<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to___________________
Commission File Number: 0-23440
Norton McNaughton, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3747173
(I.R.S. Employer Identification No.)
463 Seventh Avenue, New York, N.Y. 10018
(Address of principal executive offices)
(Zip code)
(212) 947-2960
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value, 7,636,718 shares as of September 12, 1996.
<PAGE> 2
INDEX TO FORM 10-Q
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
PAGE NO.
PART I. FINANCIAL STATEMENTS
ITEM I.
Financial Statements:
Consolidated Balance Sheets at August 3, 1996 (Unaudited)
and November 4, 1995 3
Consolidated Statements of Operations for the thirteen weeks ended
August 3, 1996 and August 4, 1995 (Unaudited) and the
thirty-nine weeks ended August 3, 1996 and August 4, 1995 (Unaudited) 4
Consolidated Statements of Stockholders' Equity for the thirty-nine
weeks ended August 3, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the thirty-nine weeks
ended August 3, 1996 and August 4, 1995 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-8
ITEM II.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
PART II. OTHER INFORMATION 13
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 3, November 4,
1996 1995
(Unaudited) (Note)
---------------- --------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 337 $ 444
Due from factor, net 8,749 35,810
Inventory 35,017 27,516
Prepaid expenses and other current assets 6,290 2,159
---------- ----------
Total current assets 50,393 65,929
Fixed assets, net of accumulated depreciation
of $1,395 and $914, respectively 4,555 3,864
Notes receivable from management stockholders 2,655 2,660
Other assets 1,432 1,071
---------- ----------
Total assets $ 59,035 $ 73,524
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,386 $ 21,639
Accrued expenses and other current liabilities 540 788
---------- ----------
Total current liabilities 11,926 22,427
Other long-term liabilities 780 628
---------- ----------
Total liabilities 12,706 23,055
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, authorized
1,000,000 shares, none issued and
outstanding -- --
Common stock, $.01 par value, authorized 20,000,000 shares, 8,052,718 and
8,046,824 shares issued, respectively, and 7,636,718 and
8,026,824 shares outstanding, respectively 80 80
Capital in excess of par 23,865 23,820
Retained earnings 26,462 26,895
Treasury stock, at cost, 416,000 shares and
20,000 shares, respectively (4,078) (326)
---------- ----------
Total stockholders' equity 46,329 50,469
---------- ----------
Total liabilities and stockholders' equity $ 59,035 $ 73,524
========== ==========
</TABLE>
Note: The balance sheet at November 4, 1995 has been derived from the audited
financial statements as of that date.
See accompanying notes.
3
<PAGE> 4
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
August 3, August 4, August 3, August 4,
1996 1995 1996 1995
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Net sales $ 48,261 $ 50,848 $ 148,107 $ 145,006
Cost of goods sold 37,051 37,304 117,037 105,419
--------- --------- --------- ---------
Gross profit 11,210 13,544 31,070 39,587
Selling, general and administrative expenses 9,684 9,440 30,362 26,611
--------- --------- --------- ---------
Income from operations 1,526 4,104 708 12,976
Other expense (income):
Interest expense 592 440 1,589 649
Interest income (42) (44) (121) (178)
--------- --------- --------- ---------
Income (loss) before provision (benefit) for income
taxes 976 3,708 (760) 12,505
Provision (benefit) for income taxes 393 1,489 (327) 5,034
--------- --------- --------- ---------
Net income (loss) $ 583 $ 2,219 $ (433) $ 7,471
========= ========= ========= =========
PER SHARE DATA:
Net income (loss) $ 0.08 $ 0.28 $ (0.06) $ 0.93
========= ========= ========= =========
Weighted average number of common shares and
common stock equivalents outstanding 7,654 8,028 7,856 8,043
========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED AUGUST 3, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Capital
----------------------- in Excess Retained Treasury
Shares Amount of Par Earnings Stock Total
---------- -------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at November 4, 1995 8,047 $ 80 $ 23,820 $ 26,895 $ (326) $ 50,469
Net loss for the thirty-nine weeks
ended August 3, 1996 -- -- -- (433) -- (433)
Treasury stock acquired, 396,000
shares, at cost -- -- -- -- (3,752) (3,752)
Sale of 5,894 shares of common
stock through the Employee
Stock Purchase Plan 6 -- 45 -- -- 45
-------- -------- -------- -------- -------- --------
Balance at August 3, 1996 8,053 $ 80 $ 23,865 $ 26,462 $ (4,078) $ 46,329
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------
AUGUST 3, AUGUST 4,
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Net income (loss) $ (433) $ 7,471
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Depreciation and amortization of fixed assets 481 291
Amortization of intangibles 26 26
Changes in operating assets and liabilities:
Due from factor, net 27,061 16,006
Inventory (7,501) (24,193)
Prepaid expenses and other current assets (4,131) (4,449)
Other assets (387) (210)
Accounts payable (10,253) 7,519
Accrued expenses and other current liabilities (248) (1,224)
Other long-term liabilities 152 139
-------- --------
Net cash provided by operating activities 4,767 1,376
-------- --------
INVESTING ACTIVITIES
Notes receivable from management stockholders 5 91
Purchase of fixed assets (1,172) (1,213)
-------- --------
Net cash used for investing activities (1,167) (1,122)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 45 57
Purchase of treasury stock (3,752) (326)
-------- --------
Net cash used for financing activities (3,707) (269)
-------- --------
Decrease in cash (107) (15)
Cash at beginning of period 444 227
-------- --------
Cash at end of period $ 337 $ 212
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 313 $ 6,824
Interest paid $ 1,598 $ 649
</TABLE>
See accompanying notes.
6
<PAGE> 7
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements of Norton
McNaughton, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes necessary
for a fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In the
opinion of management, all normal and recurring adjustments and accruals
considered necessary for a fair presentation of the Company's financial position
at August 3, 1996 and the results of operations and cash flows for the
thirty-nine weeks ended August 3, 1996 and August 4, 1995 have been included.
These statements should be read in conjunction with the audited consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission. Operating
results for the thirty-nine weeks ended August 3, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ending
November 2, 1996.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material balances and transactions have been
eliminated in consolidation.
The Company has adopted a 52-53 week accounting period. The Company's fiscal
year ends on October 31, if such date falls on a Saturday, or the first Saturday
following October 31.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles for interim reporting requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. INVENTORY
Inventory is stated at the lower of cost (first-in, first-out basis) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
August 3, November 4,
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Raw materials $ 6,364 $ 7,462
Work in process 8,079 10,368
Finished goods 20,574 9,686
------- -------
$35,017 $27,516
======= =======
</TABLE>
3. EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares of
common stock and the dilutive effect of the weighted average number of common
stock equivalents of the Company. Common stock equivalents are shares issuable
upon the exercise of stock options under the treasury stock method. Options were
excluded from the net loss per share calculation for the nine months ended
August 3, 1996 as the effects were anti-dilutive.
7
<PAGE> 8
4. STOCKHOLDERS' EQUITY
The Company's Board of Directors has authorized a stock repurchase program,
which enables the Company to repurchase up to $7.5 million of the Company's
Common Stock. The Company expects that shares may be purchased from time to time
in the open market and in block transactions. The Company purchased 46,000
shares and 350,000 shares of its stock in the open market during the first and
second quarter of fiscal 1996, respectively, at a respective aggregate cost of
$540,500 and $3,211,325. Through the end of the third quarter of fiscal 1996,
the Company had purchased 416,000 shares at an aggregate cost of $4,078,075.
5. SHAREHOLDER RIGHTS PLAN
On January 19, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan in which shareholders of record on February 8, 1996 received a
dividend distribution of one common share purchase right for each outstanding
share of the Company's Common Stock held. Each right entitles the holder to
purchase from the Company Common Stock at an initial exercise price of $32.00.
The rights are not exercisable or transferable apart from the Common Stock until
the earlier to occur of (i) ten days following a public announcement that a
person or group of affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding Common Stock of the Company, or (ii)
ten business days following the commencement of, or announcement of, an
intention to make a tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
such outstanding Common Stock.
The rights are redeemable by the Company's Board of Directors at a price of
$0.01 per right at any time prior to the acquisition by a person or group of
beneficial ownership of 20% or more of the Company's Common Stock.
If a person or group acquires 20% or more of the Company's outstanding Common
Stock, each right will entitle the holder to purchase, at the right's exercise
price, a number of shares of the Company's Common Stock having a market value at
that time of twice the right's exercise price. If the Company is acquired in a
merger or other business combination transaction, each right will entitle its
holder to purchase, at the right's exercise price, a number of the acquiring
company's common shares having a market value at that time of twice the right's
exercise price.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
As previously reported, in May 1996 the Company closed its Kate McNaughton suit
division due to its inability to achieve a level of profitability within the
Company's profitability targets. The Company has monitored, and will continue to
closely review the success, in terms of sales, profitability and customer
acceptance, of existing and new product lines.
The Company contracts for the manufacture of all of its products. As a result,
the Company has modest amounts of property and equipment, as well as modest
annual depreciation expense and capital expenditures. In addition, the Company
generally ships its products in accordance with normal apparel industry shipping
cycles. The timing of shipping cycles or the delivery of finished goods may
result in shipments to customers occurring before or after a particular fiscal
quarter end, thereby affecting both fiscal quarter to quarter comparisons and
quarter to quarter results during a fiscal year.
As a result of the Company's continued focus on improving gross profit margin,
the Company intends to minimize the production of merchandise that it does not
anticipate can be sold at acceptable profit levels. Accordingly, the Company
anticipates that revenue levels in the fourth quarter of fiscal 1996 may
decrease from those in the corresponding period of fiscal 1995. In addition, the
Company anticipates that revenue levels in fiscal 1997 may decrease from those
of fiscal 1996.
As is the norm in the apparel industry, the Company grants its customers sales
allowances which affect the Company's gross margin. The level of sales
allowances granted varies from quarter to quarter and year to year. Due to the
difficult retail environment in the United States, in particular for women's
apparel, the Company expects that it will grant a higher level of sales
allowances to customers in fiscal 1996 as compared to fiscal 1995.
In furtherance of the Company's ongoing effort to control costs the Company has
taken certain cost savings measures. The Company implemented a restructuring at
the end of the third quarter of fiscal 1996, which resulted in a significant
reduction of its workforce. In addition, the Company has made the determination
to phaze out its in-store specialist program. The benefits of these measures
will be seen in fiscal 1997.
This Management's Discussion and Analysis contains forward-looking information
about the Company's anticipated operating results for fiscal 1996 and fiscal
1997. The Company's ability to achieve its projected results is dependent on
many factors which are outside of management's control. Some of the most
significant factors would be a further increase in price pressures and other
competitive factors and a softening of retailer or consumer acceptance of the
Company's products, any of which could result in a decrease in anticipated
revenues and gross profit margins, the unanticipated loss of a major customer,
the unanticipated loss of a major contractor or supplier, unforeseen
complications resulting from the Company's implementation of major upgrades to
its management information systems, and weather conditions which could impact
retail traffic. Accordingly, there can be no assurance that the Company will
achieve its anticipated operating results for fiscal 1996 and fiscal 1997.
9
<PAGE> 10
Results of Operations
The following table is derived from the Company's Consolidated Statements of
Operations and sets forth, for the periods indicated, selected operating data as
a percentage of net sales:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------- ------------------------
August 3, August 4, August 3, August 4,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 76.8 73.4 79.0 72.7
------ ------ ------ ------
Gross profit 23.2 26.6 21.0 27.3
Selling, general and
administrative expenses 20.1 18.6 20.5 18.4
------ ------ ------ ------
Income from operations 3.1 8.0 0.5 8.9
Interest expense 1.2 0.8 1.1 0.4
Interest income (0.1) (0.1) (0.1) (0.1)
------ ------ ------ ------
Income (loss) before provision (benefit) for
income taxes 2.0 7.3 (0.5) 8.6
Provision (benefit) for income taxes 0.8 2.9 (0.2) 3.5
------ ------ ------ ------
Net income (loss) 1.2% 4.4% (0.3)% 5.1%
====== ====== ====== ======
</TABLE>
Quarter Ended August 3, 1996 Compared to Quarter Ended August 4, 1995
Net sales decreased 5.1% to $48.3 million in the third quarter of fiscal 1996,
from $50.9 million in the third quarter of fiscal 1995. The decrease of $2.6
million was primarily attributable to a decrease in net sales of $8.0 million or
19.5% in the Norton McNaughton product lines, and a decrease in net sales of
$2.3 million resulting from the discontinuation of the Kate McNaughton suit
division in May 1996. These decreases were offset in part by an increase in net
sales of $2.9 million in the Norton Studio product line, which commenced
operations in January 1996, an increase in net sales of $1.9 million, or 65%, in
the Modiano product line, and an increase in net sales of $1.5 million, or 62%,
in the Pant-her product line. The decrease in net sales in the Norton McNaughton
product lines from the third quarter of fiscal 1995 to the third quarter of
fiscal 1996 was due in part to the shipment of certain fall merchandise in the
third quarter of fiscal 1995, whereas such merchandise will be shipped in the
fourth quarter of fiscal 1996. The decrease in net sales in Norton McNaughton is
also attributable to retailers reallocating purchases from Norton McNaughton to
Norton Studio.
The gross profit margin was 23.2% for the third quarter of fiscal 1996, as
compared to 26.6% for the third quarter of fiscal 1995. The decrease resulted
from the closeout of certain Norton McNaughton inventory at break-even or below
cost in the third quarter of fiscal 1996. Although the gross profit margin
decreased in the third quarter of fiscal 1996 from the third quarter of fiscal
1995, gross profit margin increased to 23.2% in the third quarter of fiscal 1996
from 17.5% in the second quarter of fiscal 1996.
Selling, general and administrative expenses ("SG&A" expenses) were $9.7 million
in the third quarter of fiscal 1996, or 20.1% of net sales, as compared to $9.4
million in the third quarter of fiscal 1995, or 18.6% of net sales. The increase
in SG&A expenses as a percentage of net sales resulted primarily from the
spreading of the fixed component of these expenses over lower net sales in the
third quarter of fiscal 1996.
Operating income decreased from $4.1 million in the third quarter of fiscal 1995
to $1.5 million in the third quarter of fiscal 1996. The decease in operating
income resulted primarily from the decrease in gross profit margin and the
increase in SG&A expenses as a percentage of net sales.
10
<PAGE> 11
Thirty-nine Weeks Ended August 3, 1996 Compared to Thirty-nine Weeks Ended
August 4, 1995
Net sales increased 2.1% to $148.1 million in the first nine months of fiscal
1996, from $145.0 million in the first nine months of fiscal 1995. The increase
of $3.1 million was primarily attributable to an increase in net sales of $8.5
million, in the aggregate, resulting from the first shipments of the Lauren
Alexandra product line in June 1995 and the Danielle Paige product line in
August 1995, an increase in net sales of $6.2 million resulting from the
commencement of shipments of the Norton Studio product line, an increase in net
sales of $3.2 million, or 32.5%, in the Modiano product line, and an increase in
net sales of $2.2 million, or 26.7%, in the Pant-her product line. These
increases were offset by a decrease in net sales of $12.1 million in the Norton
McNaughton product lines and a decrease in net sales of $4.9 million resulting
from the discontinuation of the Kate McNaughton suit division in May 1996. The
decrease in net sales in the Norton McNaughton product lines resulted primarily
from the grant to customers of a higher level of sales allowances in the first
nine months of fiscal 1996 as compared to the first nine months of fiscal 1995
due to competitive pressures and retail weakness experienced with holiday season
merchandise, the shipment of certain fall merchandise in the third quarter of
fiscal 1995, whereas such merchandise will be shipped in the fourth quarter of
fiscal 1996, and the reallocation by retailers of purchases from Norton
McNaughton to Norton Studio for the nine months ended August 4, 1996.
The gross profit margin was 21.0% in the first nine months of fiscal 1996, as
compared to 27.3% for the first nine months of fiscal 1995. The decrease was
primarily attributable to lower gross profit margins experienced in the Norton
McNaughton and Kate McNaughton product lines in the first nine months of fiscal
1996 as compared to the first nine months of fiscal 1995. The decrease resulted
from the sale of certain Norton McNaughton and Kate McNaughton inventory at
break-even or below cost and the higher level of sales allowances granted in the
first nine months of fiscal 1996 as compared to the first nine months of fiscal
1995.
SG&A expenses were $30.4 million in the first nine months of fiscal 1996, or
20.5% of net sales, as compared to $26.6 million in the first nine months of
fiscal 1995, or 18.4% of net sales. The increase in dollar amount of $3.8
million included approximately $1.5 million in personnel costs resulting from
the hiring of additional production, design, selling and support staff in the
Norton McNaughton division, the introduction of the Danielle Paige product line
in August 1995 and the Norton Studio product line in January 1996, an increase
in personnel costs, professional and consulting fees, and other expenses related
to the implementation of new management information systems, and an increase in
variable distribution and freight expenses resulting from an increase in the
volume of products shipped in the first nine months of fiscal 1996. The increase
in SG&A expenses as a percentage of net sales was primarily attributable to the
aforementioned hiring of additional production, design, selling and support
staff, the additional expenses associated with the implementation of the
Company's new management information systems, and the increase in distribution
and freight expenses as a result of the Company's expanding product lines.
Operating income decreased from $13.0 million in the first nine months of fiscal
1995 to approximately $700,000 in the first nine months of fiscal 1996. The
decrease in operating income resulted primarily from the decrease in gross
profit margin and the increase in SG&A expenses as a percentage of net sales.
Interest expense increased to $1.6 million in the first nine months of fiscal
1996 from approximately $650,000 in the first nine months of fiscal 1995. The
increase was caused by higher working capital requirements associated with the
build-up in inventory to support the introduction of the Lauren Alexandra,
Danielle Paige and Norton Studio product lines, the earlier placement of goods
into production in fiscal 1996 as compared to fiscal 1995, and the purchase of
treasury stock under the Company's stock repurchase program.
Liquidity and Capital Resources
The Company's liquidity requirements arise from the funding of the Company's
working capital needs, primarily inventory and accounts receivable. The
Company's borrowing requirements for working capital purposes are seasonal, with
peak working capital needs generally arising during the second fiscal quarter
and at the end of the third fiscal quarter extending through the fourth fiscal
quarter. The Company had working capital of $38.5 million at August 3, 1996 as
compared to $43.5 million at November 4, 1995. The decrease resulted primarily
from the upgrade of the Company's management information systems, related
consulting fees and the Company's expenditure in connection with the open market
purchases of its common stock under its stock repurchase program.
The Company's Factoring Agreement provides for the sale of its trade accounts
receivable, generally without recourse,
11
<PAGE> 12
up to a maximum established by the factor for each customer. The Company may
borrow up to 90% of the net balance due on eligible accounts receivable, up to
$10.0 million of additional advances and up to $20.0 million in letter of credit
financing. From time to time, the Company may borrow additional amounts from the
factor in excess of those set forth in the preceding sentence. No such
additional amounts were outstanding at August 3, 1996. Interest on factor
advances is payable monthly at 0.75% below the NationsBank of Georgia, N.A.
prime rate (the "Nations Prime Rate") for amounts advanced which are less than
the purchase price of eligible accounts receivable, and 1.25% above the Nations
Prime Rate for amounts advanced in excess of the purchase price of eligible
accounts receivable. At August 3, 1996, outstanding advances under the Factoring
Agreement were approximately $29.6 million. There were outstanding advances
under the $10.0 million additional advance facility of approximately $6.1
million at August 3, 1996. Letters of credit outstanding amounted to
approximately $13.2 million at August 3, 1996.
The Company anticipates that it will incur an additional $100,000 to $200,000 of
capital expenditures in connection with the implementation of its new management
information systems and approximately $100,000 for consulting fees in connection
therewith, and approximately $400,000 to $500,000 for the upgrade of its
management information warehousing systems and related consulting fees, all in
the fourth quarter of fiscal 1996 and in fiscal 1997. The Company expects to
finance these capital expenditures from internally generated funds and advances
under the Factoring Agreement.
The Company's Board of Directors has authorized a stock repurchase program,
which enables the Company to repurchase up to $7.5 million of the Company's
Common Stock. The Company expects that shares may be purchased from time to time
in the open market and in block transactions. The Company purchased 46,000
shares and 350,000 shares of its stock in the open market during the first and
second quarters of fiscal 1996, respectively, at a respective aggregate cost of
$540,500 and $3,211,325. Through the end of the third quarter of fiscal 1996,
the Company had purchased a total of 416,000 shares at an aggregate cost of
$4,078,075.
Management believes that cash generated from operations and advances under its
Factoring Agreement will provide sufficient cash resources to finance the
Company's working capital and capital expenditure requirements for the current
and next fiscal year.
The moderate rate of inflation over the past few years has not had a significant
impact on the Company's sales or profitability. Inflation is not expected to
have a significant impact on the Company's business.
Seasonality
Historically, the Company has achieved its highest sales in the fourth quarter
and, to a lesser extent, the second quarter of each fiscal year. This pattern
results primarily from the timing of shipments for each season, although the
timing of shipments can vary from quarter to quarter and season to season. Fall
season merchandise is generally shipped between August and October and spring
merchandise is generally shipped between February and April.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 Financial Data Schedule (For SEC use only)
b) There were no Current Reports on Form 8-K filed during the thirteen
weeks ended August 3, 1996.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTON MCNAUGHTON, INC.
(Registrant)
Date: September 17, 1996 By /s/Sanford Greenberg
---------------------
SANFORD GREENBERG
Chairman of the Board and
Chief Executive Officer
(Principal Executive and
Operating Officer)
Date: September 17, 1996 By /s/Amanda J. Bokman
--------------------
AMANDA J. BOKMAN
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-02-1996
<PERIOD-START> NOV-05-1995
<PERIOD-END> AUG-03-1996
<CASH> 337
<SECURITIES> 0
<RECEIVABLES> 8,749
<ALLOWANCES> 0
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0
0
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