<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(x) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 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 0-6708
Nautica Enterprises, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-2431048
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
40 West 57th Street, New York, N.Y. 10019
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212)541-5990
- --------------------------------------------------------------------------------
(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 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of Common Stock outstanding as of October 2, 1996
was 40,032,715.
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
AUGUST 31, 1996
(Unaudited)
INDEX
Page No.
Part I - Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
As at August 31, 1996 and February 29, 1996................. 2
Condensed Consolidated Statements of Earnings
For the Six and Three Month Periods Ended
August 31, 1996 and 1995.................................... 3
Condensed Consolidated Statements of Cash Flows
For the Six Month Periods Ended
August 31, 1996 and 1995.................................... 4
Notes to Condensed Consolidated Financial
Statements.................................................. 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................... 6
Part II - Other Information............................................ 9
<PAGE> 3
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
August 31, February 29,
ASSETS 1996 1996
------------------ ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 55,096,454 $ 61,047,522
Accounts receivable - net 67,790,733 45,704,169
Inventories 67,064,154 54,235,489
Prepaid expenses and other current assets 4,426,931 5,290,473
Deferred tax benefit 3,636,137 3,636,137
---------------- -------------
Total current assets 198,014,409 169,913,790
Property, plant and equipment, net of
accumulated depreciation and amortization 37,406,673 30,712,102
Other assets 9,516,597 8,713,957
---------------- -------------
$ 244,937,679 $ 209,339,849
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable - trade 25,350,700 15,440,362
Accrued expenses and other current liabilities 23,707,371 19,140,265
Income taxes payable 5,161,516 1,370,934
---------------- -------------
Total current liabilities 54,269,587 36,001,561
Long-term debt -net 150,000 200,000
Stockholders' equity:
Preferred stock - par value $.01, authorized,
2,000,000 shares; no shares issued
Common stock - par value $.10, authorized, 100,000,000 shares; issued
41,601,085 shares at August 31, 1996 and 41,354,806 shares at
February 29, 1996 4,160,108 4,135,480
Additional paid-in capital 53,445,850 52,836,972
Retained earnings 133,462,694 116,716,396
------------------ -----------------
191,068,652 173,688,848
Less:
Common stock in treasury - at cost;
1,570,070 shares at August 31, 1996
and February 29, 1996 550,560 550,560
------------------ -----------------
Total stockholders' equity 190,518,092 173,138,288
------------------ -----------------
$ 244,937,679 $ 209,339,849
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31, August 31,
------------------------------------ ------------------------------------
1996 1995 1996 1995
---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net Sales $ 179,480,714 $ 142,002,588 $ 103,342,954 $ 80,554,130
Cost of goods sold 97,783,152 79,851,107 56,263,198 45,115,750
---------------- ---------------- ----------------- ---------------
Gross profit 81,697,562 62,151,481 47,079,756 35,438,380
Selling, general and administrative expenses 56,583,019 44,702,968 29,540,472 23,185,871
Net royalty (income) (1,582,401) (787,261) (810,081) (374,811)
---------------- ---------------- ----------------- ---------------
Operating profit 26,696,944 18,235,774 18,349,365 12,627,320
Interest income, net 1,213,554 1,270,332 509,124 558,566
---------------- ---------------- ----------------- ---------------
Earnings before provision for income taxes 27,910,498 19,506,106 18,858,489 13,185,886
Provision for income taxes 11,164,200 7,802,448 7,543,400 5,275,283
---------------- ---------------- ----------------- ---------------
Net earnings $ 16,746,298 $ 11,703,658 $ 11,315,089 $ 7,910,603
================ ================ ================= ===============
Earnings per share of common stock $ 0.39 $ 0.28 $ 0.26 $ 0.19
================ ================ ================= ===============
Weighted average number of shares of
common stock outstanding 43,026,414 42,409,254 43,018,171 42,398,670
================ ================ ================= ===============
Cash dividends per common share none none none none
================ ================ ================= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 5
Nautica ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
August 31,
--------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 16,746,298 $ 11,703,658
----------------- -----------------
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,124,545 2,244,675
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:
Accounts receivable, net (22,086,564) (16,237,666)
Inventories (12,828,665) (17,834,503)
Prepaid expenses and other current assets 863,542 1,598,647
Other assets (1,062,068) (173,896)
Accounts payable 9,910,338 3,733,754
Accrued expenses and other current liabilities 4,567,106 2,901,430
Income taxes payable 3,790,582 2,224,034
----------------- -----------------
Total adjustments (13,721,184) (21,543,525)
----------------- -----------------
Net cash provided by (used in) operating activities 3,025,114 (9,839,867)
----------------- -----------------
Cash flows from investing activities:
Purchase of property, plant and equipment (9,559,688) (5,765,478)
----------------- -----------------
Net Cash used in investing activities (9,559,688) (5,765,478)
----------------- -----------------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) (50,000)
Proceeds from issuance of common stock 633,506 531,412
----------------- -----------------
Net cash provided by financing activities 583,506 481,412
----------------- -----------------
Decrease in cash and cash equivalents (5,951,068) (15,123,933)
Cash and cash equivalents at beginning of period 61,047,522 49,153,556
================= =================
Cash and cash equivalents at end of period $ 55,096,454 $ 34,029,623
================= =================
Supplemental Information:
Cash payments for the periods ended:
Interest expense $ 4,489 $ 5,400
================= =================
Income taxes $ 7,374,513 $ 6,425,853
================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 6
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996
(Unaudited)
NOTE 1- The accompanying financial statements have been prepared
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. These statements include all
adjustments, consisting only of normal recurring accruals,
considered necessary for a fair presentation of financial
position and results of operations. The financial statements
included herein should be read in conjunction with the
financial statements and notes thereto included in the latest
annual report on Form 10-K.
NOTE 2- The results of operations for the six and three month
periods ended August 31, 1996 and 1995 are not necessarily
indicative of the results to be expected for the full year.
NOTE 3- The Company utilized the last-in, first-out "Lifo" method
for inventories as at August 31, 1996 and February 29, 1996
and for the six and three month periods ended August 31,
1996 and 1995. The "Lifo" inventory for the six and three
month periods ended August 31, 1996 and 1995 are based upon
end of year estimates. Inventories at August 31, 1996 and
February 29, 1996 consist primarily of finished goods.
NOTE 4- On April 29, 1996 the Board of Directors declared a
two-for-one stock split of the Company's common stock effected
in the form of a stock dividend paid on May 28, 1996 to the
stockholders of record on May 13, 1996. All share and per
share data have been adjusted to reflect the stock split.
- 5 -
<PAGE> 7
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AUGUST 31, 1996
(Unaudited)
RESULTS OF OPERATIONS
For the Six Months Ended August 31, 1996:
Consolidated net sales increased 26.4% to $179.5 million in the six
months ended August 31, 1996 as compared to $142.0 million in the comparable
prior year period. The increase is due primarily to increased sales of Nautica
products through its wholesale and retail operations. Nautica's wholesale sales
increased primarily due to the expansion of Nautica's in-store shop program,
sales to new retail customers and to additional locations of existing customers.
The increase in Nautica's wholesale sales is primarily due to increased unit
volume rather than price increases. The increase in retail sales is attributable
to the opening of new stores and to an increase in comparable store sales.
Consolidated gross profit increased in the six months ended August 31,
1996 to 45.5% of net sales, as compared to 43.8% in the comparable prior year
period. The net increase resulted primarily from a shift to the higher margin
Nautica wholesale products and to an increase in retail operations.
Selling, general and administrative expenses as a percentage of net
sales remained constant at 31.5% for the six months ended August 31, 1996 as
compared to the prior year period.
Net royalty income increased by $795,000 in the six months ended August
31, 1996 as compared to the comparable prior year period. The increase is a
result of increased royalty revenue from new and existing licenses.
Higher cash balances offset by a lower rate of return on investments
resulted in comparable interest income during the period.
The provision for income taxes remained constant at 40.0% of earnings
before income taxes for the six month period ended August 31, 1996 as compared
to the comparable prior year period.
Net earnings increased 43.1% to $16.7 million in the six months ended
August 31, 1996 from $11.7 million in the comparable prior year period as a
result of the factors discussed above.
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<PAGE> 8
For the Three Months Ended August 31, 1996:
Consolidated net sales increased 28.3% to $103.3 million in the three
months ended August 31, 1996 as compared to $80.6 million in the comparable
prior year period. The increase is due primarily to increased sales of Nautica
products through its wholesale and retail operations. Nautica's wholesale sales
increased primarily due to the expansion of Nautica's in-store shop program,
sales to new retail customers and to additional locations of existing customers.
The increase in Nautica's wholesale sales is primarily due to increased unit
volume rather than price increases. The increase in retail sales is attributable
to the opening of new stores and to an increase in comparable store sales.
Consolidated gross profit increased in the three months ended August
31, 1996 to 45.6% of net sales, as compared to 44.0% in the comparable prior
year period. The net increase resulted primarily from a shift to the higher
margin Nautica wholesale products and to an increase in retail operations.
Selling, general and administrative expenses as a percentage of net
sales decreased to 28.6% in the three months ended August 31, 1996 as compared
to 28.8% in the comparable prior year period. The decrease as a percentage of
net sales resulted from economies of scale achieved with sales growth.
Net royalty income increased by $435,000 in the three months ended
August 31, 1996 as compared to the comparable prior year period. The increase is
a result of increased royalty revenue from new and existing licenses.
Higher cash balances offset by a lower rate of return on investments
resulted in comparable interest income during the period.
The provision for income taxes remained constant at 40.0% of earnings
before income taxes for the three month period ended August 31, 1996 as compared
to the comparable prior year period.
Net earnings increased 43.0% to $11.3 million in the three months ended
August 31, 1996 from $7.9 million in the comparable prior year period as a
result of the factors discussed above.
- 7 -
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended August 31, 1996, the Company generated cash
from operating activities of approximately $3.0 million. Increases in accounts
receivable and inventory of $22.1 and $12.8 million, respectively, resulting
from increased sales levels, were financed by cash generated from net earnings,
increases in accounts payable, accrued expenses and income taxes payable. During
the six months ended August 31, 1995, the Company used cash in its operating
activities of approximately $9.8 million. The cash used was principally
attributable to increases in accounts receivable and inventory of $16.2 and
$17.8 million, respectively, which were offset by net earnings of $11.7 million
plus increases in accounts payable, accrued expenses and income taxes payable
aggregating $8.9 million. The increase in inventory is primarily the result of
stocking more basic inventory to fill EDI orders resulting from increased demand
for the anchor group of Nautica products and to fill increased orders for
shipments to be made in the future. Accounts receivable increases were primarily
due to increased sales and normal seasonality.
During the six months ended August 31, 1996, the Company's principal
investing activities related to the expansion of the Company's warehouse and
distribution facilities and the continued expansion of Nautica in-store shops.
Expenditures for the Company's warehouse and distribution facilities are
substantially completed. The Company expects to continue to incur capital
expenditures to expand the in-store shop programs. At August 31, 1996 there were
no other material commitments for capital expenditures.
The Company has $80.0 million in lines of credit with two commercial
banks available for short-term borrowings and letters of credit. These lines are
collateralized by wholesale inventory and accounts receivable. At August 31,
1996 and February 29, 1996, respectively, letters of credit outstanding under
the lines were $51.2 million and $32.5 million and there were no short-term
borrowings outstanding.
Historically, the Company has experienced its lowest level of sale's in
the first quarter and its highest level in the third quarter. This pattern has
resulted primarily from the timing of shipments to retail customers for spring
and fall seasons. In the future, the timing of seasonal shipments may vary by
quarter.
INFLATION AND CURRENCY FLUCTUATIONS
The Company believes that inflation and the effect of fluctuations of
the dollar against foreign currencies has not had a material effect on the cost
of imports or the Company's results of operations.
- 8 -
<PAGE> 10
PART II
OTHER INFORMATION
Items 1 through 9. - All items are inapplicable except:
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Annual Meeting of Stockholders of Nautica Enterprises, Inc. was
held on July 1, 1996.
(b) The directors named in the Proxy Statement constituting the entire
Board of Directors were elected to one year terms expiring in 1997, as
follows:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Harvey Sanders 34,380,672 205,590
David Chu 34,380,750 205,512
George Greenberg 34,380,472 205,790
Robert B. Bank 34,371,776 214,486
Israel Rosenzweig 34,380,750 205,512
Charles Scherer 34,380,414 205,848
Ronald G. Weiner 34,380,414 205,848
</TABLE>
(c) At the Annual Meeting, the stockholders voted upon a proposal to amend
the Company's Certificate of Incorporation to increase the authorized
shares of Common Stock from 50,000,000 to 100,000,000, as follows:
<TABLE>
<S> <C>
For the proposal 32,110,006
Against the proposal 2,351,288
Withheld 79,882
Broker non-vote 45,086
</TABLE>
(d) At the Annual Meeting, the stockholders voted upon a proposal to adopt
the Nautica Enterprises, Inc. 1996 Stock Incentive Plan, as follows:
<TABLE>
<S> <C>
For the proposal 16,305,236
Against the proposal 15,097,378
Withheld 100,096
Broker non-vote 3,083,552
</TABLE>
The Notice of Annual Meeting of Stockholders and Proxy Statement for Nautica
Enterprises, Inc. dated June 3, 1996 was filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Act and is incorporated herein
by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K. None
- 9 -
<PAGE> 11
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.
NAUTICA ENTERPRISES, INC.
Date: October 7, 1996 By: /s/ Harvey Sanders
----------------------------------
Harvey Sanders
Chairman of the Board
and President
Date: October 7, 1996 By: /s/ Neal S. Nackman
---------------------------------
Neal S. Nackman
V.P. Finance and
Chief Accounting Officer
- 10 -
<PAGE> 12
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF THE
COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<CASH> 55,096,454
<SECURITIES> 0
<RECEIVABLES> 69,109,376
<ALLOWANCES> (1,318,643)
<INVENTORY> 67,064,154
<CURRENT-ASSETS> 198,014,409
<PP&E> 51,282,543
<DEPRECIATION> (13,875,870)
<TOTAL-ASSETS> 244,937,679
<CURRENT-LIABILITIES> 54,269,587
<BONDS> 150,000
0
0
<COMMON> 4,160,108
<OTHER-SE> 186,357,984
<TOTAL-LIABILITY-AND-EQUITY> 244,937,679
<SALES> 179,480,714
<TOTAL-REVENUES> 181,063,115
<CGS> 97,783,152
<TOTAL-COSTS> 97,783,152
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,910,498
<INCOME-TAX> 11,164,200
<INCOME-CONTINUING> 16,746,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,746,298
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
