<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 quarter ended June 30, 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: 0-24176
Marisa Christina, Incorporated
(Exact name of registrant as specified in its charter)
Delaware 11-3216809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
415 Second Avenue New Hyde Park, New York 11040
(Address of principal executive offices) (Zip Code)
(516) 352-5050
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the Company's Common Stock on July 31,
1996 were 8,384,769.
<PAGE> 2
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1995
and June 30, 1996 (Unaudited) 2
Consolidated Statements of Earnings for the Three and Six Months
Ended June 30, 1995 and 1996 (Unaudited) 3
Consolidated Statement of Stockholders' Equity for the Six Months
Ended June 30, 1996 (Unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1995 and 1996 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 5. Other Matters
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1995 (1) 1996
-------- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $20,512,918 $ 1,054,082
Accounts receivable, less allowance for doubtful
accounts of $136,199 in 1995 and $111,820
in 1996 12,055,079 11,334,982
Inventories 9,325,223 10,461,592
Prepaid income taxes -- 1,021,500
Prepaid expenses and other current assets 1,553,225 4,033,199
----------- -----------
Total current assets 43,446,445 27,905,355
Property and equipment, net 2,181,767 2,789,474
Goodwill, less accumulated amortization of $990,473
in 1995 and $1,887,544 in 1996 8,038,798 33,837,721
Other assets 342,429 1,253,660
----------- -----------
Total assets $54,009,439 $65,786,210
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ -- $ 6,949,798
Accounts payable 5,504,140 5,259,915
Income taxes payable 757,101 --
Accrued expenses and other current liabilities 1,397,335 2,030,155
----------- -----------
Total current liabilities 7,658,576 14,239,868
Other liabilities 128,000 128,000
----------- -----------
Total liabilities 7,786,576 14,367,868
----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value; 15,000,000 shares
authorized, 8,434,250 shares in 1995 and 8,586,769
in 1996 issued and outstanding 84,343 85,868
Additional paid-in capital 29,084,978 31,653,186
Retained earnings 17,036,930 19,662,676
Cumulative translation adjustment 16,612 16,612
----------- -----------
Total stockholders' equity 46,222,863 51,418,342
----------- -----------
Total liabilities and stockholders' equity $54,009,439 $65,786,210
=========== ===========
</TABLE>
(1) Amounts were derived from the audited consolidated balance sheet as of
December 31, 1995.
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 11,547,500 $ 21,386,789 $ 31,027,956 $ 49,648,695
Cost of goods sold 7,273,536 14,109,519 18,955,518 32,056,910
------------ ------------ ------------ ------------
Gross profit 4,273,964 7,277,270 12,072,438 17,591,785
Selling, general and administrative
expenses 3,979,157 6,810,841 8,280,584 13,901,388
------------ ------------ ------------ ------------
Operating earnings 294,807 466,429 3,791,854 3,690,397
Other income, net 308,715 399,553 589,646 918,316
Interest income (expense), net 209,981 (214,148) 374,386 (356,152)
------------ ------------ ------------ ------------
Earnings before provision
for income taxes 813,503 651,834 4,755,886 4,252,561
Provision for income taxes 280,905 224,331 1,884,402 1,626,815
------------ ------------ ------------ ------------
Net earnings $ 532,598 $ 427,503 $ 2,871,484 $ 2,625,746
============ ============ ============ ============
Weighted average shares
outstanding 8,434,000 8,586,058 8,434,000 8,584,050
============ ============ ============ ============
Earnings per share $ .06 $ .05 $ .34 $ .31
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995 8,434,250 $ 84,343 $29,084,978 $17,036,930 $ 16,612 $46,222,863
Issuance of common
stock in acquisition
of Adrienne Vittadini,
Inc. 147,679 1,477 2,498,523 -- -- 2,500,000
Proceeds from exercise
of stock options 4,840 48 62,872 -- -- 62,920
Other -- -- 6,813 -- -- 6,813
Net earnings for the six
months ended
June 30, 1996 -- -- -- 2,625,746 -- 2,625,746
--------- --------- ----------- ----------- ---------- -----------
Balance at June 30,
1996 8,586,769 $ 85,868 $31,653,186 $19,662,676 $ 16,612 $51,418,342
========= ========= =========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,871,484 $ 2,625,746
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization 410,463 1,268,499
Provision for doubtful accounts 42,025 160,037
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (2,155,441) 1,810,421
(Increase) decrease in inventories (988,286) 1,359,013
Increase in prepaid expenses and other current
assets (297,588) (1,617,027)
Increase in prepaid income taxes (1,040,867) (1,021,500)
(Increase) decrease in other assets 34,811 (24,319)
Increase (decrease) in accounts payable 601,590 (3,537,571)
Increase (decrease) in accrued expenses and
other current liabilities 176,404 (4,373,534)
(Decrease) in income taxes payable -- (757,101)
------------ ------------
Net cash used by operating activities (345,405) (4,107,336)
------------ ------------
Cash flows used in investing activities:
Acquisitions of property and equipment (266,676) (330,118)
Acquisition of Adrienne Vittadini, Inc. net of cash
acquired (note 3) -- (17,804,994)
------------ ------------
Net cash used in investing activities (266,676) (18,135,112)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 62,920
Borrowings from banks, net -- 2,718,761
Other (7,204) 1,931
------------ ------------
Net cash provided by (used in) financing activities (7,204) 2,783,612
------------ ------------
Net decrease in cash (619,285) (19,458,836)
Cash at beginning of period 10,832,472 20,512,918
------------ ------------
Cash at end of period $ 10,213,187 $ 1,054,082
============ ============
Cash paid during the period for:
Income taxes $ 3,065,738 $ 3,338,058
============ ============
Interest $ 1,074 $ 423,964
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION AND REORGANIZATION
The accompanying unaudited consolidated financial statements include the
accounts of Marisa Christina, Incorporated (the "Company") and its wholly-owned
subsidiaries. Significant intercompany accounts and transactions are eliminated
in consolidation.
The unaudited consolidated financial statements do not include all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. For
further information, such as the significant accounting policies followed by the
Company, refer to the notes to the Company's audited consolidated financial
statements.
In the opinion of management, the unaudited consolidated financial
statements include all necessary adjustments (consisting of normal, recurring
accruals), for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. The results of
operations for the six months ended June 30, 1995 and 1996 are not necessarily
indicative of the operating results to be expected for a full year.
(2) INVENTORIES
Inventories at December 31, 1995 and June 30, 1996 consist of the
following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Piece goods $ 2,624,956 $ 3,330,745
Work in process 1,528,643 1,366,426
Finished goods 5,171,624 5,764,421
----------- -----------
$ 9,325,223 $10,461,592
=========== ===========
</TABLE>
(3) ACQUISITION OF ADRIENNE VITTADINI, INC.
On January 18, 1996, the Company acquired, through a newly formed
subsidiary, Adrienne Vittadini Enterprises, Inc. ("AVE"), substantially all of
the assets and assumed certain liabilities of Adrienne Vittadini, Inc. ("AVI")
and acquired the trademarks of Vittadini, Ltd., which relate to the business and
operations of AVI for cash in the aggregate of $18,830,000 and 147,679 shares of
the Company's common stock valued at $2,500,000. Additional consideration may be
paid to AVI by the Company based upon profitability achieved by AVE in 1998 and
2000, up to a maximum additional purchase price of $39 million. For the six-year
period beginning January 1, 1996, the Company will pay AVI 10% of net royalty
and commission income received by AVE plus 10% of net earnings before interest,
income taxes and amortization of goodwill of AVE over $3,000,000 per year. In
addition, upon retirement of the two majority shareholders of AVI from the
Company, AVI will receive, in the aggregate, royalties equal to .825% of net
sales of AVE and its trademark licensees for a period ending on the latter of
December 31, 2005 or five years after the death of the last such shareholder.
6
<PAGE> 8
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
The acquisition occurred on January 18, 1996, but was based on asset
values at December 31, 1995. Accordingly, operating results related to the AVI
assets acquired commenced on January 1, 1996 and are consolidated with those of
the Company from that date forward. The acquisition has been accounted for using
the purchase method of accounting. Amounts payable to AVI based on net sales
will be charged to earnings annually. Contingent consideration payable based on
1998 and 2000 results of AVE will be considered as part of the purchase price
and allocated to goodwill.
The aggregate initial purchase price for the assets of AVI is as follows:
<TABLE>
<S> <C>
Cash paid to AVI $10,080,000
Cash used to retire supplier note payable 8,750,000
Fair value, based on quoted market price,
of 147,679 shares of the Company's
common stock issued to AVI 2,500,000
Liabilities assumed 11,535,619
Transaction costs 1,000,000
-----------
Initial purchase price $33,865,619
===========
</TABLE>
The Company funded the cash portion of the initial purchase price with
accumulated cash reserves.
The initial purchase price was allocated to the assets acquired based on
their fair value as follows:
<TABLE>
<S> <C>
Cash $ 1,025,006
Accounts receivable 1,250,361
Inventory 2,495,382
Prepaid expenses and other current assets 862,947
Property and equipment 649,016
Goodwill and other intangible assets 26,695,995
Other assets 886,912
-----------
Initial purchase price $33,865,619
===========
</TABLE>
7
<PAGE> 9
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
Pro forma consolidated net sales, net earnings (loss) and earnings (loss)
per share for the three and six months ended June 30, 1995 assuming the
acquisition had occurred on January 1, 1995 are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, 1995 June 30, 1995
------------- -------------
<S> <C> <C>
Net sales $16,019,000 $40,559,000
=========== ===========
Net earnings (loss) $ (495,000) $ 1,111,000
=========== ===========
Earnings (loss) per common share $ (.06) $ .13
=========== ===========
</TABLE>
(4) CREDIT FACILITIES
The Company has a $20,000,000 line of credit facility with a bank which
may be utilized for commercial letters of credit, banker's acceptances,
commercial loans and letters of indemnity. Borrowings under the credit facility
are secured by the Company's accounts receivable and imported inventory and bear
interest at the bank's prime rate. As of June 30, 1996, outstanding commercial
letters of credit and loans amounted to $5,451,424 and available borrowings
under the facility were $14,548,576.
In connection with the acquisition of the assets of Adrienne Vittadini,
Inc., described in note 3, AVE assumed and retained a credit facility and
factoring arrangement whereby AVE assigns and sells substantially all of its
trade accounts receivable to a bank, without recourse as to credit risk but with
recourse for any claims by the customer for adjustments in the normal course of
business. The credit facility provides for the bank, at AVE's request and the
bank's discretion, to make advances to AVE, subject to the bank's right to
withhold reserves. Such advances and letters of credit amounted to $8,255,310 at
June 30, 1996. Advances bear interest at an annual rate equal to the bank's
prime rate. Such advances are collateralized by all of AVE's assets and a
guarantee of the Company. Amounts outstanding under the factoring arrangement
and borrowed under the credit facility cannot exceed $15 million.
(5) SUBSEQUENT EVENT
Subsequent to June 30, 1996, the Company acquired 202,000 shares of its
common stock for an aggregate purchase price of $1,954,350, which it intends to
hold in treasury.
8
<PAGE> 10
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On January 18, 1996, the Company acquired, through a newly formed
subsidiary, Adrienne Vittadini Enterprises, Inc. ("AVE"), substantially all of
the assets and assumed certain liabilities of Adrienne Vittadini, Inc. ("AVI")
and acquired the trademarks of Vittadini, Ltd., which relate to the business and
operations of AVI for cash in the aggregate of $18,830,000 and 147,679 shares of
the Company's common stock valued at $2,500,000. Additional consideration may be
paid to AVI by the Company based upon profitability achieved by AVE in 1998 and
2000, up to a maximum additional purchase price of $39 million. The acquisition
occurred on January 18, 1996, but was based on asset values at December 31,
1995. Operating results related to the AVI assets acquired on January 1, 1996
are consolidated with those of the Company from that date forward. Accordingly,
results for the three and six months ended June 30, 1996 are not directly
comparable to those for the three and six months ended June 30, 1995. (See note
3 to consolidated financial statements).
In a press release dated July 10, 1996, the Company noted that it has
revised its outlook for the remainder of the year due to difficult market
conditions, which have affected both the sales and margins of the Marisa
Christina Apparel Division.
The following table sets forth information with respect to the percentage
relationship to net sales of certain items of the consolidated statements of
earnings of the Company for the three and six months periods ended June 30, 1995
and 1996.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- --------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Gross profit 37.0 34.0 38.9 35.4
Selling, general and administrative expenses 34.5 31.8 26.7 28.0
----- ----- ----- -----
Operating earnings 2.5 2.2 12.2 7.4
Other income, net 2.7 1.9 1.9 1.9
Interest income (expense), net 1.8 (1.0) 1.2 (.7)
Provision for income taxes (2.4) (1.1) (6.1) (3.3)
----- ----- ----- -----
Pro forma net earnings 4.6% 2.0% 9.2% 5.3%
===== ===== ===== =====
</TABLE>
9
<PAGE> 11
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Net sales. Net sales increased 86%, from $11.5 million in 1995 to $21.4
million in 1996. This increase was primarily attributable to $13.5 million of
sales by AVE, which was acquired in January 1996. Sales by Marisa Christina
declined in the quarter principally due to the timing of shipment between the
first and second quarter and a poor retail environment. This decline was offset
by increased sales by Flapdoodles primary as the result of new private label
accounts.
Gross Profit. Gross profit increased 69.8%, from $4.3 million in 1995 to
$7.3 million in 1996. As a percentage of net sales, gross profit decreased from
37.0% in 1995 to 34.0% in 1996. The decline in the gross profit percentage for
the quarter was attributable to increased sales of lower margin merchandise at
Flapdoodles and lower margins due to markdowns at Marisa Christina as a result
of the poor retail environment.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 70.0%, from $4.0 million in 1995 to $6.8
million in 1996. Selling, general and administrative expenses related to AVE
represent $2.7 million of the increase. As a percentage of net sales of the
Company, selling, general and administrative expenses decreased from 34.5% in
1995 to 31.8% in 1996 due to the increased volume of sales without a
corresponding increase in administrative expenses.
Other Income, Net. Other income, net consists of royalty, licensing and
copyright infringement income. Other income increased by $91,000 in 1996
compared to 1995 as the result of AVE which had royalty income of $292,000. This
more than offset the Company's decline in copyright infringement income. During
the three months ended June 30, 1996 the Company had copyright infringement
income of $13,000 compared to $237,000 in 1995. The timing and amount of income
from copyright infringements, if any, is not reasonably predicable by
management.
Interest Income (Expense), net. Interest income (expense), net changed
from income of $210,000 in 1995 to expense of $214,000 in 1996 as a result of
less cash available to invest due to the AVI acquisition as well as interest
expense related to bank loans.
Income Taxes. Income taxes decreased from $281,000 in 1995 to $224,000 in
1996 as the result of lower earnings. The Company effective income tax rate for
the three months ended June 30, 1996 was 34.4% compared to 34.5% during the same
period in 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales increased 60.0%, from $31.0 million in 1995 to $49.6
million in 1996. This increase was primarily attributable to sales by AVE of
$17.0 million, which was acquired in January 1996. Net sales excluding AVE were
$32.6 million. An increase in sales by Flapdoodles primarily attributable to
increased the sales of private label products, more than offset a sales decline
by Marisa Christina.
Gross Profit. Gross profit increased 45.5%, from $12.1 million in 1995 to
$35.4 million in 1996. As a percentage of net sales, gross profit decreased from
38.9% in 1995 to 35.4% in 1996. The decline in the gross profit percentage was
attributable to increased sales of lower margin merchandise at Flapdoodles and
lower margins due to markdowns at Marisa Christina as a result of the poor
retail environment.
10
<PAGE> 12
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 67.5%, from $8.3 million in 1996 to $13.9
million in 1996. Selling, general and administrative expenses related to AVE
represent $5.2 million of the increase. As a percentage of net sales of the
Company, selling, general and administrative expenses increased from 26.7% in
1995 to 28.0% in 1996. This increase is primarily attributable to the
amortization of $667,000 of goodwill recorded in the AVI acquisition.
Other Income, Net. Other income, net consists of royalty, licensing and
copyright infringement income. Other income increased by $329,000 in 1996,
compared to 1995 as the result of AVE which had $748,000 of royalty income. This
more than offset the Company's decline in copyright infringement income. During
the six months ended June 30, 1996 and 1995, the Company received $40,000 and
$459,000, respectively from settlements of copyright infringement cases. The
timing and amount of future settlements, if any, are not predictable by
management.
Interest Income (Expense), net. Interest income (expense), net changed
from income of $374,000 in 1995 to expense of $356,000 in 1996 as the result of
less cash available to invest due to the AVI acquisition as well as interest
expenses related to bank loans.
Income Taxes. Income taxes decreased from $1.9 million in 1995 to $1.7
million in 1996 as the result of lower earnings. The Company's effective income
tax rate for the six months ended June 30, 1996 was 38.3% compared to 39.6%
during the same period in 1995.
SEASONALITY
The Company's business is seasonal, with a substantial portion of its
revenues and earnings accruing during the second half of the year as a result of
the Back-to-School, Fall and Holiday selling seasons. This is due to both a
larger volume of unit sales in these seasons and traditionally higher prices for
these garments, which generally require more costly materials than the
Spring/Summer and Resort seasons. Merchandise from Holiday and Fall, the
Company's largest seasons, are shipped in the last two fiscal quarters.
Merchandise for Resort, Spring/Summer and Early Fall, the Company's lower volume
seasons, are all shipped primarily in the first two quarters. Sales volume is
typically the lowest in the second quarter with shipments for the Fall season
beginning in the last days of the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The AVI acquisition was funded with approximately $17 million existing
cash resources of the Company. In addition the Company has a $20,000,000 credit
facility with a bank and AVE has a credit facility and factoring arrangement
with a bank based upon a formula amount not to exceed $15,000,000.
The Company's $20,000,000 line of credit facility with a bank may be
utilized for commercial letters of credit, banker's acceptances, commercial
loans and letters of indemnity. Borrowings under the credit facility are secured
by the Company's accounts receivable and imported inventory and bear interest at
the bank's prime rate. As of June 30, 1996, outstanding commercial letters of
credit and loans amounted to $5,451,424 and available borrowings under the
facility were $14,548,576.
11
<PAGE> 13
During 1996, the Company has planned capital expenditures of approximately
$1,000,000, primarily to upgrade computer systems. These capital expenditures
will be funded by internally generated funds and, if necessary, bank borrowings
under the Company's line of credit facility. Capital expenditures during the six
months ended June 30, 1996 were approximately $330,000.
The Company believes that funds generated by operations, if any, and the
bank credit facilities will provide financial resources sufficient to meet all
of its foreseeable working capital and letter of credit requirements.
EXCHANGE RATES
Although it is the Company's policy to contract for the purchase of
imported merchandise in United States dollars, reductions in the value of the
dollar could result in Company paying higher prices for its products. During the
last three fiscal years, however, currency fluctuations have not had an impact
on the Company's cost of merchandise. The Company does not engage in hedging
activities with respect to such exchange rate risk.
12
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings required to be disclosed in response to Item 103
of Regulation S-K.
ITEM 5. OTHER MATTERS
Except for historical information contained herein, the statements in this
release are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, among others, risks
associated with the receipt and timing of future customer orders, price
pressures and other competitive factors and a softening of retailer or consumer
acceptance of the Company's products leading to a decrease in anticipated
revenues and gross profit margins. Those and other risks are described in the
Company's filings with the Securities and Exchange Commission (SEC), copies of
which are available from the SEC or may be obtained upon request from the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule.
Exhibit 28 Press release dated July 10, 1996.
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
13
<PAGE> 15
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.
Date: August 12, 1996 /s/ S. E. Melvin Hecht
----------------------- -------------------------------------
S. E. Melvin Hecht
Chief Financial Officer and Treasurer
14
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
EX-28 Press Release
EX-27 Financial Data Schedule
<PAGE> 1
Exhibit 28
FOR: Marisa Christina, Inc.
APPROVED BY: Michael Lerner
Chairman and Chief Executive
Officer
Melvin Hecht
Chief Financial Officer
(212) 221-5770
For Immediate Release
CONTACT: Investor Relations:
June Filingeri/Howard Zar/
Shannon Moody
Press: Stacy Berns/Michael McMullan
Morgen-Walke Associates
(212) 850-5600
MARISA CHRISTINA, INC. REPORTS PRELIMINARY SECOND QUARTER RESULTS
AND OUTLOOK FOR 1996
New York, New York, July 10, 1996 -- Marisa Christina, Inc.
(Nasdaq:MRSA) today announced that it expects to report second quarter 1996 net
income of approximately $400,000, or $0.05 per share, on approximately $20
million of net sales, in line with analysts' expectations. This compares to net
income of $533,000, or $0.06 per share, on net sales of $11.5 million in the
second quarter of 1995.
Further, the Company noted that it has revised its outlook for the
remainder of the year due to difficult market conditions, which have affected
both the sales and margins of its Marisa Christina Apparel Division.
Accordingly, the Company expects 1996 net income to be in the range of $7.3
million to $8.2 million, or $0.85 to $0.95 per share, on net sales of
approximately $115 million to $118 million. This compares to 1995 net income of
$10.1 million, or $1.20 per share, on net sales of $86.8 million.
Michael Lerner, Chairman of the Board and Chief Executive Officer
noted, "While we have only partially completed bookings for the second half of
the
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<PAGE> 2
MRSA -- REPORTS PRELIMINARY SECOND QUARTER RESULTS PAGE: 2
year, we believe it prudent to offer a revised outlook based on current order
patterns for the Holiday season. Our Marisa Christina line is being adversely
affected by recent major introductions of brand-name lines in "better"
departments of major retailers. Additionally, demand has shifted from hand-knit
sweaters to other products and this change has negatively impacted Marisa
Christina's bookings. Partially offsetting this is continued double digit
increase in demand for our Adrienne Vittadini and Flapdoodles lines."
Mr. Lerner continued, "We are focussing on several opportunities for
Marisa Christina including the addition of new cleaner casual styles with unique
yarns and fabric textures as well as enhancing the brand recognition of the
Marisa Christina name. This is a lesson we have learned from our early success
with Adrienne Vittadini."
Mr. Lerner concluded, "At this early date, based on current
information, we believe it is possible that our historic 20% bottom line growth
will be restarted in 1997. Our deep confidence in our business and its long-term
outlook remains unchanged. Based on this confidence, the Company confirms its
previously announced open-market stock purchase program for its common stock."
Safe harbor for forward-looking statements: Except for historical
information contained herein, the statements in this release are forward-looking
statements that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties which may cause the
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<PAGE> 3
MRSA -- REPORTS PRELIMINARY SECOND QUARTER RESULTS PAGE: 3
Company's actual results in future periods to differ materially from forecasted
results. Those risks include, among others, risks associated with the receipt
and timing of future customer orders, price pressures and other competitive
factors and a softening of retailer or consumer acceptance of the Company's
products leading to a decrease in anticipated revenues and gross profit margins.
Those and other risks are described in the Company's filings with the Securities
and Exchange Commission (SEC), copies of which are available from the SEC or may
be obtained upon request from the Company.
Marisa Christina, Inc. designs, manufactures, sources and markets a
broad line of high quality "better" and "bridge" clothing for women and
children. The Marisa Christina label includes sweaters characterized by classic,
timeless styling and unique details. Flapdoodles apparel consists of casual
children's and infant's sportswear, swimwear, and outerwear featuring vibrant
colors, all-natural fabrics and unique patterns. The Adrienne Vittadini line
includes women's knit-oriented casual coordinates and licensed products
characterized by distinctive and elegant designer styling.
# # #
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM MARISA CHRISTINA, INC.
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF
EARNINGS FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,054,082
<SECURITIES> 0
<RECEIVABLES> 11,446,802
<ALLOWANCES> 111,820
<INVENTORY> 10,461,592
<CURRENT-ASSETS> 27,905,355
<PP&E> 5,692,313
<DEPRECIATION> 2,902,839
<TOTAL-ASSETS> 65,786,210
<CURRENT-LIABILITIES> 14,239,868
<BONDS> 0
0
0
<COMMON> 85,868
<OTHER-SE> 51,332,474
<TOTAL-LIABILITY-AND-EQUITY> 65,786,210
<SALES> 49,648,695
<CGS> 32,056,910
<TOTAL-REVENUES> 49,648,695
<TOTAL-COSTS> 13,741,351
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 160,037
<INTEREST-EXPENSE> 356,152
<INCOME-PRETAX> 4,252,561
<INCOME-TAX> 1,626,815
<INCOME-CONTINUING> 2,625,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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