<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report(Date of earliest event reported) SEPTEMBER 4, 1997
NORTON MCNAUGHTON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23440 13-3747173
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
463 SEVENTH AVENUE
NEW YORK, N.Y. 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 947-2960
<PAGE> 2
ITEM 5. OTHER EVENTS
Reference is made to the press release issued on September 4, 1997, attached
hereto as Exhibit 99.
ITEM 7. EXHIBITS
Exhibit Index
Exhibit 99 Press release dated September 4, 1997.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTON MCNAUGHTON, INC.
(Registrant)
Date: September 11, 1997 By: /s/ Sanford Greenberg
-------------------------------------------
SANFORD GREENBERG
Chairman of the Board and Chief Executive
Officer
(Principal Executive and Operating Officer)
3
<PAGE> 4
Exhibit Index
Exhibit 99 Press release dated September 4, 1997.
<PAGE> 1
EXHIBIT 99
MORGEN WALKE ASSOCIATES (LETTERHEAD)
FOR:NORTON MCNAUGHTON, INC.
APPROVED BY:PETER BONEPARTH
PRESIDENT
AMANDA BOKMAN
CHIEF FINANCIAL OFFICER
(212) 947-2960
FOR IMMEDIATE RELEASE
CONTACT: INVESTOR RELATIONS:
HOWARD ZAR/SHANNON MOODY
PRESS: MICHAEL MCMULLAN
MORGEN-WALKE ASSOCIATES
(212) 850-5600
NORTON MCNAUGHTON, INC. ANNOUNCES THIRD QUARTER 1997 RESULTS
- ENTERS INTO AN AGREEMENT TO ACQUIRE MISS ERIKA, INC. -
NEW YORK, NEW YORK, SEPTEMBER 4, 1997 - NORTON MCNAUGHTON, INC.
(NASDAQ:NRTY) TODAY ANNOUNCED THAT THIRD QUARTER NET INCOME INCREASED 22.1% TO
$712,000, OR $0.10 PER SHARE, COMPARED TO NET INCOME OF $583,000, OR $0.08 PER
SHARE, FOR THE SAME PERIOD A YEAR AGO.
THE COMPANY ALSO ANNOUNCED THAT IT HAS ENTERED INTO A DEFINITIVE
AGREEMENT TO ACQUIRE SUBSTANTIALLY ALL THE ASSETS AND ASSUME SUBSTANTIALLY ALL
THE LIABILITIES OF MISS ERIKA, INC., A PRIVATELY-HELD APPAREL MANUFACTURER OF
MODERATE WOMEN'S CASUAL SEPARATES. THE TERMS OF THE TRANSACTION PROVIDE FOR THE
PAYMENT OF APPROXIMATELY $24 MILLION IN CASH AT CLOSING, WITH ADDITIONAL
CONSIDERATION PAYABLE AT THE COMPANY'S OPTION IN CASH OR COMPANY COMMON STOCK TO
BE PAID BASED ON THE PROFITABILITY OF MISS ERIKA IN 1998 AND 1999.
THE TRANSACTION WILL BE ACCOUNTED FOR UNDER THE PURCHASE METHOD OF
ACCOUNTING. CLOSING OF THE TRANSACTION, WHICH THE COMPANY EXPECTS WILL TAKE
PLACE DURING ITS FOURTH FISCAL QUARTER, IS SUBJECT TO THE EXPIRATION OF THE HART
SCOTT RODINO WAITING PERIOD AND THE SATISFACTION OF OTHER CUSTOMARY CLOSING
CONDITIONS. THE COMPANY EXPECTS TO RECOGNIZE ONE-TIME EXPENSES ASSOCIATED WITH
THE MISS ERIKA TRANSACTION IN THE FOURTH QUARTER OF FISCAL 1997 AND BELIEVES
THAT THE TRANSACTION WILL BE ACCRETIVE TO EARNINGS IN FISCAL 1998 AND
THEREAFTER.
BASED IN NEW YORK AND FOUNDED IN 1968, MISS ERIKA DESIGNS, CONTRACTS
FOR THE MANUFACTURE OF AND MARKETS WOMEN'S MODERATE SEPARATES, INCLUDING KNIT
TOPS AND BOTTOMS, SWEATERS, DRESSES AND SHORT SETS IN A VARIETY OF FABRICATIONS.
MISS ERIKA'S MERCHANDISE IS SOLD PRIMARILY UNDER THE "ERIKA"
-MORE-
<PAGE> 2
NRTY -- ANNOUNCES THIRD QUARTER 1997 RESULTS; PAGE:2
ENTERS INTO AN AGREEMENT TO ACQUIRE MISS ERIKA, INC.
LABEL AND IS DISTRIBUTED THROUGH REGIONAL CHAINS, DEPARTMENT STORES AND
SPECIALTY CHAINS. MISS ERIKA REPORTED ANNUAL SALES OF APPROXIMATELY $90 MILLION
FOR ITS MOST RECENT FISCAL YEAR ENDED JANUARY 31, 1997.
UPON CLOSING OF THE TRANSACTION, MISS ERIKA WILL OPERATE AS A SEPARATE
SUBSIDIARY UNDER THE DIRECTION OF STUART BREGMAN, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OF MISS ERIKA, AS WELL AS HOWARD ZWILLING, PRESIDENT AND CHIEF OPERATING
OFFICER OF MISS ERIKA. FOLLOWING THE CLOSING, MR. BREGMAN WILL ALSO SERVE AS A
MEMBER OF NORTON MCNAUGHTON'S BOARD OF DIRECTORS.
SANDY GREENBERG, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF NORTON
MCNAUGHTON COMMENTED, "THIS IS AN EXCITING OPPORTUNITY AS MISS ERIKA
SIGNIFICANTLY EXPANDS OUR REACH FROM THE MODERATE CAREER AREA INTO CASUAL
SEPARATES. WE HAVE SPOKEN TO MANY OF THEIR RETAIL CUSTOMERS, AND THEY ARE VERY
ENTHUSIASTIC ABOUT MISS ERIKA'S PRODUCTS AND THE PRICE/VALUE RELATIONSHIP THEY
BRING TO THE CONSUMER."
PETER BONEPARTH, PRESIDENT AND CHIEF OPERATING OFFICER OF NORTON
MCNAUGHTON, CONTINUED, "MISS ERIKA IS A PERFECT FIT FOR NORTON MCNAUGHTON, AND
ILLUSTRATES OUR STRATEGY OF ACQUIRING COMPANIES THAT ARE ACCRETIVE TO EARNINGS,
HAVE STRONG MANAGEMENT TEAMS IN PLACE, AND BROADEN OUR CHANNELS OF DISTRIBUTION.
MOREOVER, THE TRANSACTION STRUCTURE PROVIDES SIGNIFICANT ONGOING INCENTIVES TO
MISS ERIKA'S MANAGEMENT TEAM CONSISTENT WITH NORTON MCNAUGHTON'S OVERALL GOAL OF
MAXIMIZING SHAREHOLDER VALUE."
WITH RESPECT TO THE THIRD QUARTER, THE COMPANY ANNOUNCED NET SALES WERE
$48.2 MILLION VERSUS $48.3 MILLION FOR THE COMPARABLE PERIOD IN 1996. NET INCOME
INCREASED 22.1% TO $712,000, OR $0.10 PER SHARE, COMPARED TO NET INCOME OF
$583,000, OR $0.08 PER SHARE, FOR THE SAME PERIOD A YEAR AGO. THE AVERAGE NUMBER
OF COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING WAS 7,414,000 COMPARED
TO 7,654,000 FOR THE COMPARABLE PERIOD IN 1996.
PETER BONEPARTH REMARKED, "THIRD QUARTER RESULTS WERE IN LINE WITH
MANAGEMENT'S EXPECTATIONS. WHILE GROSS MARGINS WERE SLIGHTLY BEHIND LEVELS IN
THE PRIOR YEAR, OVERHEAD SAVINGS IN THE QUARTER HELPED TO IMPROVE OPERATING
PROFITS. WE EXPECT TO BENEFIT FROM ONGOING OVERHEAD SAVINGS IN THE FOURTH
QUARTER AND BEYOND BUT AT PRESENT WE ARE DISAPPOINTED WITH HOLIDAY BOOKINGS.
ACCORDINGLY, WE HAVE MADE THE DECISION TO REDUCE PRODUCTION OF FOURTH QUARTER
MERCHANDISE IN ORDER TO MINIMIZE MARKDOWN ALLOWANCES GOING FORWARD, THUS
MAINTAINING OUR COMMITMENT TO MARGIN IMPROVEMENT IN 1998 AND BEYOND."
-MORE-
<PAGE> 3
NRTY -- ANNOUNCES THIRD QUARTER 1997 RESULTS; PAGE:3
ENTERS INTO AN AGREEMENT TO ACQUIRE MISS ERIKA, INC.
FOR THE FIRST NINE MONTHS OF FISCAL 1997, NET SALES WERE $142.7 MILLION
COMPARED TO $148.1 MILLION REPORTED FOR THE SAME PERIOD A YEAR AGO. THE NET LOSS
FOR THE FIRST NINE MONTHS WAS $2.8 MILLION, OR $0.37 PER SHARE, AFTER SPECIAL
CHARGES OF $0.44 PER SHARE TAKEN IN THE SECOND QUARTER OF FISCAL 1997, COMPARED
TO A NET LOSS OF $433,000, OR $0.06 PER SHARE, FOR THE SAME PERIOD IN 1996. THE
AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING WERE
7,520,000 FOR THE FIRST NINE MONTHS OF FISCAL 1997, VERSUS 7,856,000 FOR THE
SAME PERIOD IN 1996.
NORTON MCNAUGHTON, INC. DESIGNS, CONTRACTS FOR THE MANUFACTURE OF AND
MARKETS A BROAD LINE OF BRAND NAME, MODERATELY PRICED WOMEN'S CAREER AND CASUAL
CLOTHING. THE COMPANY'S PRODUCT LINES INCLUDE COLLECTIONS OF RELATED SEPARATES
COORDINATED BY COLOR AND STYLE, AS WELL AS CASUAL WEEKEND WEAR AND RELATED
KNITWEAR SEPARATES. FOUNDED IN 1981, THE COMPANY MARKETS ITS PRODUCTS UNDER ITS
NATIONALLY KNOWN LABELS, INCLUDING NORTON MCNAUGHTON(R), MAGGIE MCNAUGHTON(R),
MODIANO(R), DANIELLE PAIGE(TM), D.P.S.(R) AND NORTON STUDIO(R), AND UNDER
PRIVATE LABEL, INCLUDING LAUREN ALEXANDRA(R) AND PANT-HER(R).
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING INFORMATION ABOUT THE
COMPANY'S ANTICIPATED OPERATING RESULTS, INCLUDING FOLLOWING THE ACQUISITION OF
MISS ERIKA. THE COMPANY'S ABILITY, INCLUDING FOLLOWING THE ACQUISITION OF MISS
ERIKA, TO ACHIEVE ITS PROJECTED RESULTS IS DEPENDENT ON MANY FACTORS WHICH ARE
OUTSIDE OF MANAGEMENT'S CONTROL. SOME OF THE MOST SIGNIFICANT FACTORS, INCLUDING
FOLLOWING THE ACQUISITION OF MISS ERIKA, WOULD BE A FURTHER DETERIORATION IN
RETAILING CONDITIONS FOR WOMEN'S APPAREL, A FURTHER INCREASE IN PRICE PRESSURES
AND OTHER COMPETITIVE FACTORS, ANY OF WHICH COULD RESULT IN AN UNANTICIPATED
DECREASE IN GROSS PROFIT MARGINS, UNANTICIPATED PROBLEMS ARISING WITH MISS
ERIKA'S BUSINESS OR THE INTEGRATION OF MISS ERIKA'S BUSINESS WITH THAT OF THE
COMPANY, THE UNANTICIPATED LOSS OF A MAJOR CUSTOMER, THE UNANTICIPATED LOSS OF A
MAJOR CONTRACTOR OR SUPPLIER, AND WEATHER CONDITIONS WHICH COULD IMPACT RETAIL
TRAFFIC AND THE COMPANY'S ABILITY, INCLUDING FOLLOWING THE ACQUISITION OF MISS
ERIKA, TO SHIP ON A TIMELY BASIS. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THE COMPANY, INCLUDING FOLLOWING THE ACQUISITION OF MISS ERIKA, WILL ACHIEVE ITS
ANTICIPATED OPERATING RESULTS.
-FINANCIAL TABLE TO FOLLOW-
<PAGE> 4
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------- --------------------------
AUGUST 2, AUGUST 3, AUGUST 2, AUGUST 3,
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NET SALES $48,240 $48,261 $142,708 $148,107
COST OF GOODS
SOLD 37,463 37,051 113,672 117,037
------- ------- -------- --------
GROSS PROFIT 10,777 11,210 29,036 31,070
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 9,007 9,684 32,894 (a) 30,362
------- ------- -------- --------
INCOME (LOSS) FROM
OPERATIONS 1,770 1,526 (3,858) 708
OTHER EXPENSE (INCOME):
INTEREST EXPENSE 575 592 1,292 1,589
INTEREST INCOME (43) (42) (127) (121)
------- ------- -------- --------
INCOME (LOSS) BEFORE
PROVISION (BENEFIT) FOR
INCOME TAXES 1,238 976 (5,023) (760)
PROVISION (BENEFIT) FOR
INCOME TAXES 526 393 (2,227) (327)
------- ------- -------- --------
NET INCOME (LOSS) $ 712 $ 583 $ (2,796)(a) $ (433)
======= ======= ======== ========
PER SHARE DATA:
NET INCOME (LOSS) $ 0.10 $ 0.08 $ (0.37)(a) $ (0.06)
======= ======= ======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES AND
COMMON SHARES
EQUIVALENTS OUTSTANDING 7,414 7,654 7,520 7,856
======= ======= ======== ========
</TABLE>
(a) INCLUDES THE EFFECT OF A SPECIAL PRETAX CHARGE OF APPROXIMATELY $5.7
MILLION, OR $0.44 PER SHARE ON AN AFTER TAX BASIS TAKEN IN THE SECOND
QUARTER OF FISCAL 1997, IN CONNECTION WITH SEVERANCE PAYMENTS RESULTING
FROM MANAGEMENT CHANGES, THE TERMINATION OF CERTAIN LEASE OBLIGATIONS AND
THE ESTABLISHMENT OF RESERVES FOR CERTAIN CONTINGENCIES, INCLUDING THE
ANTICIPATED CLOSING OF THE NORTY'S RETAIL STORES. EXCLUDING THESE
CHARGES, EARNINGS PER SHARE FOR THE THIRTY-NINE WEEKS ENDED AUGUST 2,
1997 WOULD HAVE BEEN $0.07.
# # #
