Oxford Industries Inc (OXM) 2003 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. And welcome to your Oxford Industries Incorporated Fiscal Fourth Quarter and Year end 2003 Conference Call. At this time, all parties have been placed on a listen-only mode; and the floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Mr. Reese Lanier, Oxford's Treasurer and Investor Relations Officer. Sir, the floor is yours.

Thank you. Good afternoon, everyone. Before we get started, I'd like to point out that some of the statements made on this call as a part of prepared remarks or in response to your questions, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results -- actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, which are described in the company's current report on Form 8-K, dated July 16th 2003. A copy of this report is available online or upon request from Oxford's Investor Relations department. Oxford disclaims any duty to update any forward-looking statements.

Thanks for your attention. And, now, I'd like to introduce Hicks Lanier, Chairman and Chief Executive Officer of Oxford Industries.

Thanks, Reese. Good afternoon, and thank you for joining us for our fourth quarter conference call. With me today are Ben Blount, our Chief Financial Officer; Scott Grassmyer, our Controller; Tony Margolis, Chief Executive Officer of Viewpoint International and Tommy Bahama; and Reese Lanier, Treasurer and Director of Investor Relations.

As you may be aware, this is our first conference call in some time. Today, I'd like to talk with you about the progress we've made in our core business over the last year, give you some insight into our plans for the Tommy Bahama business, and provide some color on what we believe the retail environment holds for us over the next year.

Following this, I will turn the call over to Tony Margolis, CEO of Viewpoint International to briefly comment on our Tommy Bahama business. And, then, Ben will review our financials and provide guidance for fiscal 2004.

After this, I will provide closing comments and turn the call over to the operator to begin the question and answer session.

To begin, I'd like to provide you with the operational and financial highlights from our fiscal year 2003, which ended on May 30th. Keep in mind that our results don't yet include the benefit of the Viewpoint-Tommy Bahama acquisition, which closed on the 13th of June. We reported strong results for the full year. Net sales increased 13% to $765 million versus $677 million in fiscal 2002. All four of your operating groups enjoyed sales growth.

Gross margin increased 120 basis points, to 20.9% versus 19.7% last year. Our operating expenses declined as a percentage of net sales to 16.3%, from 17.1% last year. And, most importantly, diluted earnings per share increased 91% to $2.68, compared to $1.40 last year. We are certainly pleased with these results.

In addition to the financial results, fiscal 2003 was a year of significant accomplishments toward our ongoing strategic objectives. We further reduced our own production capacity in the western hemisphere, and have no owned domestic capacity. We improved our Far East in-sourcing (ph) with joint ventures in both India and China. We improved at our supply chain skills and systems; and we set all-time records in inventory and total asset turnover, while maintaining our strong record of high quality service to our customers.

We competed the exit of the European IZOD Club business and began to exit of IZOD Club Golf in the US. We launched a new golf business under the Oxford Golf label, to rave reviews, and, of course, the Tommy Bahama acquisition.

In 2003, we've achieved many of the goals that we set at the beginning of the year, allowing us to engineer a solid rebound from the prior year. Importantly, these accomplishments set the stage for future growth and diversification. As we look ahead, we believe, our company has several key competitive advantages.

First, superior planning and execution. Oxford has long prided itself on its stability to plan and execute. Our highly sophisticated and effective supply chain management systems enable us to have greater control over our sources of production throughout the globe. This allows us to more effectively manage risks, lower markdowns, and improve asset turnover. It also gives us an edge on lead-times and provides us with tool for more effective planning and forecasting.

Secondly, a longstanding reputation to quality. We believe our longstanding reputation for strong quality control and superior execution has set us apart as a private label vendor and licensee of choice, allowing us to successfully service some of the most vigorous and demanding retailers and license holders in the industry.

Thirdly, value-added focus. Oxford has worked diligently to differentiate itself from other apparel producers by ensuring that our mix of business is focused on higher value-added private label programs and premier-licensed and old brands. We strive to bring innovative merchandising (inaudible), demand planning, forecasting, global logistics, and distribution to our retail partners in an effort to maximize their opportunity for profitable sell-throughs.

To this end, we have long recognized the importance of compelling products and strong brands. Over the past several years, we have value-added innumerable opportunities to broaden our product offering and strengthen our portfolio businesses.

In Tommy Bahama, we have found an acquisition that meets all of our strategic requirements. As an aspirational lifestyle brand, Tommy Bahama is one of the strongest men's sportswear brands in the market. Its distribution is very clean and well diversified. The product is distributed through upscale department stores, a broad base of independent specialty stores, as well as more than 30 company-owned Tommy Bahama retail stores.

These are tiers of distribution that are highly complementary to the existing Oxford business. Tony and his management team have done an outstanding job of building the Tommy Bahama brands, while very judiciously broadening distribution. They're highly selective about their retail partners and severely restrict the promotion of their products. In so doing, Tommy Bahama has succeeded in sustaining a cycle of scarcity that adds to the allure of the brand.

They have also developed a strong company owned retail chain to showcase the brand and to generate incremental profitability. We recognized that the brand has tremendous potential for continued growth from product line extensions, sub-brands, licensing and ongoing company owned retail expansion. In apparel, we believe women's wear represents the single greatest opportunity for growth. That said, our initial approach to these opportunities will be conservative and maintaining the integrity of the brands will continue to be our primary objective.

As it stands, they will be highly accretive to our earnings. While we clearly want to leverage this acquisition to its fullest extent, we will do so with an eye towards keeping the risk profile of the expansion low. The impact of the acquisition on our results will be clear and dramatic. During fiscal 2004, we expect that on a consolidated basis, Oxford Industries will report $1.05 billion to $1.1 billion in sales and approximately $4.35 to $4.65 in fully diluted earnings per share.

We are under no illusions about the current state of the retail environment. While our business has been good, we know that there is significant pressure on nearly all of the major apparel retailers and producers. I believe our forecast reflects a healthy dose of reality. At the same time, we are confident that there is a solid market opportunity for us in both the near and long term.

At this point, we have good visibility on the first quarter of fiscal 2004 and are encouraged by what we see. Now I would like to turn the call over to my friend and partner Tony who will briefly comment on his new role at Oxford.

Thank you Hicks, and good afternoon to all of you. I wanted to take this opportunity to tell you of my enthusiasm regarding the outlook for Viewpoint International and Tommy Bahama. As I sit here today, I'm very excited to be given the opportunity to continue to lead Tommy Bahama to its fullest potentials. We believe significant opportunities exist to expand our business over the long term. So we are pursuing conservative growth strategies to realize those goals.

Some of these strategies include growing our on company retails stores that's based in 32 today by approximately five to ten additional stores over the net five years.

Excuse me--each year for the next five years. Growing our women's business to be a larger percent of our total business, continuing to develop sub brands and brand expansions such as Indigo Palms, and the Island Soft brand. These brands are small today by comparison to Tommy Bahama but they have significant potentials.

Taking advantage of the numerous benefits afforded us by becoming a part of Oxford Industries will also add to our growth opportunities. And now I would like to turn the call over to Ben to review our financials, and provide guidance for fall for fiscal 2004.

Thank you Tony, and good afternoon to everyone. I'll start by taking you through the income statement for the fourth quarter. Net sales for the fourth quarter increased 3% to about $198 million versus $192 million in the fourth quarter of last year. We're quite pleased with this.

Better than expected shipments of women's sportswear were partially offset by sales declined in IZOD Club Golf business. A gross margin declined at 30 basis points to 20.8% from 21.1%. This decrease is due to the result of the just mentioned growth in our lower margin but (inaudible) women’s sportswear, and the decline in the unprofitable but higher gross margin IZOD Club Golf business. Plus, a high OIPO (ph) credit in the previous year.

SG&A expenses increased 3% to $31.9 million from $31 million in the fourth quarter of last year. This year's numbers included approximately $2 million of non-recurring expenses associated with the shut down of our IZOD Club Golf business during the fourth quarter. Including this, our SG&A margins still decline slightly to 16.1% from 16.2% in the previous year's quarter.

As a result on the slight gross margin decline and the shutdown expenses, earnings before interest in packages for the quarter declined by 2% to $9.3 million from $9.5 million. Interest expense for the quarter was $1.8 million, compared to 200,000 for the same period last year. A higher interest expense is due entirely to interest in financing fees related to the Viewpoint expense (ph) acquisitions.

Net income for the quarter was $4.6 million versus $5.6 million in last year's fourth quarter. Diluted earnings per share for the quarter were 60 cents versus 74 cents during the fourth quarter of fiscal 2002. Our difference in the LIFO (ph) credit in the acquisition expenses alone amounted to approximately 21 cents per diluted share.

Considering this, we're pretty pleased with the fourth quarter. The full year results were also very good. For the full year sales were $765 million, an increase of 13% from $677 million for the full fiscal year 2002. This increase was largely driven by growth in Womenswear Group and the impact of the Lands' End rollout to Sears' stores to the Slacks Group and the Shirt Group.

Gross margin for the full year increased 120 basis points to 20.9% from 19.7% in the prior year. This increase was largely a result of improved manufacturing and sourcing efficiencies and lower markdowns. SG&A margin for the year improved to 16.3% from 17.1% in the prior year, despite approximately $3.7 million of expenses associated with the closing in the US and European IZOD Club Golf business, and completing our deal with Viewpoint. That should include $2.4 million in bad debt expense associated with the K-Mart bankruptcy.

Full year earnings increased 102% to $35.3 million from $17.5 million. Net income increased 92% to $20.3 million from $10.6 million during the prior year. Earnings per share increased 91%, to $2.68 from $1.40 during the prior year.

I’d also I'll provide you some detail on our operating segment. Oxford Slacks reported sales increase of 1% for the fourth quarter and 20% for the fiscal year, driven by the roll out of Lands' End product to Sears retails stores. Higher sales volumes, and improved capacity utilization resulted in an increase in operating profit of 8% for the fourth quarter, and 98% for the full year.

The Oxford Shirt Group also benefited from the introduction of the Lands' End assortment to Sears stores, but sales increase is partially offset by the decline in golf apparel shipments. Full year sales grew 6% despite the fourth quarter sales decline of 3%. Fourth quarter earnings decline as a result in shut down expenses to close the groups IZOD Club Golf business. Profitability for the full year showed significant improvement due to lower outsourcing and fewer markdowns.

A rebound in women's sportswear shipments that our Womenswear Group show 11% sales increase in the fourth quarter and a 22% increase for the year. Profitability improved significantly for both the quarter and the year, driven by greater manufacturing and sourcing efficiencies and lower bad debt expense.

Lanier Clothes, the company's tailored clothing group, reported a net improvement in profitability for both the fourth quarter and the full year due to lower markdowns to greater manufacturing and sourcing efficiencies. Sales increased 3% for the full year, despite a 3% decline for the fourth quarter.

Now I can turn your attention to some key balance sheet item. Our cash position increased to $24 million as of the close of the year versus $18 million from the same period last year. The balance sheet also reflects $205 million of cash in escrow from the senior notes offering that we used to finance to cash portion of Viewpoint acquisition.

Inventories at year-end were $104 million, compared to $85 million the previous year. Last year's $85 million was an unusually below level for us. Our current level does include some increases to support non-seasonal core replenishment programs. Overall our inventories are in good shape. Our account receivables are also in good shape.

Cash flow from operations increased to approximately $27 million, from approximately $12 million last year. I'd like to add some details to the guidance Hick’s provided on the upcoming years. On a consolidated basis, we expect Oxford Industries to report $1.05 billion to $1.1 billion in revenues and between $4.35 and $4.65 in diluted earnings per share.

We expect mid-single digit decline in Oxford's historical business, and a mid to high single digit increase in the Viewpoint business. Our expected sales decline in the Oxford's portion is attributable to the discontinuation of business with K-Mart, to the shut down of IZOD Club Golf, and to anniversary-ing our initial shipments of Lands End product to Sears.

Viewpoint sales growth will be driven primarily by retail store openings. Viewpoint's wholesale business is expected to be flat, with growth in branded sales offset by decline in private label. For our model builders in 2004, consolidated depreciation and amortization exclusive of deferred financing fees, is projected at approximately $10 million. Capital expenditures at approximately $15 million, interest at approximately $26 million and a tax rate of 37.5%.

Laid out by fiscal quarter, we're projecting the following. For the first quarter, we expect to see net sales in the range of $230 million to $240 million. Diluted earnings per share are between 75 cents and 80 cents. Weighted average diluted shares outstanding for the quarter are projected to be approximately 8.2 million. For the second quarter, we expect to see sales in the range of $245 million to $255 million and earnings between 80 and 85 cents per share based on a projected 8.3 million shares.

For the third quarter, we expect sales in the range of $280 million to $295 million, earnings per share between $1.20 and $1.30, based on 8.3 million shares. For the fourth quarter, we expect sales in the range of $295 million to $310 million, and earnings per share of between $1.60 and $1.70 based on 8.5 million shares outstanding.

The increases in projected shares outstanding, as a result of shares issued in the upfront consideration of the acquisitions, increased dilution from employee stock options resulting from an recent increase in our share price, and shares expected to be issued in the earn out. Our earnings projections do not factor in the effects of purchase accounting increase. Purchase price allocation will be completed prior to the end of our first quarter.

Thank you, and now I'd like to turn the call back over to Hicks.

Thanks, Ben. Before we take your questions, I'd just like to say that we are very pleased with our results for the quarter and the here. We are very excited about our opportunity to partner with some exceptional people at Viewpoint and looking forward to demonstrating to our shareholders what this day will mean to them, not only immediately but over the long-term.

Our company has a long and proud history. We are now writing a new chapter with a revitalized business plan and exciting prospects for growth. We are focused on building one of the world's preeminent apparel companies, and we've made excellent progress towards that goal this past year.

If we look ahead, we are focused on four key areas. First, continuing to nurture and support the Tommy Bahama brands. Secondly, launching new merchandising initiatives like the recently introduced Dockers clothing license, the Oxford Golf label, and the Indigo Palms Denim concept. Three, grow the Tommy Bahama store base to extend the reach of the brand and maintain control of our distribution. And four, to continue our prudent and disciplined financial and operating strategies.

To conclude, I'd like to thank our employees for their hard work, our management team for their dedication, and our shareholders for their continued interest and support. Thank you. Operator, we're now ready to take question.

Thank you, ladies and gentlemen, if you do have a question or a comment at this time, please press the numbers "1" followed by "4" in your telephone key pad. Questions will be taken in the order they are received. And we do ask that, while posing your question, please pick up your handset to provide optimum sound quality. Our first question is coming from Lee Backus with Buckingham Capital. Your line is live.

Yes. Good afternoon. First, congratulations Hicks, on what I think is a terrific acquisition.

Well, thank you Lee.

Tony, maybe you can talk--you have pretty strong growth over the past several years, why -- why are you selling the company now?

I think there is probably more than one or two answers to that, and some of them might get a little complex with this phone call. But I think the important ones--probably the ones that the drivers are.

As you build businesses, my partners and I took a great deal of pride in our entrepreneurial skills but there were many of what I'll call back of the house realities that we were not necessarily as proficient at, all of which we probably over a long strenuous period of time could have built into our company ourselves. But through this relationship, and the clear understanding of what some of Oxford's strength are, we thought it was a natural opportunity for us to almost instantaneously get those strengths as part of our company, and take the burden off of our team from having to build them.

I also think that there is a point at which, as operators of the business, to be distracted by many of those requirements is a risk factor that would force us to take our life off the balls that we're responsible for, and that have helped us to create this company. And I think that there was a sense that, at this stage of our existence, in these teen years of our existence, it's very, very important for us to continue to drive great product and great presentation to the customer to retain the aspiration of position that we hold.

And I think it's one of the downfalls of many of the people in our industry, who do build companies of our stature, and then get sidetracked by the daily operating parts of the business that they're not very good at; and they start focusing on that and loose sight of the thing to build the business.

I think those were the two primary drivers. And, of course, there are benefits to our employees, and being part of a larger corporation puts you in a -- puts all of our employees in, I think, a more desirable place.

So, going forward, where -- obviously, you've mentioned a lot of areas of growth. What kind of growth -- topline growth rate would you be comfortable with, going forward, for the Tommy Bahama?

I think our goals are to keep it, at this point, in the mid-to-low single -- mid-to-high single digits. I think for us to set goals that are higher than that might be obtainable, but perhaps, the long-term cost of the -- that tarnishes the brand.

You've been running pretty high up in profit margins, close to 15% operating profit margins. Are those sustainable?

I don't think there's any question about that.

Now, a lot of the growth is coming from new stores, it seems. Could you or could Ben -- someone give us a sense of how the stores perform? What kind of return investments? The store-economics?

I'll try to, Lee. The stores and sales are able to operate on pretty high margins, compared to traditional retailers. And at a pretty high productivity levels. Tommy Bahama's internal practice has been transfer at full wholesale, which puts them on a little playing ground with the their other customers.

And yet the stores do show a profitability on that basis; although, in fact, the wholesale company does not incur a number of the expenses such as sales commission and selling directly to their own stores. So, Oxford agrees with Tony and his team that the store expansion on a prudent basis is one of the key, as Hicks mentioned, strategies for us for ongoing profitable growth.

So does that mean the operating profits of the retail division are higher than the wholesale division?

It's depends upon how you have the interchange price, Lee. The way Tommy Bahama has accounted for them, the answer is no, they are not higher. But again, there is lot of profit that resides in the wholesale company that the way to book (inaudible) Cap. It is very simple matter to restate that, as their former partner did, and change the interchange price. And then the retail stores appear to be immensely more profitable than a wholesales. So it’s beyond the scope of this question to get into the detail, but the answer is it depends upon how you mange the interchange price.

Okay. On the Oxford core business, you talk about negative net single digit growth this year. Its sound likes that's from to eliminating some unprofitable divisions?

Its certainly correct as you realized to the ISAC clubbed off business as far as the K-Mart business, we just made a strategic decision back last fall that even though we had the VIP financing, we conclude we did not stayed success strategy there and elected to cease our relationship to K-Mart.

So the operating profit margins on the core Oxford business should remain round that the level that they were last year?

I would think so.

All right. I'll let somebody else cut it. Thank you very much.

Thank you.

Our next question is coming from Justin Mohrer with Ford Irving. Your line is live.

Good afternoon guys. Also, just on the Tommy business. Maybe talk a little bit about the experience that either yourselves or the guys of you point bring from a retail perspective. Did I understand -- were you guys talking, when you talked about the transfer price of the product at wholesale to the retail? Did you have a management company running that business or you normally do it yourselves?

No.

Okay. All right.

I'll try to answer the second part first I think what Ben was referring to is that prior to this transaction, there was a financial investor that was a partner in our company and for the purposes of tracking the businesses, they would go through the process of running a separate report that showed, how the stores performed, if they were counted as in-house transfer rather than third party transfer. So it's just a processing under which we account for them and they try to track it for us both ways.

Got it.

Well. This does -- to answer the first part of your question, I will tell you that personally, I have 42 years of experience in the wholesale apparel business, as does one of my other partners, I think has 40 years and the third one has about 32 years. The last gentlemen, who I mentioned actually had about 8 or 10 years of experience at retail prior to going into the wholesale business.

But we in fact over the 7 or 8 years that we have been in the retail business, have built a retail organization. And we operate that company with a president of our retail company gentlemen by the name of George Santacroce, who has been involved in retailing for a significant portion of his career. As have many of the other people in that company.

You just relative to least question of margin though. I mean, there is obviously not a ton of retails out there that are running in access of 15% of operating margin. At the retail level whether it comes out of the wholesales margins or not. Can you maybe talk a little bit about, if you can--or if you are comfortable talking about the average box size in some of the matrix?

Sure. We actually have a couple of things that I think replay and I think, the quicker answer to your question is that we generated a pretty significant sales per script foot as compared to the industry standard. I think, there in lies the explanation of the formula for the answer you are looking for. But to answer some of your more specific questions, the average size of our store today runs in the high 3,800 to 4,200 range.

Those sizes vary depend -- based on the number of different things, usually location and opportunity. And within that, we have two types of stores. We have standalone retail stores, and we have stores that are a part of what we call "a compound," which includes an operating restaurant and is really targeted to creating a vision for the lifestyle and high-end destination resort locations.

Yes.

There are only six of those in the country, today. And there is no intention to build a giant restaurant company; we just think it's a part of the marketing strategy of the company. The restaurant operates profitably. The stores where restaurants -- and those -- and to give you a sense of scale, the average compound is between 10,000 and 12,000 square feet, about 4,000 of which is retail. And the balance is restaurant. Those stores and compounds generate exceedingly high swift for the sales. The standalone retail stores do less, but they're also less expensive to build.

Yes. Okay. I guess, with a cracker-barrel of the...

That's exactly right -- of the luxury band business.

Do you guys -- yes, just one last follow-up -- actually, two on the women's business; what percentage roughly is that of the total and where you guys think you can take it?

I would tell you that, right now, womenswear represents probably 25 to 30 percent of our volume. In our opinion, it has a significantly greater potential. We have not factored it in to become anywhere near what the industry averages are. Usually, I think, womenswear represents 2 or 3 times the size of men's apparel. But we don't expect that to be our reality. However, we do believe that it would be reasonable for us to get it up into the two-thirds to three-quarters the size of men's.

And then finally, on the stores related to the wholesale business, in general. You know, a lot of companies that, kind of, embark in that direction; it speaks often times to what they feel, either frustration in the department stores and/or just lack of door growth, generally, which makes them feel like they have to go on and do it themselves. Is that part of the reason for your strategy to do that or maybe talk about that a little bit?

I will tell you, without question, part one was correct. There is some frustration in the way, in which, our product was being handled by some of the retailers; and in fact, the original store that was built was built with the intention of trying to set, sort of, a standard for them to follow with our fingers crossed that we'd actually even make some money doing it. And as you can tell, it's what well for us.

We don't really sell mainstream department stores. So we don't face that kind of frustration. I think our door growth is significant enough with the stores that we want to do business with and the stores that we do, do business, with; like, in Nostrum's, where I think -- and don't hold me to this -- but I think, over the next three or four years, they have a plan to open, I think, another 13 doors in United States.

So we see door growth from the kinds of stores we do business with. But I think that the other key for us is that, clearly, when we go into a marketplace and do the presentation the way we do it, Viewpoint International, and now Oxford Industries, captures a lot more sales in that community than when we rely on third-party clients to do it. If you got have been into one of our stores, you know that it's a pretty entertaining and exciting place to be; and not enough retailers do that today.

Yes. Okay. And then just, lastly -- I'm sorry -- what do you think the market size in terms of -- presumably, you want to stay in geographies and/or climates that are more conducive to your products. So I guess, if we see a store up here in New York and New Jersey, we should start to run for the hills. But I mean, how many stores...

Don't tell the people in Chicago that, because we have stores there that are doing quite well.

Yes.

You know it's a fascinating thing, when we started the retail project; of course, we took what I'll describe as the low-hanging fruit. It was obvious that we would want to go to Sunbelt destination resorts and things of that nature. But if you look at our wholesale third party business, it's quite evident that there is a significant amount of our product sold in northern climates, including Alaska. And, as a result of that, we are judiciously placing Tommy Bahama stores in Northern-West Sunbelt-oriented communities.

But I will tell you that we would still tend to grab that great sight in a sunny place versus a cold place. Our most recent opening was in Denver, Colorado, which, as you can imagine, can get pretty chilly; and it's doing gangbusters.

Thank you. Our next question is coming from Christina Boni with Credit Swiss First Boston. Your line is live.

Yes. Good afternoon. I had a couple of questions. One, could you possibly give D&A for the full-year period and if you do have it for the quarter?

We're sorry. Do you want it for next year or for the...

I want for the current period just reported. I think you gave an estimate for last following year, perhaps, of $10 million.

Yes, for the next year.

Right.

And, it was just under $5 million for the current.

$5 million for the current -- yes, okay. And with respect to your new credit facility, could you give us a sense of, at the end of the year, what do you had in terms of volume availability?

Reese, you want to take that one?

Yes. Our borrowing availability at the time that we closed or at yearend.

At yearend or if you have closed them subsequent for June 13th, because the transaction then will be helpful?

Right. We did not have the facility at yearend. We closed the facility concurrently with the close of the acquisition.

Right. Okay.

It is a borrowing-based driven facility. It is total $275 million, which covers our letter of credit issuances and our direct borrowing. And at the time we closed, we had on a combined basis, I believe, a little over $200 million in borrowing capacity to cover both our LTA issuances and our direct borrowing.

Okay. And the outstanding -- could you give us as of June 13th so we can see what it looks like for the transaction?

Right. We closed with approximately $25 million outstanding on the line.

Wonderful. And is their any way you can give us a sense on a pro forma basis, even on an operating income basis, what the two businesses together what it looks like at yearend?

Actually, we have provided fairly detailed pro forma information in our 8-K that was filed on June 13th.

Right. I did see that. I was just wondering if you had an update for the year end.

We haven't updated that for year end.

Okay. Very good. Thank you very much.

Thank you.

Thank you. Our next question is coming from Blair Viager (ph) with Baron Capital. Your line is live.

Hi guys. How are you? I had a couple of quick questions and then a couple of longer questions. For the guidance for '04, is there any onetime charges including any transaction charges in the first quarter?

No.

Okay. So that's with?

There are some transaction expenses related to the debt that will be amortized over the term of it. But no specific charges for '04.

Okay. My phone cut out. What did you say, shares outstanding for the year? What is your guidance for that?

We gave it by quarter, because it is changing and that they're - or could we keep them if-- The yearend is $8.3 million.

Okay. Couple of longer questions, you talked a little bit about the women's business, it seems like you - I think, initially you made or you admitted to making a few mistakes with the women's business.

Maybe you made it too useful? So what did you kind of learned earlier on with that business? So, what're you going to kind of change it in - are you at the point now where you feel like you got it right and you can grow it?

Are you talking to - about Tommy Bahama?

Yes. I'm talking about the women's business of Tommy Bahama. I'm sorry.

Actually, you got exactly backwards. I think we've been a little too mature in terms of - if there was an error in direction, I think, if you were to ask the customer based or ask the marketplace to define the -- our male customer, he is probably 30 to 50 years old and if you ask us to define the female customers, she might have been 10 years older than that.

Okay.

And I think that the part of the solution for us, because we have a relatively low for our brand, in terms of the quality of the product that we put out. Women are very favorably inclined to purchase Tommy Bahama products for their husbands or significant others. They are happy to purchase Tommy Bahama furniture for their home, there are beddings and linens. Licensee is having a field day, Tommy Bahama hand bags are doing great, Tommy Bahama footwear for women is doing great.

I think that the error if there is one that we have identified is that we went a little too old. Some of that stemmed from some personality issues in our design department, the way in which our women's design team was being built and we have made some adjustments in that area that we're very confident of. In fact, we are just breaking with spring of '04 collection this next week and for those with any track record with the company, the sort of shift in direction is pretty evident.

And we're pretty excited about the earlier -- there had been some -- also some fit issues that had arisen, as part of that, maybe misunderstanding of who the customer was. And those were addressed over the last six months to the point where we are starting to see significant improvement in sell through on women's. Even though the design work isn't quite as useful as we want. The six characteristics has got more in line with where we think they needed to be.

Okay. And so you think spring '04 will be the first season where you feel like you have all the right things in...?

I would tell you that it's an evolving business and what we are firm believers in doing is not shocking and looking schizophrenic to our customer base. And so there is an evolution that occurs where we evolve the line in the direction that we want to go. So that we're not walking away from unknown business entity and not capturing a new one. So we, sort of let our toes get wet before we jump in the water.

Okay.

But I will tell you that we have very conservative plans for growth in our women's company over the next year or two.

Okay. And in the future, are you going to talk about booking trends in the Tommy Bahama business?

I don’t think so because it's bookings for say can be pretty confusing depending on what type of replenishment programs you've got so forth. But we'll certainly give you a flavor of where we see the business going from our volume standpoint.

And so, just based on your earlier comments, you feel pretty good about the first quarter and how Tommy Bahama bookings are looking just today?

That's correct. And that would be through to holiday season.

Yes.

Our booking standpoint.

And licensing revenue in Tommy Bahama, I don't know, if I can't remember whether you've disclosed that separately, but can you maybe talk a little about that -and it sounds like that's going off very quickly if you're doing hand dyes and some other things? And maybe what are some other products that you think maybe you can license over the near term?

I will tell you that people have accepted the brand as an aspirational lifestyle brand and. So it's inappropriate for me to fantasize with you about all of the things that we could be doing. But I will tell you that our most recent signing was with a company called Brown Jordan, who is a -- is probably the preeminent outdoor furniture manufacturer in America today. And they are releasing a line, I believe, sometime in the end of this month, or early next month, for delivery later this fall or into early spring.

But there are many of what I call "lifestyle related opportunities" that exist for us. We do not have a fragrance license sign at this time. We are repositioning our sunglass eyewear license. There are many, many opportunities and it's inappropriate for me to get into those with you. There are little proprietary to be candid.

Sure.

But I will tell you that I believe the numbers for '03 or it's $3.5 million in royalty income and for '04 are projected at $5 million.

That's great. And you think overtime to be much bigger just based on how many licensees are there today?

I believe there are approximately...11 or 12. And as I said, there are some significant ones that we are in negotiation with.

Thank you so much.

Okay.

Thank you. Our next question is coming from Julie Lerner with Metropolitan Capital. Your line is live.

I have rescinded my question. It's already been answered.

Thank you.

Thank you. Our next question is coming from Russ Gorman with Merrill Lynch. Your line is live.

Good afternoon gentlemen.

Good afternoon.

Very good quarter, particularly given the environment that you folks are selling into, so really very, very much stronger than lot of your peer groups have been doing. I was wondering if you give me some idea or some way to better understand the sale rates through the Sears and Land’s End products versus core replenishments in your sales figures for the Oxford business?

You'll have somewhat opened up a Pandora Box here Russ. Let me see if I can give you a fairly concise answer to your question. Last year -- our last fiscal year that that ended in May, we had incremental business of about $40 million from the Sears rollout of lands and products.

The planning and execution of that program was sort of done on the fly as soon as Sears Docklands and they scrambled to get something underway and let me just leave at that the planning and execution last up thing to be desired, particularly as they related to the presentation. As a result of that, they forget all product categories and this may not carry over to other parts of the business.

But we are the largest suppliers of lands and by fairly significant margin. There is an over hang of inventory and until that is improved, we will be and some of that inventories that what our warehouses a lot of it is in Sears Warehouses. So it's going to sort of take a while for that to seek it's own well-being. We're confident that it will happen. But as far as the year that we've just started the first of June, we expect our total land and Sears business to be down probably $20 million.

Russ Gorman Is it safe to say that that looks like its about a $20 million delta in inventory from this time last year and today? Is it safe to say that the majority there is Land’s End related?

No that will not be an accurate statement. The inventory build up that we have as Ben said in his comments part of it is additional replenishment programs we doing up for. Part of it quiet frankly is inventory at principally womenswear for Target and Wal-Mart, that there failure to hit their sales plans over the last four-five months. They have deferred shipments on some product. But we don't think it has affected the value of the inventory for restoring the cost us in - costing us in carrying costs.

Russ Gorman Okay. Is there some other sort of matrix that you can give me that would help me sort of I guess sanitize the numbers for lack of better word with respect to you showing a 3% growth for the quarter, whereas some of the other corporations that are similarly situated are showing 5/8% (ph) percent softer numbers domestically?

Well, we may be catching up one.

So, it's really not all that Sears or Lands End related?

No, it's not. And as I say, we do not expect to match particularly our target business, which was huge this past year. We had a dramatic increase with them and they are our largest customer. They are experiencing, some backup in business, as is Wal-Mart. So those are two categories that are causing the drop Lands End situation is another. The elimination of IZOD Club Golf after the fall '03 season is part of it. And then not having K-Mart to anniversary what we have in the first half of last year.

So, it's a combination of practices not just one, and as if you relates to Land’s End/Sears business, we think when all the dust settles, we'll have a nice incremental addition of business life, but its all steered by the way what's the first two years.

Okay

And a big part of the success for that is going to be based on I'm correcting, some of these operational and marketing related problems with the Lands End.

Okay. Well congratulations again.

Okay. Thank you.

Thank you, our next is coming from A.V. Levine with Senecan Capital. Your line is live.

Hi, so from house keeping items, I was wondering if give D&A for the quarter actually?

Hang on. The $1.450 million was for the quarter.

Okay.

And pretty here let me try year to year with 5.9 now.

Okay. That's makes an..

4.6 and 5.9 together for the year.

And then also can you give me some color on how Tommy Bahamas performed in the last quarter may be even in the same store sales there, with a transient then?

I'd would say that we've got feed back from the larger customers like Nordstrom’s and (inaudible) that the spring season was excellent and we got very positive response time. And I would say as far as the own stores demand products perform very well the women's products, as Tony just described, is work in process did not perform as well.

Okay. Thank you very much.

And just one other long caveat. There's no question that the external environment is not robust that way. So the performance we generated, both in the third party resale accounts and in the company owned stores, had some point of (inaudible) with it, particularly as it relates to, the reserved where is the travel is obliviously down.

I want just to add one point to that our third party sales, our larger store businesses are have been actually quite strong, some of the smaller specialty store businesses have struggle a little bit as you know, in the Northeast we had seventy days of rain or something like that, it was a difficult spring in the North-East.

I think we've (inaudible) Southeast.

And lots of people end up spending their time in shopping centers, instead of in independent specialty stores, but our -- we don't see that as trend that's going to necessarily continue.

Thank you.

Thank you, our next question and this is coming from John Kurty (ph) with Principle Global Capital Investments. Your line is live.

Good afternoon, two question first up on, could you give us the term of your note offering that was used to finance the acquisition?

Basically, 8 and 7/8ths, coupon to yield 9%, $200 million, 8 years with a call in 4 years.

But no principle payments due in for 8 years?

That's correct.

And then I was wondering if you could give us kind of a rough indication of the volume of business that is going away from the closure of the two IZOD businesses. The K-mart business, and anything else where you were trying to kind of control distribution in that excess unprofitable business, which you have to make up?

That would be in $30 million, that $30 million to $40 million neighborhood.

Okay. And could you talk about may be some of the programs that you are going to be instituting this year that will make some of that up since your loss is only-- Your revenue decline is going to be what mid-single digit you said in the traditional side of the business?

I think we said mid to high.

Mid to high. Okay.

Yes. We've got some replenishments programs in a tailored clothing area under Nautica, Jeffery Bean (ph), and Austidala Rantis (ph) that we expect to pick up some of that business. We have launched the spring '04 and Oxford Golf line, which, we've been selling it for basically 2 or 3 weeks. But the reception we've got has exceeded our wildest expectations. So, what we're about now is tracking how many of the top 100 courses we're going to be in this for season. And it looks pretty good.

And then lastly, it looks like your cash flows are going to fairly strong relative to your capital spending requirement. I'm not sure how much inventories will go up or down for the two entities. But what do you anticipate doing with your cash?

Actually I mean in terms of cash flow when we look forward, there will be some incremental investment in working capital for going forward so we will have operating cash flow going forward but it would be devoted to growth in our -- moderate growth in our working capital assets and into capital expenditures most notably to the retail store expansion.

The CAPEX number is $15 million. Could you give us a ballpark of what you think working capital requirements will be? Just ball park?

Yes. I hate to give into too much detail on that. I would say that we're projecting our cash flow from operations to be flat and moderately down going forward. And so you take CAPEX out of that, and you're looking at under $10 million in working capital investment.

Okay. Thank you very much.

Okay. Let me see if I can add to that a little bit. We see this combination and transaction being relatively cash flow neutral for the first year. Modestly, cash flow positive in the second year, but in the years three and four, we see it dramatically cash flow positive. So we do have -- we have grown our models on that, and as it happens from the time we first framed the model. The cash flow for year one has actually improved and point of that is because of the Oxford business, which not quite at the levels that we originally planned because of these things we just talked about.

Okay. Thank you very much.

Sure.

Thank you. Our next question is coming from Justin Thomas with Petros (ph). Your line is live.

Great. Thanks. And let me add my congratulations as well. Most of my questions have been answered at this point. Just one kind of clean up, transaction costs in the fourth quarter, what was that amount?

We can give you that pretty specifically, if you hang on a second. Is this just transaction?

is about $2 million.

Okay.

And that includes the interest on the high yield bonds, which was escrowed for three weeks of the month of May.

Okay. Great. And in terms of doors and expansion, I know you talked about doing this conservatively and not wanting to do it too quickly. But can you give us a sense for maybe the number of doors that you would expect to grow into? You mentioned Nordstrom but are there other places as well?

Well, are you talking third party?

Yes, I am.

At this juncture, there are about 2100 specialty store doors. And that consist of about 1500 accounts of some of them who have multiply doors. And as it relates to the apartment stores the doors -- the number of doors is dramatically less than that. But obviously the productivity in those stores is much greater. And a key to this business is the distribution philosophy and making sure we stay true to that.

So.

The question came up as to the number of doors -- department store doors, I gave then the specialty stores number of 2100 roughly and 1500 advance.

I think that's actually the 2100 would be all doors including the partnership.

Okay. Fair enough.

Okay. And just in terms of growing that or is it just going to stay roughly the same, there is no growth there.

There has been flow of specialty stores as you can imagine but we would expect account base growth as the women's part of our gets stronger. I think our account base dominated by men's specialty stores at this time, but as the women's business grows that will open additional doors for us.

Okay, and on the department store side?

We are not aggressively pursuing what I will describe as mainstream department America. So to the extent that our Nordstrom's expands or Neiman's opens another door or Saks another door, (inaudible)Hudson, those kinds of stores do end up on our radar screen.

But another notable excision would be Macy's West, where they have got a very upscale approach to retailing. But the (inaudible) companies, the dealers, the mainstream federal stores are not on our radar screen.

Okay. Great. Thank you.

Thank you. Once again ladies and gentlemen, I'd like to remind you, if you do have a question or comment at this time, please press the numbers "1" followed by "4" on your telephone keypad. Our next question is coming from Buckingham, Lee Backus. Your line is live.

Yes. A couple of last clean up questions here. On the Oxford Industries inventories, what percentage of your businesses cut the order?

Well, virtually all of the private label business shares and that would represent some 70% of all Oxford business.

So the increase in inventories is essentially inventory that has spoken for with orders, is just a question of...

When and how.

The question is of timing of take out, that is correct.

Okay. So there is not a lot of risk in that inventory?

That's correct.

Okay.

And just to take you back up a year further, we went from 84 to 104 of this year but the previous year we were at 147. So 104 historically looks pretty good.

Okay.

It just don't look good comparison as compared to '02, which was sort of band of our Doom's day scenario after 9/11.

Okay. Second question, will there be any change in sourcing strategy for Tommy Bahama?

Absolutely not.

Okay. Thank you.

Thank you. Our next question is coming from Ray Cohen with Value Line. Your line is live.

Gentlemen, nice to speak with you again.

Thanks, Ray. Nice to see you.

Ray Collin: Well, unfortunately all my questions have pretty much been answered but I'll take this opportunity to congratulate you on a couple of things. Your 2003 was very nice, and I wish you the best of luck in achieving your expectations in 2004.

Thank you.

My last congratulation is for your first conference call -- a long time - as long as I have known you.

Well, we think we have a compelling story there, Ray, which we wanted you to have previously.

Good and I expect that you have conference calls regularly every quarter.

That is our plan.

Very nice, thanks again and best of luck.

Thank you.

Thank you. Our next question is coming from Russ Gorman with Merrill Lynch. Your line is live.

Hi. Just one more follow up on the store expansion side. Could you sense that we really do start to get traction on the second half and early part of '04 with respect to an economic recovery.

What do you see as the high and low range for store build-outs? To the extend that you are getting really good traction and selling into a positive environment?

I think in -- the answer is 5 to 10. Because we are very committed to maintaining our wholesale third party distribution formula. We think that the balances that creates for us as a company, strengthens the company. And if you look at the significant players in aspiration life style branding, they are all wholesalers with retail stores. Not retailers, stand alone retailers.

Okay. Great. Thank you.

Thank you once again ladies and gentleman. If you do have any questions or comments at this time, please press the numbers "1" followed "4" on your telephone keypad. At this time, there appear to be no further questions. I will now turn the call back over to management for any closing comments.

Well, we appreciate your answers and look forward to doing this again in about 3 months. Thanks to all here.

Thank you ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day.