by the Parent of all of the Equity Interests of the Target pursuant to the Acquisition Agreement. "Acquisition Agreement" shall mean that certain Share Purchase Agreement dated as of June 19, 2004 among Oxford Industries (UK 3) (as assignee of the Parent) and the Sellers, as the same may be amended, modified or supplemented from time to time in accordance with Section 8.15. "Acquisition Documents" shall mean the Acquisition Agreement, that certain Escrow Agreement to be dated on or before the date of the consummation of the Acquisition, among the Sellers and Oxford Industries (UK 3) in form and substance satisfactory to the Administrative Agent, that certain Deposit Escrow Agreement dated June 19, 2004 among the Sellers and Oxford Industries (UK 3) (as assignee of the Parent), and the Loan Notes, as the same may be amended, modified or supplemented from time to time in accordance with Section 8.15. "Additional Commitment Amount" shall have the meaning specified in Section 2.17. "Additional Lender" shall have the meaning specified in Section 2.17. "Administrative Agent" shall mean SunTrust Bank, acting as administrative agent for the Lender Group, and any successor Administrative Agent appointed pursuant to Section 10.12. "Administrative Agent's Office" shall mean the office of the Administrative Agent located at 303 Peachtree Street, Atlanta, Georgia 30308, or such other office as may be designated pursuant to the provisions of Section 11.1. "Administrative Borrower" shall have the meaning specified in Section 13.4. 4

"Administrative Questionnaire" shall mean a questionnaire substantially in the form of Exhibit B. "Advance" or "Advances" shall mean amounts of the Revolving Loans or Swing Loans, as applicable, advanced by the Lenders or the Swing Bank, as applicable, to the Borrowers pursuant to Section 2.2 on the occasion of any borrowing. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person, and any other Person who is a director, officer or partner of such Person. For purposes of this definition, "control", when used with respect to any Person, includes, without limitation, the direct or indirect beneficial ownership of ten percent (10%) or more of the outstanding voting securities or voting equity of such Person or the power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Aggregate Letter of Credit Commitment" shall mean the several obligations of the Issuing Banks to issue (or arrange with a Foreign Issuer for the issuance of) Letters of Credit for the account of Borrowers from time to time in an aggregate face amount not to exceed $175,000,000 pursuant to the terms of this Agreement. "Aggregate Revolving Credit Obligations" shall mean, as of any particular time, the sum of (a) the aggregate principal amount of all Revolving Loans then outstanding, plus (b) the aggregate amount of all Letter of Credit Obligations then outstanding, plus (c) the aggregate amount of all Swing Loans then outstanding. "Agreement" shall mean this Credit Agreement, together with all Exhibits and Schedules hereto, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Date" shall mean the date as of which this Agreement is dated. "Applicable Law" shall mean, in respect of any Person, all provisions of constitutions, statutes, rules, regulations, and orders of governmental bodies or regulatory agencies applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party or by which it is bound. "Approved Freight Handler" shall mean any Freight Handler that has delivered a Lien Acknowledgment Agreement in favor of the Administrative Agent, so long as such Lien Acknowledgment Agreement remains in full force and effect and the Administrative Agent has not received any notice of termination with respect thereto. "Approved Fund" shall mean any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity that administers or manages a Lender. "Assigned Interest" shall have the meaning specified in Section 11.18. 5

"Assignee" shall have the meaning specified in Section 11.18. "Assignment and Assumption Agreement" shall mean that certain form of Assignment and Assumption Agreement attached hereto as Exhibit C, pursuant to which each Lender may, as further provided in Section 11.5, sell a portion of its Loans and Revolving Loan Commitment. "Assignments of Life Insurance Policy" shall mean the assignments of life insurance policies as collateral from the applicable Borrower Party in favor of the Administrative Agent, for the benefit of the Lender Group, assigning such Borrower Party's life insurance policy or policies on the lives of (a) S. Anthony Margolis and (b) Lucio Dalla Gasperina, and acknowledged by the applicable insurance company issuing such policy or policies, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Assignment of Rights under Viewpoint Acquisition Agreement" shall mean that certain Assignment of Rights under Acquisition Agreement, dated as of June 13, 2003, executed by the Parent in favor of the Administrative Agent, for the benefit of the Lender Group, and acknowledged by the Viewpoint Sellers, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Authorized Signatory" shall mean such personnel of each Borrower Party as may be duly authorized and designated in writing to the Administrative Agent by such Borrower Party to execute documents, agreements, and instruments on behalf of such Borrower Party. "Availability" shall mean, as of any particular time, (a) the Revolving Loan Commitments minus (b) in each case, the Aggregate Revolving Credit Obligations. "Available Letter of Credit Amount" shall mean, as of any particular time, an amount equal to the lesser of (a) the Aggregate Letter of Credit Commitment at such time, minus the aggregate amount of all Letter of Credit Obligations at such time and (b) Availability at such time. "Available Revolving Loan Commitment" shall mean, as of any particular time, (a) the amount of the Revolving Loan Commitments at such time minus (b) the Aggregate Revolving Credit Obligations at such time. "Avoidance Provisions" shall have the meaning specified in Section 13.5(b). "Bank Products" shall mean any one or more of the following types of services or facilities extended to the Borrower Parties by the Administrative Agent (or any affiliate of the Administrative Agent) or, so long as Bank of America, N.A. is a Lender hereunder, Bank of America, N.A. (or any affiliate of Bank of America, N.A.) or, in the case of Hedge Agreements, the Administrative Agent (or any affiliate of the Administrative 6

Agent) or any Lender: (a) credit cards; (b) ACH Transactions; (c) cash management, including controlled disbursement services; and (d) Hedge Agreements. "Bank Products Documents" shall mean all agreements entered into from time to time by the Borrower Parties in connection with any of the Bank Products and shall include the Hedge Agreements. "Bankruptcy Code" shall mean the United States Bankruptcy Code (11 U.S.C. Section 101 et seq.), as now or hereafter amended, and any successor statute. "Base Rate" shall mean, at any time, a fluctuating and floating rate per annum equal to the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest announced publicly by SunTrust Bank from time to time as its "prime rate" for the determination of interest rate loans of varying maturities in Dollars to United States residents of varying degrees of credit worthiness. Such "prime rate" is not necessarily the lowest rate of interest charged to borrowers of SunTrust Bank, and SunTrust Bank may make commercial loans or other loans at rates of interest at, above, or below such "prime rate". Each change in the prime rate announced by SunTrust Bank shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Advance" shall mean an Advance which the Administrative Borrower requests to be made as a Base Rate Advance or which is reborrowed as a Base Rate Advance, in accordance with the provisions of Section 2.2. "Borrower Parties" shall mean, collectively, the Borrowers and each of their respective Domestic Subsidiaries. "Borrower Payments" shall have the meaning specified in Section 2.8(b)(i). "Borrowers" shall mean the Parent, Oxford of South Carolina, Inc., a South Carolina corporation, and Viewpoint. "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of Georgia or is a day on which banking institutions located in such state are closed; provided, however, that when used with reference to a Eurodollar Advance (including the making, continuing, prepaying or repaying of any Eurodollar Advance), the term "Business Day" shall also exclude any day in which banks are not open for dealings in deposits of Dollars on the London interbank market. "Capital Expenditures" shall mean, for any period, on a consolidated basis for the Borrower Parties, the aggregate of all expenditures made by the Borrower Parties during such period that, in conformity with GAAP, are required to be included in or reflected on 7

the consolidated balance sheet as a capital asset of the Borrower Parties, including Capitalized Lease Obligations of the Borrower Parties. "Capitalized Lease Obligation" shall mean that portion of any obligation of a Person as lessee under a lease which at the time would be required to be capitalized on the balance sheet of such lessee in accordance with GAAP. "Change in Control" shall mean the occurrence of one or more of the following events: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the SEA) of thirty five percent (35%) or more of the outstanding shares of the voting Equity Interest of the Parent; (b) as of any date a majority of the board of directors of the Parent consists (other than vacant seats) of individuals who were not either (i) directors of the Parent as of the Agreement Date, (ii) selected or nominated to become directors by the board of directors of the Parent of which a majority consisted of individuals described in clause (i), or (iii) selected or nominated to become directors by the board of directors of the Parent of which a majority consisted of individuals described in clause (i) and individuals described in clause (ii), or (c) except as otherwise specifically permitted hereunder and except for directors qualifying shares (required by Applicable Law) in certain Foreign Subsidiaries, the Parent ceases to directly or indirectly own and control one hundred percent (100%) of the outstanding Equity Interests of all of its Subsidiaries. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean all property pledged as collateral security for the Obligations pursuant to the Security Documents or otherwise, and all other property of any Borrower Party that is now or hereafter in the possession or control of the Administrative Agent, any Issuing Bank or any Lender or on which the Administrative Agent, any Issuing Bank or any Lender has been granted a Lien in connection with the Obligations. "Commercial Letter of Credit" shall mean a documentary Letter of Credit issued in respect of the purchase of goods or services by any Borrower Party in the ordinary course of its business. "Confidential Information" means information that any Borrower Party furnishes to any member of the Lender Group in a writing designated as confidential, and all information relating to the Acquisition, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such member of the Lender Group from a source other than a Borrower Party. "Contributing Borrower" shall have the meaning specified in Section 13.5(e). "Date of Issue" shall mean the date on which an Issuing Bank issues (or, at the direction of an Issuing Bank, a Foreign Issuer issues) a Letter of Credit pursuant to Section 2.15. 8

"Default" shall mean any Event of Default, and any of the events specified in Section 9.1 regardless of whether there shall have occurred any passage of time or giving of notice (or both) that would be necessary in order to constitute such event an Event of Default. "Default Rate" shall mean a simple per annum interest rate equal to, (a) with respect to outstanding principal, the sum of (i) the applicable Interest Rate Basis, plus (ii) the applicable Interest Rate Margin plus (iii) two percent (2%), and (b) with respect to all other Obligations, the sum of (i) the Base Rate, plus (ii) the Interest Rate Margin applicable to Base Rate Advances plus (iii) two percent (2%); provided, however, that with respect to any Eurodollar Advance outstanding on the date on which the Default Rate becomes applicable, the Default Rate shall be based on the then applicable Eurodollar Basis until the end of the current Eurodollar Advance Period and thereafter the Default Rate shall be based on the Base Rate as in effect from time to time. "Disbursement Account" shall mean account number 8800828975 maintained at SunTrust Bank, or as otherwise designated to the Administrative Agent by the Borrowers. "Dividends" shall mean, any direct or indirect distribution, dividend, or payment to any Person on account of any Equity Interests of any Borrower or any Borrower's Subsidiaries. "Dollars" or "$" shall mean United States dollars. "Domestic Subsidiary" shall mean any Subsidiary of a Borrower Party that is organized and existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia, but shall not include the US Ben Sherman Holdco. "EBITDA" shall mean, with respect to the Parent on a consolidated basis with its Subsidiaries for any period, the Net Income for such period, plus, (i) without duplication and to the extent reflected as charges in the statement of Net Income for such period, the sum of (a) income taxes, (b) Interest Expense (c) depreciation and amortization expense, and (d) extraordinary losses, minus (ii) to the extent added in computing Net Income for such period, extraordinary gains; provided, however, that if any such calculation includes any period in which an acquisition or sale of a Person or the assets of a Person occurred, then such calculation shall be made on a Pro Forma Basis. "Eligible Assignee" shall mean (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; or (d) any other Person approved by the Administrative Agent, the Issuing Banks and, unless (x) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (y) a Default has occurred and is continuing, the Borrowers, such approvals not to be unreasonably withheld or delayed. If the consent of the Borrowers to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in Section 11.5(b)), the Borrowers 9

shall be deemed to have given their consent five (5) Business Days after the date notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrowers prior to such fifth (5th) Business Day. "Employment Agreements" shall have the meaning specified in Section 4.1. "Environmental Laws" shall mean, collectively, any and all applicable federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning environmental protection matters, including without limitation, Hazardous Materials or human health, as now or may at any time during the term hereof be in effect. "Equity Interests" shall mean, as applied to any Person, any capital stock, membership interests, partnership interests or other equity interests of such Person, regardless of class or designation, and all warrants, options, purchase rights, conversion or exchange rights, voting rights, calls or claims of any character with respect thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect on the Agreement Date and as such Act may be amended thereafter from time to time. "ERISA Affiliate" shall mean any Person (whether incorporated or unincorporated) that together with the Borrowers would be deemed to be a "single employer" within the meaning of Section 414 of the Code. "Eurodollar Advance" shall mean an Advance which the Administrative Borrower requests to be made as a Eurodollar Advance or which is reborrowed as a Eurodollar Advance, in accordance with the provisions of Section 2.2. "Eurodollar Advance Period" shall mean, for each Eurodollar Advance, each one, two, three, or six month period, as selected by the Administrative Borrower pursuant to Section 2.2, during which the applicable Eurodollar Rate (but not the applicable Interest Rate Margin) shall remain unchanged. Notwithstanding the foregoing, however: (i) any applicable Eurodollar Advance Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Eurodollar Advance Period shall end on the next preceding Business Day; (ii) any applicable Eurodollar Advance Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Eurodollar Advance Period is to end shall (subject to clause (i) above) end on the last day of such calendar month; and (iii) no Eurodollar Advance Period shall extend beyond the Maturity Date or such earlier date as would interfere with the repayment obligations of the Borrowers under Section 2.6. Interest shall be due and payable with respect to any Advance as provided in Section 2.3. 10

"Eurodollar Basis" shall mean, with respect to each Eurodollar Advance Period, a simple per annum interest rate equal to the quotient of (i) the Eurodollar Rate divided by (ii) one minus the Eurodollar Reserve Percentage, stated as a decimal. The Eurodollar Basis shall remain unchanged during the applicable Eurodollar Advance Period, except for changes to reflect adjustments in the Eurodollar Reserve Percentage. "Eurodollar Rate" shall mean, for any applicable Eurodollar Advance Period, the rate per annum quoted at or about 11:00 a.m. (London, England time) two (2) Business Days prior to the first day of the Eurodollar Advance Period on that page of the Reuters, Telerate or Bloombergs reporting service (as then being used by the Administrative Agent to obtain such interest rate quotes) that displays British Banker's Association Interest Settlement Rates for deposits in Dollars for a period equal to such Eurodollar Advance Period or if such page or such service shall cease to be available, such other page or service (as the case may be) for the purpose of displaying British Banker's Association Interest Settlement Rates as reasonably determined by the Administrative Agent upon advising the Administrative Borrower as to the use of any such other service; provided, that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Eurodollar Advance Period, the Eurodollar Rate shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest one one-hundredth of one percent (1/100th of 1%)) of the rates per annum at which deposits in the applicable currency are offered to the Administrative Agent two (2) Business Days preceding the first day of such Eurodollar Advance Period by leading banks in the London interbank market as of 10:00 a.m. for delivery on the first day of such Eurodollar Advance Period, for the number of days comprised therein and in an amount comparable to the amount of the applicable Eurodollar Advance of the Administrative Agent. "Eurodollar Reserve Percentage" shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next one one-hundredth of one percent (1/100th of 1%)) in effect on any day to which the Administrative Agent is subject with respect to the Eurodollar Basis pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to Eurocurrency Liabilities (as that term is defined in Regulation D). Eurodollar Advances shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to the Administrative Agent under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. The Eurodollar Basis for any Eurodollar Advance shall be adjusted as of the effective date of any changes in the Eurodollar Reserve Percentage. 11

"Event of Default" shall mean any of the events specified in Section 9.1, provided that any requirement for notice or lapse of time, or both, has been satisfied. "Excess Funding Guarantor" shall have the meaning specified in Section 3.1(m). "Excess Payment" shall have the meaning specified in Section 3.1(m). "Excluded Deposit Accounts" shall mean, collectively, (i) each disbursement account that has a balance no greater than the amount necessary to cover outstanding checks drawn on such account, (ii) petty cash deposit accounts for retail stores of Retail Borrower Parties that have a balance (determined on an average basis for all retail stores as of any date of determination) no greater than $5,000 per retail store, (iii) the employee benefit trust account number 8801663496 at SunTrust Bank or such other similar employee benefit trust account, so long as the balance therein does not exceed as of any date of determination the Administrative Borrower's estimate of employee benefit claims to be paid in the remaining portion of such fiscal year (or, with respect to any date of determination in the last fiscal month of any fiscal year, the Administrative Borrower's estimate of employee benefit claims to be paid in the remaining portion of such fiscal year and during the next succeeding fiscal year) from such date of determination (provided, that at any time that a Default exists, Borrower Parties shall not deposit additional funds into such account except to the extent necessary to pay accrued and unpaid employee benefit claims that are then due and payable) and (iv) other deposit accounts with balances not to exceed $1,000,000 in the aggregate. "Existing Letters of Credit" shall have the meaning specified in Section 2.15. "Federal Funds Rate" shall mean, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 12:00 noon (Atlanta, Georgia time) on that day by each of three leading brokers of Federal funds transactions in New York, New York selected by the Administrative Agent. "Fixed Charge Coverage Ratio" shall mean, with respect to the Parent and its Subsidiaries on a consolidated basis for any period, calculated on a Pro Forma Basis in the event of any acquisition during such period, the ratio of (a) the greater of (i)(x) EBITDA minus (y) (A) Capital Expenditures made during such period and (B) taxes accrued during such period and (ii) zero, to (b) the sum of (i) scheduled payments of principal made with respect to Indebtedness during such period, (ii) Interest Expense (other than loan fees that, in accordance with GAAP, are amortized) accrued during such period, (iii) cash earnout payments made to the Viewpoint Sellers pursuant to the Viewpoint Earnout Agreement during such period; provided that such payments shall not 12

be included in this clause (b) if, after giving effect to such payments, the Total Senior Debt to EBITDA Ratio for the four (4) fiscal quarters of the Parent immediately preceding the date of such payments would have been at least 0.25 to 1.00 below the covenant level of the Total Senior Debt to EBITDA Ratio applicable during such period under Section 8.9, and, after giving effect to such payments, Availability would have been at least $40,000,000 as of the date of such payments; and (iv) Dividends paid by the Parent during such period (other than Dividends on common stock which accrue (but are not paid in cash) or are paid in kind or Dividends on preferred stock which accrue (but are not paid in cash) or are paid in kind); provided, however, that for purposes of calculating the components of item (a)(i)(y)(B) and (b)(ii) of this definition (1) for the period ending as of the last day of the first fiscal quarter of the 2005 fiscal year, the actual amount of such components for such fiscal quarter multiplied by 4 shall be included, (2) for the period ending as of the last day of the second fiscal quarter of the 2005 fiscal year, the actual amount of such components for such fiscal year multiplied by 2 shall be included and (3) for the period ending as of the last day of the third fiscal quarter of the 2005 fiscal year, the actual amount of such components for such fiscal year multiplied by 4/3 shall be included. "Foreign Issuer" shall mean any foreign bank engaged by an Issuing Bank to issue Commercial Letters of Credit on behalf of such Issuing Bank so long as (a) such foreign bank has agreed to hold any and all documents, instruments or other Collateral in its possession in connection with the issuance of any Commercial Letter of Credit as bailee on behalf of the Administrative Agent to perfect the Administrative Agent's security interest in such documents, instruments or other Collateral and (b) the agreement between such Issuing Bank and the Foreign Issuer is satisfactory to the Administrative Agent in its reasonable discretion. "Foreign Subsidiary" shall mean any Subsidiary of a Borrower Party that does not constitute a Domestic Subsidiary. "Freight Handler" shall mean any freight forwarder, customs broker, customs agent, shipper, shipping company or similar Person utilized by a Borrower Party from time to time in connection with the importation of Inventory. "Fund" shall mean any Person that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Funding Borrower" shall have the meaning specified in Section 13.5(e). "GAAP" shall mean, as in effect from time to time (subject to the provisions of Section 1.2), United States generally accepted accounting principles consistently applied, provided, however, that with respect to the financial statements of the Target and its Subsidiaries dated as of a date on or prior to the Agreement Date, such term shall mean United Kingdom generally accepted accounting principles consistently applied. 13

"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government. "Guarantors" shall mean, collectively, all Domestic Subsidiaries (other than the Borrowers) of the Parent and "Guarantor" shall mean any one of the foregoing Guarantors. "Guaranty" or "guaranteed," as applied to an obligation (each a "primary obligation"), shall mean and include (a) any guaranty, direct or indirect, in any manner, of any part or all of such primary obligation, and (b) any agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of any part or all of such primary obligation, including, without limiting the foregoing, any reimbursement obligations as to amounts drawn down by beneficiaries of outstanding letters of credit, and any obligation of any Person, whether or not contingent, (i) to purchase any such primary obligation or any property or asset constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of such primary obligation or (2) to maintain working capital, equity capital or the net worth, cash flow, solvency or other balance sheet or income statement condition of any other Person, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner or holder of any primary obligation of the ability of the primary obligor with respect to such primary obligation to make payment thereof or (iv) otherwise to assure or hold harmless the owner or holder of such primary obligation against loss in respect thereof. All references in this Agreement to "this Guaranty" shall be to the Guaranty provided for pursuant to the terms of Article 3. "Guaranty Supplement" shall have the meaning specified in Section 6.21. "Hazardous Materials" shall mean any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances, petroleum products (including crude oil or any fraction thereof), friable asbestos containing materials defined or regulated as such in or under any Environmental Law. "Hedge Agreement" shall mean any and all transactions, agreements or documents now existing or hereafter entered into between or among any Borrower Party, on the one hand, and the Administrative Agent (or an Affiliate of the Administrative Agent) or one or more Lenders (or an Affiliate of any Lender), on the other hand, which provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging such Borrower Party's exposure to fluctuations in interest or exchange rates, loan, credit exchange or security or currency valuations. 14

"Increased Revolving Loan Commitment Activation Notice" shall mean a notice substantially in the form of Exhibit D. "Indebtedness" shall mean, with respect to any Person (a) indebtedness for borrowed money or for the deferred purchase price of property and services (other than trade accounts payable on customary terms in the ordinary course of business), (b) financial obligations evidenced by bonds, debentures, notes or other similar instruments, (c) financial obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (d) financial obligations of such Person as the issuer of Equity Interests redeemable in whole or in part at the option of a Person other than such issuer, at a fixed and determinable date or upon the occurrence of an event or condition not solely within the control of such issuer, (e) all net payment obligations with respect to interest rate and currency hedging agreements, including, without limitation under Hedge Agreements, (f) reimbursement obligations (contingent or otherwise) with respect to amounts under letters of credit, bankers acceptances and similar instruments, (g) financial obligations under purchase money mortgages, (h) financial obligations under asset securitization vehicles, (i) conditional sale contracts and similar title retention instruments with respect to property acquired, and (j) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against a loss in respect of, indebtedness or financial obligations of others of the kinds referred to in clauses (a) through (i) above, except to the extent such guaranties are limited to a lesser amount. "Indenture" shall mean that certain Indenture dated as of May 16, 2003 between the Parent, as issuer, and the Indenture Trustee governing the issuance of the Senior Notes, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with Section 8.15. "Indenture Trustee" shall mean SunTrust Bank. "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any state or federal bankruptcy or insolvency law, assignment for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement or similar relief. "Intellectual Property Security Agreement" shall mean that certain Amended and Restated Intellectual Property Security Agreement of even date herewith among the Borrower Parties and the Administrative Agent, on behalf of, and for the benefit of, the Lender Group, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Interest Coverage Ratio" shall mean, with respect to the Parent and its Subsidiaries on a consolidated basis for any period, calculated on a Pro Forma Basis in the event of any 15

acquisition during such period, the ratio of EBITDA to Interest Expense (other than loan fees that, in accordance with GAAP, are amortized); provided, however, that for purposes of calculating the components of Interest Expense above (a) for the period ending as of the last day of the first fiscal quarter of the 2005 fiscal year, the actual amount of Interest Expense for such fiscal quarter multiplied by 4 shall be included, (b) for the period ending as of the last day of the second fiscal quarter of the 2005 fiscal year, the actual amount of Interest Expense for such fiscal year multiplied by 2 shall be included, and (c) for the period ending as of the last day of the third fiscal quarter of the 2005 fiscal year, the actual amount of Interest Expense for such fiscal year multiplied by 4/3 shall be included. "Interest Expense" shall mean, for any period, interest expense and loan fees of the Parent and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, and including capitalized and non-capitalized interest and the interest component of Capitalized Lease Obligations. "Interest Rate Basis" shall mean the Base Rate or the Eurodollar Basis, as appropriate. "Interest Rate Margin" shall have the meaning specified in Section 2.3(c). "In-Transit Inventory" shall mean Inventory of a Borrower Party that is currently in transit (whether by vessel, air, or land) from a location outside of the United States to a location in the United States. "Inventory" shall mean all "inventory," as such term is defined in the UCC, of each Borrower Party, whether now existing or hereafter acquired, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of a Borrower Party for sale or lease or are furnished or are to be furnished under a contract of service, goods that are leased by a Borrower Party as lessor, or that constitute raw materials, samples, work-in-process, finished goods, returned goods, promotional materials or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Borrower Party's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. "ISP" shall mean, with respect to any Letter of Credit, the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance). "Issuing Bank Joinder Agreement" shall have the meaning specified in Section 2.15(i). "Issuing Banks" shall mean (a) SunTrust Bank, (b) Bank of America, N.A., (c) Shanghai Commercial Bank Ltd., (d) HSBC Bank USA, National Association (formerly HSBC Bank USA), (e) Wachovia Bank, National Association and (f) any other Person (consented to by the Administrative Agent and, so long as no Default exists, the 16

Administrative Borrower) who hereafter may be designated as an Issuing Bank pursuant to an Assignment and Assumption Agreement or pursuant to an Issuing Bank Joinder Agreement. "Lender Group" shall mean, collectively, the Administrative Agent, the Issuing Banks and the Lenders. "Lenders" shall mean those lenders whose names are set forth on the signature pages to this Agreement under the heading "Lenders" and any assignees of the Lenders who hereafter become parties hereto pursuant to and in accordance with Section 2.17 or 11.5. "Letter of Credit Commitment" means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue (or arrange with a Foreign Issuer for the issuance of) Letters of Credit in an aggregate face amount from time to time not to exceed the amount set forth on Schedule 1(a) or any applicable Assignment and Assumption Agreement. "Letter of Credit Obligations" shall mean, at any time, the sum of (a) an amount equal to 100% of the aggregate undrawn and unexpired stated amount (including the amount to which any such Letter of Credit can be reinstated pursuant to its terms) of the then outstanding Letters of Credit, plus (b) an amount equal to 100% of the aggregate drawn, but unreimbursed drawings of any Letters of Credit (excluding, for the avoidance of doubt, such drawings that have been reimbursed with Advances made pursuant to Section 2.15(e)). "Letter of Credit Reserve Account" shall mean any account maintained by the Administrative Agent for the benefit of any Issuing Bank, the proceeds of which shall be applied as provided in Section 9.2(d). "Letters of Credit" shall mean either Standby Letters of Credit or Commercial Letters of Credit issued by Issuing Banks (or arranged by an Issuing Bank with a Foreign Issuer on or after the Agreement Date) on behalf of the Borrowers from time to time in accordance with Section 2.15 and shall include the Existing Letters of Credit. "License Agreement" shall mean any license agreement or other agreement between a Borrower Party and a Person duly holding rights in a trademark, trade name or service mark pursuant to which such Borrower Party is granted a license to use such trademark, trade name or service mark on Inventory of such Borrower Party. "Licensor Consent Agreement" shall mean an agreement among the applicable Borrower Party, the Administrative Agent and the applicable licensor in form and substance reasonably acceptable to the Administrative Agent. "Lien" shall mean, with respect to any property, any mortgage, lien, pledge, negative pledge agreement, assignment, charge, security interest, title retention agreement, levy, 17

execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested, or perfected. "Lien Acknowledgment Agreement" shall mean an agreement between a Freight Handler and the Administrative Agent, in form and substance satisfactory to the Administrative Agent, pursuant to which, among other things, the Freight Handler acknowledges the Lien of the Administrative Agent in the Collateral in the possession of the Freight Handler and any documents evidencing same. "Loan Account" shall have the meaning specified in Section 2.7. "Loan Documents" shall mean this Agreement, any Revolving Loan Notes, any New Lender Supplement, the Security Documents, the Account Control Agreements, the Securities Account Control Agreements, the Viewpoint Earnout Subordination Agreement, the Syndication Letter, the Guaranty Supplements, all reimbursement agreements relating to Letters of Credit, the Licensor Consent Agreements, any Lien Acknowledgment Agreement, all landlord, warehouseman or bailee waiver agreements in favor of the Administrative Agent, all Requests for Advance, all Requests for Issuance of Letters of Credit, all Notices of Conversion/Continuation, all Increased Revolving Loan Commitment Activation Notices, and all other agreements executed or delivered by a Borrower Party in connection with or contemplated by this Agreement, including, without limitation, any security agreements or guaranty agreements from the Borrowers' Subsidiaries to the Administrative Agent, the Lenders and the Issuing Banks; provided, however, that none of the Bank Products Documents shall be deemed to constitute Loan Documents. "Loan Notes" shall mean those certain Loan Notes issued in connection with the Acquisition by the Parent or its Subsidiaries in favor of certain Sellers in the aggregate principal amount not to exceed 4,000,000 Pounds Sterling, in form and substance satisfactory to the Administrative Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with Section 8.15. "Loans" shall mean, collectively, the Revolving Loans and the Swing Loans. "Losses" shall mean any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnified Person or Agent Indemnified Person, as applicable). "Majority Lenders" shall mean (i) as of any date of calculation prior to the termination of the Revolving Loan Commitments, Lenders the sum of whose Revolving Commitment Ratios of the Revolving Loan Commitments on such date of calculation equals or exceeds fifty-one percent (51%) of the amount of the Revolving Loan Commitments on such date of calculation, or (ii) as of any date of calculation after termination of the Revolving Loan Commitments, Lenders the total of whose Revolving Loans outstanding plus participation interests in Letter of Credit Obligations and Swing Loans outstanding, 18

as applicable, on such date of calculation equals or exceeds fifty-one percent (51%) of the total principal amount of the Revolving Loans and Swing Loans outstanding plus Letters of Credit Obligations as of such date of calculation. "Materially Adverse Effect" shall mean any materially adverse effect (a) upon the business, condition (financial or otherwise), operations, properties or prospects of the Parent and its Subsidiaries, taken as a whole, or (b) upon the ability of the Borrower Parties, taken as a whole, to perform under the Loan Documents, or (c) upon the rights, benefits or interests of the Administrative Agent, the Lenders or the Issuing Banks in or to this Agreement, any other Loan Document or the Collateral. "Maturity Date" shall mean July 28, 2009 or such earlier date as payment of the Loans shall be due (whether by acceleration or otherwise). "Maximum Borrower Liability" shall have the meaning specified in Section 13.5(b). "Moody's" shall mean Moody's Investor Service, Inc. "Mortgage" shall mean, collectively, any mortgage, deed of trust or deed to secure debt entered into between a Borrower Party and the Administrative Agent, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Multiemployer Plan" shall have the meaning specified in Section 4001(a)(3) of ERISA. "Necessary Authorizations" shall mean all material authorizations, consents, permits, approvals, licenses, and exemptions from, and all filings and registrations with, and all reports to, any Governmental Authority whether federal, state, local, and all agencies thereof, which are required for the consummation of the Acquisition and the transactions contemplated by the Loan Documents and the conduct of the businesses and the ownership (or lease) of the properties and assets of the Borrower Parties and their Subsidiaries, as applicable. "Net Cash Proceeds" shall mean, with respect to any sale, lease, transfer, casualty loss or other disposition or loss of assets by any Borrower Party or any issuance by any Borrower Party of any Equity Interests or the incurrence by any Borrower Party of any Total Debt (other than the Obligations), the aggregate amount of cash received for such assets or Equity Interests, or as a result of such Total Debt, net of reasonable and customary transaction costs properly attributable to such transaction and payable by such Borrower Party to a non-Affiliate in connection with such sale, lease, transfer or other disposition of assets or the issuance of any Equity Interests or the incurrence of any Total Debt, including without limitation, sales commissions and underwriting discounts. "Net Income" shall mean, with respect to any Person for any period, the consolidated net income (or deficit) of such Person and its Subsidiaries for such period, determined in accordance with GAAP. 19

"New Lender Supplement" shall have the meaning specified in Section 2.17. "Notice of Conversion/Continuation" shall mean a notice in substantially the form of Exhibit E. "Obligations" shall mean (a) all payment and performance obligations as existing from time to time of the Borrower Parties to the Lender Group under this Agreement and the other Loan Documents (including all Letter of Credit Obligations and including any interest, fees and expenses that, but for the provisions of the Bankruptcy Code, would have accrued), as they may be amended from time to time, or as a result of making the Loans or issuing the Letters of Credit, (b) any obligations as existing from time to time of any Borrower Party to the Administrative Agent (or an affiliate of the Administrative Agent) or, so long as Bank of America, N.A. is a Lender hereunder, Bank of America, N.A. (or an affiliate of Bank of America, N.A.) arising from or in connection with Bank Products and (c) any obligations as existing from time to time of any Borrower Party to the Administrative Agent (or an affiliate of the Administrative Agent) or any Lender (or an Affiliate of a Lender), as applicable, arising from or in connection with any Hedge Agreement. "Other Debt Relief Law" shall have the meaning specified in Section 13.5(b)(iii). "Other Taxes" shall have the meaning specified in Section 2.8(b)(ii). "Oxford Clothing" shall mean Oxford Clothing Corporation, a Georgia corporation. "Oxford Industries (UK 1)" shall mean Oxford Industries (UK 1) Limited, a private company limited by shares incorporated in England. "Oxford Industries (UK 2)" shall mean Oxford Industries (UK 2) Limited, a private company limited by shares incorporated in England. "Oxford Industries (UK 3)" shall mean Oxford Industries (UK 3) Limited, a private company limited by shares incorporated in England. "Parent" shall mean Oxford Industries, Inc., a Georgia corporation. "Participant" shall have the meaning specified in Section 11.5(d). "Payment Date" shall mean the last day of each Eurodollar Advance Period for a Eurodollar Advance. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Liens" shall mean, as applied to any Person: 20

(a) Any Lien in favor of the Administrative Agent or any other member of the Lender Group given to secure the Obligations; (b) (i) Liens on real estate for real estate taxes not yet delinquent and (ii) Liens for taxes, assessments, judgments, governmental charges or levies, or claims not yet delinquent or the non-payment of which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been set aside on such Person's books; (c) Liens of carriers, warehousemen, mechanics, laborers, suppliers, workers and materialmen incurred in the ordinary course of business for sums not yet due or being diligently contested in good faith, if such reserve or appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens incurred in the ordinary course of business in connection with worker's compensation and unemployment insurance or other types of social security benefits; (e) Easements, rights-of-way, restrictions (including zoning or deed restrictions), and other similar encumbrances on the use of real property which do not interfere with the ordinary conduct of the business of such Person; (f) Purchase money security interests and Liens securing Capitalized Lease Obligations provided that such Lien attaches only to the asset (which asset shall not constitute Inventory) so purchased or leased by the applicable Borrower Party and secures only Indebtedness incurred by such Borrower Party in order to purchase or lease such asset, but only to the extent permitted by Section 8.1(d); (g) Deposits to secure the performance of bids, trade contracts, tenders, sales, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (h) Liens on assets of the Borrower Parties, the Target and its Subsidiaries on the Agreement Date which are set forth on Schedule 1(b); (i) With respect to Collateral consisting of real property, Liens that are exceptions to the commitments for title insurance issued in connection with the Mortgage, as accepted by the Administrative Agent in its sole and absolute discretion; (j) Liens on the assets of the Target and its Subsidiaries securing Indebtedness under the UK Credit Facility Documents; and (k) Liens on the assets of the Target and its Subsidiaries permitted by the UK Credit Facility Documents to the extent approved by the Administrative Agent in writing. 21

"Person" shall mean an individual, corporation, partnership, trust, joint stock company, limited liability company, unincorporated organization, other legal entity or joint venture or a government or any agency or political subdivision thereof. "Plan" shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA or any other plan maintained for employees of any Person or any ERISA Affiliate of such Person. "Pledge Agreement" shall mean that certain Pledge Agreement, dated as of June 13, 2003, by certain Borrower Parties in favor of the Administrative Agent, on behalf of, and for the benefit of, the Lender Group, as amended by the Pledge Agreement First Amendment, as the same may be further amended, restated, supplemented or otherwise modified from time to time. "Pledge Agreement First Amendment" shall mean that certain First Amendment to Pledge Agreement of even date herewith by certain Borrower Parties in favor of the Administrative Agent, on behalf of, and for the benefit of, the Lender Group. "Pounds Sterling" shall mean the lawful currency of the United Kingdom and, if the United Kingdom adopts the Euro as its lawful currency, includes the equivalent amount of Euros. "Pro Forma Basis" shall mean for purposes of determining compliance with the covenants set forth in Sections 8.8, 8.9, 8.10 and 8.11 hereof and the defined terms relating thereto, giving pro forma effect to any acquisition or sale of a Person, business or asset, and any related incurrence, repayment or refinancing of Indebtedness, Capital Expenditures or other related transactions which would otherwise be accounted for as an adjustment permitted by Regulation S-X under the Securities Act or on a pro forma basis under GAAP, in each case, as if such acquisition or sale and related transactions were realized on the first day of the relevant period. "Property" shall mean any real property or personal property, plant, building, facility, structure, underground storage tank or unit, equipment, Inventory or other asset owned, leased or operated by any Borrower Party or any Subsidiary of a Borrower Party (including, without limitation, any surface water thereon or adjacent thereto, and soil and groundwater thereunder). "Pro Rata Share" shall have the meaning specified in Section 3.1(m). "Reimbursement Obligations" shall mean the payment obligations of the Borrowers under Section 2.15(d). "Replacement Asset" shall have the meaning specified in Section 2.6(b)(ii). "Replacement Event" shall have the meaning specified in Section 11.16. 22

"Replacement Lender" shall have the meaning specified in Section 11.16. "Reportable Event" shall have the meaning specified in Section 4043(c) of ERISA and the regulations thereunder, but shall not include any event which is not subject to the thirty (30) day notice requirement for which notice is waived under the regulations to Section 4043 of ERISA. "Request for Advance" shall mean any certificate signed by an Authorized Signatory of the Administrative Borrower requesting an Advance pursuant to Section 2.2 which will increase the aggreg