SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 27, 2004
OXFORD INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Georgia 001-04365 58-0831862
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(State of incorporation) Commission File Number (IRS employer identification)
222 Piedmont Avenue NE
NE Atlanta, Georgia 30308
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 404-659-1224
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of business acquired
VIEWPOINT INTERNATIONAL, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
March 31, 2003
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Index
Page
----
Independent Auditor's Report F-1
Consolidated Balance Sheets as of March 31, 2003 and 2002 F-2
Consolidated Statements of Income for the Years Ended
March 31, 2003, 2002 and 2001 F-4
Consolidated Statements of Shareholders' Equity (Deficiency)
for the Years Ended March 31, 2003, 2002 and 2001 F-6
Consolidated Statements of Cash Flows for the Years Ended
March 31, 2003, 2002 and 2001 F-8
Notes to Consolidated Financial Statements F-10
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
Viewpoint International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Viewpoint International, Inc. and Subsidiaries as of March 31, 2003 and 2002,
and the related consolidated statements of income, shareholders' equity
(deficiency) and cash flows for each of the three years in the period ended
March 31, 2003. 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 auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audits 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Viewpoint International, Inc. and Subsidiaries as of March 31, 2003 and 2002,
and the results of their operations and their cash flows for each of the three
years in the period ended March 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Mahoney Cohen & Company, CPA, P.C.
New York, New York
June 25, 2003
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2003 and 2002
($ in thousands, except per share amounts)
ASSETS (Notes 7 and 9)
2003 2002
-------- --------
Current assets:
Cash and cash equivalents $ 4,281 $ 2,620
Cash equivalent - restricted (Note 9) -- 8,197
Due from factor (Note 4) 47,657 40,464
Accounts receivable, net of allowance for doubtful
accounts of approximately $150 in 2003 and
$45 in 2002 3,321 3,033
Royalties receivable - Paradise Shoe Company LLC
(Note 6) 814 722
Inventories 30,204 24,232
Prepaid income taxes 11 1,820
Deferred income taxes (Note 12) 956 353
Assets held for sale (Note 13) 491 636
Prepaid expenses and other current assets 7,196 5,493
-------- --------
Total current assets 94,931 87,570
Property and equipment, net (Notes 5 and 8) 25,532 18,386
Other assets:
Goodwill, net 5,537 5,537
Deferred financing costs, net 643 857
Royalties receivable - Paradise Shoe Company LLC
(Note 6) 152 187
Investment in Paradise Shoe Company LLC (Note 6) 762 496
Deferred income taxes (Note 12) 3,188 1,855
Marketable securities (Note 11) 854 617
Security deposits and other assets 512 595
-------- --------
Total other assets 11,648 10,144
-------- --------
$132,111 $116,100
======== ========
See accompanying notes.
F-2
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Concluded)
March 31, 2003 and 2002
($ in thousands, except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
2003 2002
--------- ---------
Current liabilities:
Accounts payable (Notes 3 and 14) $ 20,765 $ 19,155
Notes and bankers acceptances payable (Note 7) 21,208 23,262
Long-term debt - current portion (Note 8) 7,591 7,500
Income taxes payable 1,790 38
Loans payable - shareholders (Notes 9 and 10) 59 10,103
Liabilities held for sale (Note 13) 263 343
Accrued expenses and other current liabilities (Note 9) 13,608 10,092
--------- ---------
Total current liabilities 65,284 70,493
Long-term debt (Note 8) 14,528 21,875
Deferred rent (Note 14) 1,598 1,086
Deferred compensation (Note 11) 854 617
Subordinated notes payable - shareholders (Note 9) 26,335 25,448
Commitments and contingencies (Notes 9, 11 and 14)
Shareholders' equity (deficiency):
Class A Voting Common Stock - $.0001 par value:
Authorized - 40,000,000 shares
Issued - 29,325,000 shares 3 3
Class B Non-Voting Common Stock - $.0001 par value:
Authorized - 675,000 shares
Issued - 675,000 shares -- --
Class C Voting Common Stock - $.0001 par value:
Authorized - 6,200,000 shares
Issued - 5,948,067 shares 1 1
Additional paid-in capital 29,714 29,714
Retained earnings 93,995 67,064
--------- ---------
123,713 96,782
Less: Treasury stock, at cost (Note 10) 100,201 100,201
--------- ---------
Total shareholders' equity (deficiency) 23,512 (3,419)
--------- ---------
$ 132,111 $ 116,100
========= =========
See accompanying notes.
F-3
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
2003 2002 2001
--------- --------- ---------
Net sales:
Wholesale (Note 3) $ 213,413 $ 188,534 $ 188,043
Retail and restaurant 116,094 95,074 64,809
--------- --------- ---------
Total net sales 329,507 283,608 252,852
Cost of goods sold (Note 3) 163,231 137,440 133,724
--------- --------- ---------
Gross profit 166,276 146,168 119,128
Licensing income (Note 6) 3,938 2,434 1,234
--------- --------- ---------
170,214 148,602 120,362
Operating expenses:
Retail and restaurant 44,097 40,500 29,634
Selling and shipping 29,610 25,777 21,934
General and administrative (Note 11) 46,304 37,036 27,110
Impairment of property and equipment (Note 5) 1,693 - -
--------- --------- ---------
Total operating expenses 121,704 103,313 78,678
--------- --------- ---------
Operating income 48,510 45,289 41,684
Other expense (income):
Interest expense, net of interest income of
approximately $67 in 2003, $563 in 2002
and $524 in 2001 (Note 9) 6,104 7,510 2,714
Equity in loss (income) of Paradise Shoe
Company LLC (Note 6) (267) 291 (80)
Other income (257) (14) (32)
--------- --------- ---------
Net other expense 5,580 7,787 2,602
--------- --------- ---------
Income before provision for income taxes and
discontinued operations 42,930 37,502 39,082
Provision for income taxes (Note 12) 15,481 13,339 14,665
--------- --------- ---------
Income from continuing operations 27,449 24,163 24,417
Discontinued operations, including taxes of $11 in
2002 (Note 13) (518) (245) (393)
--------- --------- ---------
Net income $ 26,931 $ 23,918 $ 24,024
========= ========= =========
See accompanying notes
F-4
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Concluded)
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
2003 2002 2001
-------------- -------------- --------------
Basic net income (loss) per share:*
From continuing operations $ 1.62 $ 1.42 $ .87
From discontinued operations (.03) (.01) (.01)
-------------- -------------- --------------
Net income per share $ 1.58 $ 1.41 $ .85
============== ============== ==============
Diluted net income (loss) per share:*
From continuing operations $ 1.61 $ 1.41 $ .86
From discontinued operations (.03) (.01) (.01)
-------------- -------------- --------------
Net income per share $ 1.58 $ 1.40 $ .85
============== ============== ==============
Weighted-average common shares
outstanding - basic 16,994,476 16,994,476 28,218,421
============== ============== ==============
Weighted-average common shares
outstanding - diluted 17,096,505 17,096,505 28,232,398
============== ============== ==============
* Per share amounts may not total due to rounding
See accompanying notes
F-5
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficiency)
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
COMMON STOCK
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------- --------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------ ------------ ------------
Balance, April 1, 2000 29,325,000 $ 3 675,000 $ -- -- $ --
Issuance of 5,948,067 shares of
Class C Common Stock on
February 9, 2001 for cash
(at $5.15 per share), net
of related fees and expenses of
approximately $3,320 -- -- -- -- 5,948,067 1
Repurchase of 18,278,591 shares
of Class A Common Stock on
February 9, 2001 for cash of
$79,112 and issuance of
subordinated notes of $15,000
(total at $5.15 per share) -- -- -- -- -- --
Repurchase of 675,000 shares of
Class B Common Stock on
February 9, 2001 for cash
(at $5.15 per share) -- -- -- -- -- --
To allocate proceeds of subordinated
notes payable to detachable warrants
to purchase 102,222 shares of
Class C Common Stock -- -- -- -- -- --
Net income -- -- -- -- -- --
------------ ------------ ------------ ----- ------------ ------------
Balance, March 31, 2001
(carried forward) 29,325,000 $ 3 675,000 $ -- 5,948,067 $ 1
------------ ------------ ------------ ----- ------------ ------------
ADDITIONAL TREASURY STOCK
PAID-IN RETAINED ---------------------------
CAPITAL EARNINGS SHARES AMOUNT TOTAL
------------ ------------ ------------ ------------ ------------
Balance, April 1, 2000 $ 1,885 $ 19,122 -- $ -- $ 21,010
Issuance of 5,948,067 shares of
Class C Common Stock on
February 9, 2001 for cash
(at $5.15 per share), net
of related fees and expenses of
approximately $3,320 27,304 -- -- -- 27,305
Repurchase of 18,278,591 shares
of Class A Common Stock on
February 9, 2001 for cash of
$79,112 and issuance of
subordinated notes of $15,000
(total at $5.15 per share) -- -- 18,278,591 (94,112) (94,112)
Repurchase of 675,000 shares of
Class B Common Stock on
February 9, 2001 for cash
(at $5.15 per share) -- -- 675,000 (3,475) (3,475)
To allocate proceeds of subordinated
notes payable to detachable warrants
to purchase 102,222 shares of
Class C Common Stock 525 -- -- -- 525
Net income -- 24,024 -- -- 24,024
---------- ------------ ------------ ------------ ------------
Balance, March 31, 2001
(carried forward) $ 29,714 $ 43,146 18,953,591 $ (97,587) $ (24,723)
---------- ------------ ------------ ------------ ------------
See accompanying notes.
F-6
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficiency) (Concluded)
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
COMMON STOCK
-------------------------------------------------------------------------
CLASS A CLASS B CLASS C ADDITIONAL
----------------------- -------------------- ----------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
---------- ---------- ---------- ------- ---------- ---------- ---------- ----------
Balance, March 31, 2001
(brought forward) 29,325,000 $ 3 675,000 $ -- 5,948,067 $ 1 $ 29,714 $ 43,146
Adjustment to treasury stock
purchase price (Note 10) -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- -- 23,918
---------- ---------- ---------- ------- ---------- ---------- ---------- ----------
Balance, March 31, 2002 29,325,000 3 675,000 -- 5,948,067 1 29,714 67,064
Net income -- -- -- -- -- -- -- 26,931
---------- ---------- ---------- ------- ---------- ---------- ---------- ----------
Balance, March 31, 2003 29,325,000 $ 3 675,000 $ -- 5,948,067 $ 1 $ 29,714 $ 93,995
========== ========== ========== ======= ========== ========== ========== ==========
TREASURY STOCK
----------------------
SHARES AMOUNT TOTAL
---------- ---------- ----------
Balance, March 31, 2001
(brought forward) 18,953,591 $ (97,587) $ (24,723)
Adjustment to treasury stock
purchase price (Note 10) -- (2,614) (2,614)
Net income -- -- 23,918
---------- ---------- ----------
Balance, March 31, 2002 18,953,591 (100,201) (3,419)
Net income -- -- 26,931
---------- ---------- ----------
Balance, March 31, 2003 18,953,591 $ (100,201) $ 23,512
========== ========== ==========
See accompanying notes.
F-7
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
2003 2002 2001
-------- --------- ---------
Cash flows from operating activities:
Net income $ 26,931 $ 23,918 $ 24,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for doubtful accounts 105 (14) 59
Depreciation and amortization 4,508 3,841 2,739
Impairment of property and equipment 1,693 -- --
Interest amortization of discount on notes
payable and deferred financing costs 317 329 36
Accrued interest on subordinated notes
payable - shareholders 785 761 97
Deferred income taxes (1,936) 764 (2,557)
Deferred rent 512 456 378
Equity in loss (income) of Paradise Shoe
Company LLC (267) 291 (80)
Losses (gains) on marketable securities 224 (14) --
Minority interests in net income (loss) of
subsidiary (75) (87) 512
Gain on purchase of minority interest (37) -- --
Change in assets and liabilities:
Due from factor (7,117) (2,078) (5,089)
Accounts receivable (392) 3,934 (6,963)
Royalties receivable - Paradise Shoe
Company LLC (57) (325) (210)
Inventories (5,841) (2,293) (5,157)
Due from vendor -- -- 8,338
Prepaid income taxes 1,809 (1,835) --
Prepaid expenses and other current assets (1,785) 722 (5,186)
Marketable securities (460) (603) --
Security deposits and other assets 83 (272) (45)
Accounts payable 1,694 3,175 4,277
Income taxes payable 1,752 (11,154) 3,459
Accrued expenses and other current liabilities 3,513 (261) 4,510
Deferred compensation 237 617 --
-------- -------- --------
Net cash provided by operating activities 26,196 19,872 23,142
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment (13,036) (6,118) (9,517)
Investment in Paradise Shoe Company LLC -- (250) --
Purchase of minority interest (31) -- (7,449)
-------- -------- --------
Cash used in investing activities (13,067) (6,368) (16,966)
-------- -------- --------
Totals carried forward $ 13,129 $ 13,504 $ 6,176
-------- -------- --------
See accompanying notes.
F-8
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Concluded)
For the Years Ended March 31, 2003, 2002 and 2001
($ in thousands, except per share amounts)
2003 2002 2001
-------- -------- ---------
Totals brought forward $ 13,129 $ 13,504 $ 6,176
Cash flows from financing activities:
Purchase of restricted cash equivalent -- -- (15,000)
Proceeds from restricted cash equivalent 8,197 6,917 --
Payment of deferred financing costs -- -- (1,107)
Decrease in cash overdraft -- (560) (2,079)
Proceeds from (repayments of) notes and
acceptances payable, net (2,054) (6,664) 8,120
Proceeds from long-term debt -- -- 37,500
Repayments of long-term debt (7,566) (7,580) (1,894)
Repayment of loan payable - member -- -- (175)
Proceeds from (repayments of) loans payable
- shareholders, net (10,045) (9,090) 12,648
Proceeds from subordinated notes payable
- shareholders -- -- 10,000
Issuance of common stock -- -- 27,305
Purchase of treasury stock -- -- (82,587)
-------- -------- --------
Net cash used in financing activities (11,468) (16,977) (7,269)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,661 (3,473) (1,093)
Cash and cash equivalents, beginning of year 2,620 6,093 7,186
-------- -------- --------
Cash and cash equivalents, end of year $ 4,281 $ 2,620 $ 6,093
======== ======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 5,931 $ 6,282 $ 2,434
Income taxes $ 13,877 $ 25,557 $ 13,983
Supplemental Schedule of Non-Cash Investing and Financing Activities
In 2003, the Company incurred long-term debt of $310 in connection with the
acquisition of capitalized equipment.
In 2002, in connection with an adjustment to the purchase price of treasury
stock (see Note 10), the Company issued loans payable to shareholders totalling
$2,614.
In 2001, in connection with the purchase of treasury stock, the Company issued
subordinated notes payable to several shareholders totalling $15,000.
See accompanying notes
F-9
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 1 - Nature of Business
Viewpoint International, Inc. (the "Company") is an importer of men's
and women's sportswear sold primarily to retail stores in the United States. Its
wholly-owned subsidiaries, Tommy Bahama R&R Holdings, Inc. and Tommy Bahama R&R
Holdings II, Inc. (collectively "Tommy Bahama Retail"), operate, through their
wholly-owned subsidiaries, retail restaurants and clothing stores that sell
products by and promote the "Tommy Bahama" brand name in the United States. Its
majority-owned subsidiary, Paradise Neckwear Co. LLC ("Neckwear") is a
manufacturer of men's neckwear sold primarily to retail stores in the United
States (see Note 13).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company, Tommy Bahama R&R Holdings, Inc. and its thirty-five wholly-owned
subsidiaries and Neckwear (hereinafter referred to collectively as the
"Companies"). All significant intercompany transactions and balances have been
eliminated in consolidation. Effective March 31, 2002, Tommy Bahama R&R Holdings
II, Inc. was merged with and into Tommy Bahama R&R Holdings, Inc.
Note 2 - Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Companies consider cash on hand, deposits in banks and short-term
investments, with maturities of three months or less when purchased, as cash and
cash equivalents.
Inventories
Substantially all inventories are finished goods and are stated at the
lower of cost (first-in, first-out method) or market. At March 31, 2003 and
2002, inventory in-transit was approximately $3,476 and $3,207, respectively.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed by
both the straight-line and accelerated methods over the assets' estimated lives
ranging from three to seven years. Leasehold improvements are amortized over the
lesser of the lease terms or the assets' useful lives. Upon sale or retirement
of equipment, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in operations.
F-10
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Goodwill
Goodwill represents the aggregate excess of the acquired cost of
the minority interest in two retail stores over the fair value of their net
assets on the date of acquisition. Commencing April 1, 2001, with the Company's
adoption of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), goodwill is no longer
amortized and the Company is required to complete a test for impairment of
goodwill annually.
The following table is provided to disclose what net income would
have been had SFAS 142 been adopted in prior periods:
Year Ended March 31,
-----------------------------------------
2003 2002 2001
---------- --------- ----------
Reported net income $ 26,931 $ 23,918 $ 24,024
Add back: Goodwill amortization -- -- 205
---------- ---------- ----------
Adjusted net income $ 26,931 $ 23,918 $ 24,229
========== ========== ==========
Basic net income per share, as reported $ 1.58 $ 1.41 $ .85
========== ========== ==========
Diluted net income per share, as reported $ 1.58 $ 1.40 $ .85
========== ========== ==========
Basic net income per share, adjusted $ 1.58 $ 1.41 $ .86
========== ========== ==========
Diluted net income per share, adjusted $ 1.58 $ 1.40 $ .86
========== ========== ==========
Deferred Financing Costs
Costs incurred in the issuance of the subordinated notes payable -
shareholders, principally professional fees, are amortized by the straight-line
method over the term of the notes (see Note 9). The following schedule details
the Company's deferred financing costs, which are included in the accompanying
consolidated balance sheets at March 31:
2003 2002
----------- ---------
Deferred financing costs $ 1,107 $ 1,107
Less: Accumulated amortization 464 250
----------- ----------
Net carrying amount $ 643 $ 857
=========== ==========
F-11
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Deferred Financing Costs (Continued)
Amortization expense for the years ended March 31, 2003, 2002 and
2001 was approximately $214, $214 and $36, respectively, and is included in
interest expense in the accompanying consolidated statements of income.
Subsequent to March 31, 2003, with the termination of the
subordinated notes payable - shareholders agreement (see Note 17), the
unamortized deferred financing costs were charged to operations.
Impairment of Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"), long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. If the carrying amount of an asset
exceeds the asset's fair value, an impairment charge is recognized for the
amount by which the carrying amount of the asset exceeds the fair value of the
asset. At March 31, 2003, management determined that the property and equipment
at one of its retail locations was impaired (see Note 5).
Revenue Recognition
Net sales from wholesale products are recognized upon transfer of
title and risk of ownership to customers. Net sales from retail and restaurant
sales are recognized when payment is tendered at the point of sale. Revenue is
recorded net of discounts, as well as provisions for estimated returns,
allowances and doubtful accounts. Licensing revenue is recognized as earned.
Income Taxes
The Company and Tommy Bahama Retail file consolidated income tax
returns.
The wholly-owned subsidiaries of Tommy Bahama Retail are all either
limited liability companies or limited partnerships (collectively referred to as
the "LLCs"). Limited liability companies and limited partnerships are not tax
paying entities at the corporate level. Each member/partner is individually
responsible for their share of the Companies' income or loss for income tax
reporting purposes. Tommy Bahama Retail includes its respective share of the
income and losses of the LLCs in its income tax returns.
F-12
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Shipping and Handling Costs
The Company includes shipping and handling costs in selling and
shipping expense. Shipping and handling costs for the years ended March 31,
2003, 2002 and 2001 amounted to approximately $3,305, $3,619 and $3,237,
respectively.
Advertising Expenses
Advertising expenses are charged to operations in the period in
which they are incurred. Advertising expenses for the years ended March 31,
2003, 2002 and 2001 were approximately $4,465, $2,084 and $2,023, respectively.
Fair Value of Financial Instruments
The Company estimates the carrying value of its financial
instruments approximates the fair value at the balance sheet date, except for
its $25,000 of subordinated notes payable - shareholders (see Note 9). The
estimated fair value of these notes is approximately $29,042 and $28,000 at
March 31, 2003 and 2002, respectively, based upon management's best estimate of
interest rates that would be available to the Company for similar debt
obligations. The notes and acceptances payable and long-term debt approximate
fair value due to the variable rates of interest being charged.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Net Income Per Share
In accordance with SFAS No. 128, "Earnings Per Share," basic and
diluted income per common share has been computed using the weighted-average
number of shares of common stock outstanding during the period. Potentially
dilutive securities outstanding at March 31, 2003 and 2002 which convert to
common share equivalents consist of common stock warrants to purchase 102,222
shares of the Company's Class C Common Stock.
F-13
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections" ("SFAS 145"). SFAS 145
rescinds the provisions of SFAS No. 4 that require companies to classify certain
gains and losses from debt extinguishment as extraordinary items, eliminates the
provisions of SFAS No. 44 regarding the Motor Carrier Act of 1980 and amends the
provisions of SFAS No. 13 to require that certain lease modifications be treated
as sale leaseback transactions. The provisions of SFAS 145, related to the
classification of debt extinguishment, are effective for fiscal years beginning
after May 15, 2002. Reclassification of the gains and losses related to debt
extinguishment are required for all prior periods presented in comparative
financial statements. The adoption of SFAS 145 does not have a material impact
on the Company's financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), replacing Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred instead of at the date an entity commits to an exit plan.
This statement also established that fair value is the objective for initial
measurement of the liability. The provisions of SFAS 146 are effective for exit
or disposal activities that are initiated after December 31, 2002. The adoption
of SFAS 146 has not had a material impact on the Company's financial position.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued and requires that they be recorded at fair value. The initial
recognition and measurement provisions of this interpretation are to be applied
only on a prospective basis to guarantees issued or modified after December 31,
2002. The disclosure requirements of this interpretation are effective for
financial statements of interim or annual periods ending after December 15,
2002. There is no material impact on the Company's consolidated financial
position, results of operations or cash flows based upon this interpretation.
The Company has no guarantees as defined by FIN 45.
F-14
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of SFAS No. 123" ("SFAS 148"). This statement amends
FASB Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The amendments to SFAS 123 regarding disclosure are effective for
financial statements for fiscal years ending after December 15, 2002. The
adoption of SFAS 148 has not had a material impact on the Company's consolidated
financial position, results of operations or cash flows.
In January 2003, 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. The
consolidation requirements apply to the first fiscal year or interim period
ending after March 15, 2004. The Company believes the adoption of FIN 46 will
not have a material impact on their financial position, results of operations or
cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement No. 133 on Derivative Instruments and Hedging Activities." This
statement amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. This statement is effective for contracts entered
into or modified after June 30, 2003, except for provisions that relate to SFAS
No. 133 implementation issues that have been effective for fiscal quarters that
began prior to June 15, 2003, which should continue to be applied in accordance
with their respective dates. The Company does not expect the adoption of this
pronouncement to have a material effect on its results of operations or
financial position.
F-15
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 requires that certain financial instruments that, under
previous guidance, issuers could account for as equity, be classified as
liabilities in statements of financial position. Most of the guidance in SFAS
150 is effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The Company does not expect the adoption
of this pronouncement to have a material effect on its results of operations or
financial position.
Reclassifications
Certain reclassifications have been made to the 2002 and 2001
financial statements to conform to the 2003 presentation.
Note 3 - Concentrations of Risk
Cash and Cash Equivalents
The Companies are subject to a concentration of credit risk with
respect to their cash and cash equivalents in excess of federally insured
amounts.
Accounts Receivable
The concentration of credit risk in the Company's accounts
receivable is mitigated by the sale of a substantial portion of its accounts
receivable to a commercial factor. The remaining accounts receivable are subject
to the Company's credit evaluation process, reasonably short collection terms
and the geographical dispersion of revenue. Credit losses have been within
management's expectations.
Major Customers
During the year ended March 31, 2003, two customers accounted for
approximately 14% and 13% of the Company's sales. During the year ended March
31, 2002, two customers accounted for approximately 13% and 10% of the Company's
sales. During the year ended March 31, 2001, one customer accounted for
approximately 13% of the Company's sales.
F-16
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 3 - Concentrations of Risk (Continued)
Major Suppliers
During the years ended March 31, 2003, 2002 and 2001, 45%, 42% and
48%, respectively, of purchases were from two suppliers. At March 31, 2003 and
2002, the amounts due to these suppliers were approximately $4,845 and $4,932,
respectively, and are included in accounts payable. Management believes that
other suppliers could provide the materials on comparable terms.
Note 4 - Due from Factor
The Company sells a substantial portion of its trade receivables to a
commercial factor, without recourse, up to maximum credit limits established by
the factor for each individual account. Receivables sold in excess of these
limitations are subject to recourse in the event of non-payment by the
customer. At March 31, 2003 and 2002, receivables subject to recourse were
approximately $12,798 and $8,081, respectively. Under a tri-party agreement
with the bank (see Note 7), all factor proceeds are assigned to the bank.
Note 5 - Property and Equipment
At March 31, property and equipment consists of:
2003 2002
------- -------
Office machinery and equipment $ 981 $ 771
Furniture and fixtures 7,314 6,743
Computer equipment 3,301 2,110
Computer software 5,113 654
Leasehold improvements 20,627 16,470
Kitchen equipment 1,503 1,547
Vehicles 42 --
Construction in progress 76 67
------- -------
38,957 28,362
Equipment held under capital lease 310 --
------- -------
39,267 28,362
Less: Accumulated depreciation and
amortization 13,735 9,976
------- -------
$25,532 $18,386
======= =======
F-17
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 5 - Property and Equipment (Continued)
Impairment of Assets Held and Used
In accordance with SFAS 144, the property and equipment at one of
Tommy Bahama Retail's locations was deemed to be impaired because of negative
cash flows and continued losses. The Company recorded an impairment loss of
approximately $1,693 for the year ended March 31, 2003 to write down the assets
in full based upon a present value method.
Note 6 - Investment in Paradise Shoe Company LLC
The Company has a 50% interest in Paradise Shoe Company LLC
("Paradise") which is accounted for under the equity method. Under this method,
the Company's investment is adjusted for its proportionate share of Paradise's
undistributed earnings or losses. The Company also has a royalty agreement with
Paradise based on a percentage of net sales. Royalties had been payable 50% at
the end of each quarter with the balance due eighteen months later. Effective
January 1, 2003, all royalties are due at the end of each quarter. During the
years ended March 31, 2003, 2002 and 2001, the Company charged Paradise
royalties of approximately $651, $519 and $549, respectively.
Note 7 - Notes and Bankers Acceptances Payable
The Company has a financing agreement providing for a term loan (see
Note 8) and a revolving line of credit. The agreement is renewable on an annual
basis through March 31, 2006 provided that on each renewal date the Company is
in compliance with the terms of the agreement. The revolving line of credit is
subject to the following sublimits:
June- November-
October May
------- ---------
Maximum amount available under the revolving
line of credit $40,000 $52,500
Maximum amount of bankers acceptances $35,000 $45,000
Maximum amount of cash advances $15,000 $20,000
Borrowings are based on eligible factored accounts receivable and
inventory, as defined, and bear interest at the 4-month LIBOR rate plus 2.75%,
which on a weighted-average annual basis amounted to 4.03% and 4.4% as of and
for the year ended March 31, 2003, respectively. The agreement includes various
covenants, as defined. The Company has pledged substantially all of its assets
as collateral and the debt is guaranteed by Tommy Bahama Retail and its
wholly-owned subsidiaries.
F-18
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 7 - Notes and Bankers Acceptances Payable (Continued)
Subsequent to March 31, 2003, all balances were paid in full and the
agreement was terminated (see Note 17).
Note 8 - Long-Term Debt
At March 31, long-term debt consists of:
2003 2002
--------- --------
Term loan payable (see Note 7) in monthly installments of $625
through February 2006; plus interest at the 3-month LIBOR rate
plus 3% (4.36% at March 31, 2003) (A) $ 21,875 $ 29,375
Capital lease obligations payable in monthly installments ranging
from approximately $1 to $4, including interest ranging from 5.9%
to 12.4% and maturing on various dates through October 2007;
secured by specific equipment with a carrying value of
approximately $248
279 -
--------- --------
22,154 29,375
Less: Amount representing interest 35 -
--------- --------
22,119 29,375
Less: Current portion 7,591 7,500
--------- --------
$ 14,528 $ 21,875
========= ========
(A) Subsequent to March 31, 2003, all balances were paid in full and
the agreement was terminated (see Note 17).
At March 31, 2003, maturities of capital lease obligations are as
follows:
Year Ending
March 31,
-----------
2004 $ 91
2005 98
2006 31
2007 16
2008 8
-----
$ 244
=====
F-19
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 9 - Related Party Transactions
Loans Payable - Shareholders
During the year ended March 31, 2001, the Company borrowed $15,000
from four shareholders to purchase a certificate of deposit, which was pledged
as collateral on the Company's credit facility. The deposit was in an
automatically renewed 7-day certificate of deposit. The shareholders were
entitled to interest earned and, accordingly, interest expense charged to
operations for the years ended March 31, 2003, 2002 and 2001 was approximately
$5, $378 and $114, respectively. In June 2001, the Company repaid three of the
shareholders $7,170 plus accrued interest of approximately $126. In April 2002,
the Company repaid the remaining shareholder $7,830 plus accrued interest of
approximately $372. At March 31, 2002, loans payable - shareholders includes
approximately $367 of accrued interest.
Additionally, included in loans payable - shareholders at March 31,
2002 was approximately $515 of accrued interest remaining on a loan payable to
a shareholder. The loan bore interest at the rate of 6% per annum and was due
on demand. Interest expense charged to operations for the years ended March 31,
2002 and 2001 was approximately $50 and $148, respectively. The interest was
repaid in full in June 2002.
Subordinated Notes Payable - Shareholders
At March 31, 2003 and 2002, the Company has notes payable to several
shareholders, which bear interest at 16% (effective rate of 17.05%), are due on
March 31, 2006 and are subordinated to the Company's credit facility. Interest
is payable quarterly at the rate of 13% and the remaining 3% accrues and is
paid upon maturity. Interest expense charged to operations for the years ended
March 31, 2003, 2002 and 2001 in connection with these notes was approximately
$4,287, $4,176 and $515, respectively. Included in accrued expenses and other
current liabilities at March 31, 2003 and 2002 is approximately $849 and $824,
respectively, of accrued interest. The notes include various covenants and
restrictions, as defined. The Company has pledged substantially all of its
assets as collateral and the debt is guaranteed by Tommy Bahama Retail and its
wholly-owned subsidiaries.
At March 31, subordinated notes payable - shareholders is comprised of
the following:
2003 2002
-------- --------
Face value $ 25,000 $ 25,000
Unamortized discount (307) (410)
Accrued interest 1,642 858
-------- --------
$ 26,335 $ 25,448
======== ========
F-20
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 9 - Related Party Transactions (Continued)
Subordinated Notes Payable - Shareholders (Continued)
Subsequent to March 31, 2003, all balances were paid in full and the
agreements were terminated (see Note 17).
Employment Contracts
The Company has entered into employment contracts with three
shareholders and a key employee expiring in 2006 that provide for minimum
annual salaries and incentives based on the Company's attainment of specified
levels of sales and earnings. The future minimum salaries are as follows:
Year Ending
March 31,
-----------
2004 $ 2,520
2005 2,520
2006 2,100
-------
$ 7,140
=======
Salaries and incentives to shareholders charged to operations for the
years ended March 31, 2003, 2002 and 2001 amounted to approximately $3,370,
$3,178 and $3,811, respectively.
Subsequent to March 31, 2003, these agreements were terminated (see
Note 17).
Consulting Contract
The Company has entered into a consulting contract with a director
expiring in 2006. Future minimum payments are as follows:
Year Ending
March 31,
2004 $ 893
2005 893
2006 744
-------
$ 2,530
=======
F-21
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 9 - Related Party Transactions (Continued)
Consulting Contract (Continued)
Consulting fees to the related party charged to operations for the
years ended March 31, 2003 and 2002 amounted to approximately $1,372 and
$1,349, respectively.
Subsequent to March 31, 2003, this agreement was terminated (see Note
17).
Management Contract
The Company has entered into a management contract with a shareholder
calling for an advisory fee in annual payments of $300. The fee will be reduced
to $200 per annum at such time as the shareholder and all of its affiliates
collectively own less than 50% of the shares of the Company's Class C Common
Stock.
Advisory fees to the shareholder charged to operations for the years
ended March 31, 2003, 2002 and 2001 amounted to approximately $300, $300 and
$50, respectively.
Subsequent to March 31, 2003, this agreement was terminated (see Note
17).
Note 10 - Shareholders' Equity
Common Stock
On February 7, 2001, the Company amended and restated its Articles of
Incorporation creating an additional class of Common Stock (Class C) and
authorizing additional shares of Class A and B. Each existing share was
converted into 20,000 shares of the same class. Accordingly, the accompanying
consolidated financial statements give effect to the conversion for all periods
presented.
Conversion Rights
Each Class B share is convertible into one share of Class A at the
option of the holder immediately prior to a public offering. If the offering
does not occur, the conversion option is voided.
Each Class C share is convertible into one share of Class A at the
option of the holder at anytime. The convertible number of shares will be
adjusted for any stock dividends, distributions, splits or mergers, as defined.
F-22
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 10 - Shareholders' Equity (Continued)
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the
affairs of the Company, holders of Class C Common Stock are entitled to the
greater of (a) the amount they would receive after conversion of all shares to
Class A Common Stock or (b) an amount equal to a compounded annual rate of
return of 14.5% of the original purchase price of each share from the date of
issuance ($5.15 per share) as adjusted for stock splits, dividends,
combinations and the like, reduced by the aggregate amounts of dividends or
other distributions paid to them from the original issue date through
liquidation date.
Treasury Stock
At March 31, 2003 and 2002, treasury stock consisted of the following:
Shares Amount
----------- --------
Class A voting common stock 18,278,591 $ 96,726
Class B non-voting common stock 675,000 3,475
----------- --------
18,953,591 $100,201
=========== ========
In November 2001, the Company adjusted the purchase price of various
shares purchased on February 9, 2001 by approximately $2,614. At March 31, 2003
and 2002, approximately $59 and $1,392, respectively, of this amount was unpaid
and is included in loans payable - shareholders on the accompanying
consolidated balance sheets.
Warrants
At March 31, 2003, there are outstanding warrants to purchase 102,222
shares of Class C Common Stock at $.01 per share. The warrants are exercisable
anytime after August 9, 2002 and expire on February 9, 2008.
Subsequent to March 31, 2003, the warrants were exercised (see Note
17).
F-23
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 11 - Employee Benefit Plans
401(k) Plan
The Company has a 401(k) plan for all eligible employees. Matching
contributions to the plan are at the discretion of the Company. For the years
ended March 31, 2003, 2002 and 2001, employer contributions to the plan were
approximately $604, $321 and $258, respectively. Note 11 - Employee Benefit
Plans (Continued)
Deferred Compensation Plan
During the year ended March 31, 2002, the Company began a
non-qualified, deferred compensation plan (the "Plan") for all eligible highly
compensated employees, as defined. Participants may contribute up to 100% of
their annual compensation, as defined. Participants are immediately vested in
their contributions plus actual earnings thereon. Employer contributions are
based on a discretionary matching contribution. Participants become 100% vested
in employer contributions after five years of service. For the year ended March
31, 2003, employer contributions to the Plan were approximately $33. There were
no employer contributions during the year ended March 31, 2002.
The assets of the Plan have been invested, as directed by employees,
in marketable securities consisting primarily of mutual funds, and have been
classified as trading securities, which are recorded at fair value on the
consolidated balance sheets with the change in fair value during the period
included in earnings. Included in general and administrative expenses on the
accompanying consolidated statements of income for the years ended March 31,
2003 and 2002 is approximately ($228) and $13, respectively, of gains (losses)
on these securities.
Note 12 - Income Taxes
The provision for income taxes for the years ended March 31, 2003,
2002 and 2001 consists of:
2003 2002 2001
-------- ------- --------
Federal:
Current $ 15,115 $11,743 $ 16,355
Deferred (1,783) 704 (1,872)
-------- ------- --------
13,332 12,447 14,483
-------- ------- --------
State and local:
Current 2,302 832 867
Deferred (153) 60 (685)
-------- ------- --------
2,149 892 182
-------- ------- --------
$ 15,481 $13,339 $ 14,665
======== ======= ========
F-24
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 12 - Income Taxes (Continued)
Reconciliations of the United States federal statutory income tax
rates and the Company's effective tax rates are summarized as follows:
Year Ended March 31,
--------------------------------------
2003 2002 2001
------ ------ ------
Statutory rate 35.0% 35.0% 35.0%
State income taxes - net of federal
income tax benefit 3.4 1.6 .3
Non-deductible expenses and other, net (1.9) (.7) 2.1
------ ------ ------
Effective rate 36.5% 35.9% 37.4%
====== ====== ======
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Significant components of the deferred income tax assets as of March
31, 2003 and 2002 are as follows:
2003 2002
------- -------
Current portion:
Inventory uniform capitalization $ 191 $ 164
Charitable contribution 722 --
Accrued compensation 38 194
Other 5 (5)
------- -------
956 353
------- -------
Long-term portion:
Depreciation and amortization 1,759 1,197
Impairment of property and equipment 643 --
Deferred rent obligation 607 413
Deferred compensation 179 245
------- -------
3,188 1,855
------- -------
$ 4,144 $ 2,208
======= =======
F-25
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 13 - Discontinued Operations
The Company signed an agreement on March 31, 2003 to sell its 75.5%
membership interest in Neckwear, effective April 1, 2003, for one dollar. In
accordance with SFAS 144, all the operations of Neckwear have been reported
separately as discontinued operations in the consolidated statement of income
and the assets and liabilities of Neckwear have been classified as held for
sale on the consolidated balance sheet. Assets are reported at the lower of the
carrying amount or fair value less costs to sell. Neckwear was included in the
Company's wholesale segment (see Note 15).
Included in discontinued operations are approximately $1,002, $1,345
and $1,613 of net sales for the years ended March 31, 2003, 2002 and 2001,
respectively.
Assets and liabilities held for sale at March 31, consist of the
following:
2003 2002
------ ------
Assets:
Due from factor $ 65 $ 141
Inventories 307 438
Other 119 57
------ ------
Total assets $ 491 $ 636
====== ======
Liabilities:
Accounts payable $ 259 $ 200
Minority interest in subsidiary -- 137
Accrued expenses and other current liabilities 4 6
------ ------
Total liabilities $ 263 $ 343
====== ======
Note 14 - Commitments and Contingencies
Operating Leases
The Companies lease office, showroom, store space and equipment under
operating leases expiring in various years through 2019. The rental payments
under store facility leases are based upon a minimum rental plus a percentage
of the stores' sales in excess of stipulated amounts. Only the minimum rental
portions are included in future commitments.
F-26
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 14 - Commitments and Contingencies (Continued)
Operating Leases (Continued)
At March 31, 2003, the aggregate approximate minimum annual rental
commitments under non-cancellable leases are as follows:
Year Ending
March 31,
2004 $ 11,206
2005 11,481
2006 9,927
2007 9,353
2008 9,341
Thereafter 44,776
--------
$ 96,084
========
Rent expense for the years ended March 31, 2003, 2002 and 2001
amounted to approximately $12,761, $9,720 and $6,262, respectively. Rent
expense for the years ended March 31, 2003, 2002 and 2001 includes
straight-line adjustments in accordance with Statement of Financial Accounting
Standards No. 13 of approximately $512, $456 and $378, respectively. As of
March 31, 2003 and 2002, obligations of approximately $1,598 and $1,086,
respectively, representing future payments are reflected in the accompanying
consolidated balance sheets.
Letters of Credit
At March 31, 2003, the Company had approximately $8,564 of outstanding
letters of credit under its credit facility. In addition, the Company has
recorded approximately $813 of outstanding letters of credit as in-transit
inventory, which is included in accounts payable on the accompanying
consolidated balance sheet.
In addition, the Company has outstanding five standby letters of
credit totalling approximately $1,318 as security deposits for three of its
leased premises and as collateral on surety bonds used for its insurance plans.
The letters of credit will be drawn upon only in the event of non-payment by
the Company and mature on various dates through March 2004.
F-27
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 14 - Commitments and Contingencies (Continued)
Self Insurance Program
The Company provides its employees basic and major medical insurance
coverage through a limited self-insurance program. Claims processed and paid
are reimbursed to a maximum per participant per contract year. Benefits in
excess of this limit are covered by stop-loss insurance coverage.
Litigation
The Company is a defendant in various lawsuits which arose in the
ordinary course of business. Management is vigorously defending the lawsuits
and believes the outcomes will not have a material effect on the Company's
financial position or results of operations.
Note 15 - Segments
The Company's business segments are wholesale and retail and
restaurant operations. The wholesale operations consist of the importing of
men's and women's sportswear sold primarily to retail stores throughout the
United States. The retail and restaurant operations consist of retail clothing
stores and restaurants that sell products by and promote the "Tommy Bahama"
brand name in the United States.
The accounting policies of the segments are consistent with those
described in Note 2. All intercompany revenue and profits or losses are
eliminated in consolidation. The Company evaluates each segment based upon
earnings before interest and income taxes. Effective April 1, 2002, the Company
began allocating corporate overhead expense to each segment based upon each
segment's usage of corporate resources. The amount allocated to the retail and
restaurant segment for the year ended March 31, 2003 was approximately $6,715.
Retail and
Wholesale Restaurant Eliminations Total
--------- ---------- ------------ --------
March 31, 2003:
Net sales $253,526 $116,094 $(40,113) $329,507
Depreciation and amortization $ 1,434 $ 3,074 $ -- $ 4,508
Income before interest and income taxes $ 44,988 $ 3,968 $ (440) $ 48,516
Total assets $119,321 $ 72,511 $(59,721) $132,111
Purchases of property and equipment $ 6,662 $ 6,374 $ -- $ 13,036
F-28
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 15 - Segments (Continued)
Retail and
Wholesale Restaurant Eliminations Total
--------- ---------- ------------ --------
March 31, 2002:
Net sales $220,175 $ 95,074 $(31,641) $283,608
Depreciation and amortization $ 1,084 $ 2,757 $ -- $ 3,841
Income before interest and income taxes $ 40,618 $ 4,837 $ (688) $ 44,767
Total assets $106,183 $ 38,739 $(28,822) $116,100
Purchases of property and equipment $ 1,793 $ 4,325 $ -- $ 6,118
March 31, 2001:
Net sales $210,960 $ 64,809 $(22,917) $252,852
Depreciation and amortization $ 637 $ 2,102 $ -- $ 2,739
Income before interest and income taxes $ 41,129 $ 2,697 $ (2,423) $ 41,403
Total assets $113,858 $ 38,836 $(30,240) $122,454
Purchases of property and equipment $ 1,215 $ 8,302 $ -- $ 9,517
Note 16 - Summarized Quarterly Data (Unaudited)
The following is a summary of the quarterly results of operations for
the periods ended March 31, 2003 and 2002:
March 31, Dec. 31, Sept. 30, June 30,
2003 2002 2002 2002 Total
--------- --------- --------- --------- ---------
Net sales $ 104,913 $ 76,291 $ 70,161 $ 78,142 $ 329,507
Gross profit $ 51,914 $ 39,192 $ 33,901 $ 41,269 $ 166,276
Income from continuing operations $ 8,728 $ 7,295 $ 3,172 $ 8,254 $ 27,449
Discontinued operations $ (163) $ (47) $ (195) $ (113) $ (518)
Net income $ 8,565 $ 7,248 $ 2,977 $ 8,141 $ 26,931
Basic net income (loss) per share:*
From continuing operations $ .51 $ .43 $ .19 $ .49 $ 1.62
From discontinued operations (.01) -- (.01) (.01) (.03)
--------- --------- --------- --------- ---------
Net income per share $ .50 $ .43 $ .18 $ .48 $ 1.58
========= ========= ========= ========= =========
Diluted net income (loss) per share:*
From continuing operations $ .51 $ .43 $ .19 $ .48 $ 1.61
From discontinued operations (.01) -- (.01) (.01) (.03)
--------- --------- --------- --------- ---------
Net income per share $ .50 $ .42 $ .17 $ .48 $ 1.58
========= ========= ========= ========= =========
* Per share amounts may not total due to rounding.
F-29
VIEWPOINT INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Note 16 - Summarized Quarterly Data (Unaudited) (Continued)
March 31, Dec. 31, Sept. 30, June 30,
2003 2002 2002 2002 Total
--------- --------- --------- --------- ---------
Net sales $ 92,529 $ 61,983 $ 52,075 $ 77,021 $ 283,608
Gross profit $ 46,793 $ 34,113 $ 25,419 $ 39,843 $ 146,168
Income (loss) from continuing operations $ 10,557 $ 6,040 $ (170) $ 7,736 $ 24,163
Discontinued operations $ (90) $ (95) $ (70) $ 10 $ (245)
Net income (loss) $ 10,467 $ 5,945 $ (240) $ 7,746 $ 23,918
Basic net income (loss) per share:*
From continuing operations $ .62 $ .36 $ (.01) $ .46 $ 1.42
From discontinued operations (.01) (.01) -- -- (.01)
--------- --------- --------- --------- ---------
Net income per share $ .62 $ .35 $ (.01) $ .46 $ 1.41
========= ========= ========= ========= =========
Diluted net income (loss) per share:*
From continuing operations $ .62 $ .35 $ (.01) $ .45 $ 1.41
From discontinued operations (.01) (.01) -- -- (.01)
--------- --------- --------- --------- ---------
Net income per share $ .61 $ .35 $ (.01) $ .45 $ 1.40
========= ========= ========= ========= =========
* Per share amounts may not total due to rounding.
Note 17 - Subsequent Event
On June 13, 2003, all of the outstanding capital stock of the Company
was acquired by Oxford Industries, Inc. ("Oxford") for $240,000 in cash and
$10,000 of Oxford common stock. In addition, Oxford entered into an earnout
agreement with the selling shareholders whereby they will be entitled to earn
up to an additional $75,000, in the aggregate, over the next four years
following the closing date of the acquisition, based on the Company's
achievement of certain performance targets.
Simultaneously, with the closing of the acquisition, all outstanding
warrants were exercised and the cash proceeds from the sale were used to repay
the Company's bank (notes and bankers acceptances payable and long-term debt)
and the subordinated notes payable - shareholders. These agreements, along with
the Company's employment, consulting and management contracts, have all been
terminated.
F-30
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF EARNINGS
GENERAL
The unaudited pro forma combined statement of earnings for the year
ended May 30, 2003 gives effect to the following events as if each had occurred
on June 1, 2002 (with respect to Oxford Industries, Inc.) and April 1, 2002
(with respect to Viewpoint International, Inc.). The unaudited pro forma
combined statement of earnings for the six months ended November 28, 2003 gives
effect to the following events as if each had occurred on May 31, 2003.
- The issuance of $200 million of notes on May 16,
2003;
- The acquisition of Viewpoint on June 13, 2003;
- Borrowings under our new senior secured credit
facility, as necessary to consummate the pending
acquisition of Viewpoint, and repayment of all
amounts of our notes payable related to our existing
securitization facility; and
- The issuance to Viewpoint stockholders of shares of
our common stock with a market value of $10.0
million.
The acquisition of Viewpoint has been accounted for using the purchase
method of accounting. We have not yet finalized the purchase price allocation.
The purchase price allocation will be finalized upon refinement of certain
preliminary estimates.
On June 13, 2003, we acquired all of the common stock of Viewpoint.
The transaction is valued at up to $325 million, consisting of $240 million in
cash, $10 million in Oxford common stock (388,200 at issuance, 776,400 adjusted
for the 2-for-1 common stock split), and up to $75 million in contingent
payments, subject to the achievement by Viewpoint of certain performance
targets over the next four years. If the performance targets are met, any
payments made will be recorded as additional purchase price and will be
allocated to goodwill.
The unaudited pro forma combined statements of earnings are based on
assumptions that we believe are reasonable under the circumstances and are
intended for informational purposes only. They are not necessarily indicative
of our future results of operations or results of operations that would have
actually occurred had the acquisition of Viewpoint taken place as of the
beginning of such periods presented. All share and per share amounts include
the effect of a 2-for-1 common stock split in the form of a stock dividend
payable on December 1, 2003 as if it were payable at the beginning of each
period presented.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
$ in thousands except per share Year Ended Year Ended
amounts May 30, 2003 March 31, 2003
------------ -------------- ----------- -----------
Oxford Viewpoint Pro Forma Pro Forma
Adjustments Combined
------------ -------------- ----------- -----------
NET SALES $ 764,602 $329,507 $ -- $ 1,094,109
Cost of goods sold 604,891 163,231 -- 768,122
----------- -------- --------- -----------
GROSS PROFIT 159,711 166,276 -- 325,987
Selling, general and administrative 124,362 120,011 (2,133)(1) 242,240
Amortization of Intangible assets -- -- 6,632 (2) 6,632
----------- -------- --------- -----------
124,362 120,011 4,499 248,872
Royalties and other operating income -- 4,462 -- 4,462
Impairment of property and equipment -- 1,693 -- 1,693
----------- -------- --------- -----------
OPERATING INCOME 35,349 49,034 (4,499) 79,884
Interest expense, net 1,935 6,104 16,759 (3) 24,798
----------- -------- --------- -----------
EARNINGS BEFORE INCOME TAXES 33,414 42,930 (21,258) 55,086
Income taxes 13,087 15,481 (7,994)(4) 20,574
----------- -------- --------- -----------
INCOME FROM CONTINUING OPERATIONS 20,327 27,449 (13,264) 34,512
Discontinued operations -- 518 -- 518
----------- -------- --------- -----------
NET EARNINGS $ 20,327 $ 26,931 $ (13,264) $ 33,994
=========== ======== ========= ===========
Pro Forma earnings per share
Basic $ 1.35 $ 2.15
Diluted $ 1.34 $ 2.14
Pro forma shares outstanding
Basic 15,034,720 776,400 (5) 15,811,120
Diluted 15,143,290 776,400 (5) 15,919,690
See accompanying notes to Unaudited Pro Forma Combined Statements of Earnings.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
$ in thousands except per share Six Months Ended
amounts November 28, 2003
Oxford Pro Forma Pro Forma
As Reported Adjustments Combined
----------- ----------- ----------
NET SALES $ 495,988 $ 11,732(1) $ 507,720
Cost of goods sold 348,265 5,497(1) 353,762
---------- -------- ----------
GROSS PROFIT 147,723 6,235 153,958
Selling, general and administrative 112,861 5,261(1) 118,122
Amortization of Intangibles 3,355 - 3,355
---------- -------- ----------
116,216 5,261 121,477
Royalties and other operating income 2,320 203(1) 2,523
---------- -------- ----------
OPERATING INCOME 33,827 1,177 35,004
Interest expense, net 11,844 236(2) 12,080
---------- -------- ----------
EARNINGS BEFORE INCOME TAXES 21,983 941 22,924
Income taxes 8,301 358(3) 8,659
---------- -------- ----------
NET EARNINGS $ 13,682 $ 583 $ 14,265
========== ======= ==========
Pro Forma earnings per share
Basic $ 0.86 $ 0.90
Diluted $ 0.83 $ 0.87
Pro forma shares outstanding
Basic 15,994,443 59,723(4) 16,054,166
Diluted 16,452,738 59,723(4) 16,512,461
See accompanying notes to Unaudited Pro Forma Combined Statements of Earnings.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF EARNINGS
Year Ended May 30, 2003 Unaudited Pro Forma Combined Statement of Earnings
(1) Reflects the elimination of $2.1 million of accounting and legal
charges related to the acquisition.
(2) Reflects the amortization of intangible assets with finite lives
recorded in purchase accounting. Such intangible assets will be
amortized for the first five years as follows:
$ in thousands
Fiscal Year End 2004 2005 2006 2007 2008
------- ------- ------- ------- -------
Amortization $ 6,632 $ 5,563 $ 4,167 $ 2,975 $ 2,167
(3) Reflects the adjustment of interest expense to give effect to (i)
borrowings under our new senior credit facility, (ii) notes issued of
$200.0 million, (iii) amortization of debt issuance costs, (iv) the
elimination of Viewpoint's interest expense and (v) the elimination of
interest on debt retired in connection with the acquisition and
refinancing and the elimination of a bridge financing commitment. Debt
issuance costs are amortized on a straight-line method, which
approximates an effective interest method over the terms of the
related debt facilities.
(4) The tax rate for the pro forma adjustments has been calculated based
on our statutory rate of approximately 37.6% during the period
presented.
(5) Reflects the impact of the issuance of 776,400 shares of our common
stock with a total market value of $10.0 million based on a market
price of $12.88 per share. The price per share reflects the average
high and low trading prices of our stock for the ten days prior to the
acquisition signing date adjusted for the pro forma effect of a
2-for-1 stock split.
Six Months ended November 28, 2003 Unaudited Pro Forma Combined Statement of
Earnings
(1) Reflects the addition of the pre-acquisition operating results of
Viewpoint International, Inc. from May 31, 2003 to June 13, 2003.
(2) Reflects the adjustment of interest expense to give effect to
borrowings under our new senior credit facility and debt issuance
cost. Debt issuance costs are amortized on a straight-line method,
which approximates an effective interest method over the terms of the
related debt facilities.
(3) The tax rate for the pro forma adjustments has been calculated based
on our statutory rate of approximately 38.0% during the period
presented.
(4) Reflects the impact of the issuance of 776,400 shares of our common
stock with a total market value of $10.0 million based on a market
price of $12.88 per share. The price per share reflects the average
high and low trading prices of our stock for the ten days prior to the
acquisition signing date adjusted for the pro forma effect of a
2-for-1 stock split.
EXHIBIT 23.1 CONSENT OF MAHONEY COHEN & COMPANY, CPA, P.C.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No.333-110598), in the Registration Statement (Form S-8 No. 33-64097)
pertaining to the Oxford Industries, Inc. 1992 Stock Option Plan, in the
Registration Statement (Form S-8 No. 333-59409) pertaining to the Oxford
Industries, Inc. 1997 Restricted Stock Plan and in the Registration Statements
(Form S-8 No. 333-59411 pertaining to the Oxford Industries, Inc. 1997 Stock
Option Plan, of our report dated June 25, 2003, with respect to the
consolidated financial statements of Viewpoint International, Inc. and
subsidiaries for the three years ended March 31, 2003 appearing in this Current
Report on Form 8-K.
/s/ Mahoney Cohen & Company, CPA, P.C.
Mahoney Cohen & Company, CPA, P.C.
New York, New York
January 27, 2004
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OXFORD INDUSTRIES, INC.
By:/s/Ben B. Blount, Jr.
------------------------
Ben B. Blount, Jr.
Executive Vice President and
Chief Financial Officer
Date: January 27, 2004