<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 May 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
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Commission file number 0-6708
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Nautica Enterprises, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-2431048
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
40 West 57th Street, New York, N.Y. 10019
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212)541-5990
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(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 July 3, 1996 was
39,949,162.
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MAY 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
INDEX
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Page No.
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<S> <C>
Part I - Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
As at May 31, 1996 and February 29, 1996.......................................................... 2
Condensed Consolidated Statements of Earnings
For the Three Month Periods Ended
May 31, 1996 and 1995............................................................................ 3
Condensed Consolidated Statements of Cash Flows
For the Three Month Periods Ended
May 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.................................................................................. 8
</TABLE>
<PAGE> 3
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS
May 31, February 29,
1996 1996
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 65,843,003 $ 61,047,522
Accounts receivable - net 43,320,371 45,704,169
Inventories 65,520,529 54,235,489
Prepaid expenses and other current assets 4,110,561 5,290,473
Deferred tax benefit 3,636,137 3,636,137
------------ ------------
Total current assets 182,430,601 169,913,790
Property, plant and equipment, net of
accumulated depreciation and amortization 33,326,391 30,712,102
Other assets 8,838,523 8,713,957
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$224,595,515 $209,339,849
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable - trade 22,812,761 15,440,362
Accrued expenses and other current liabilities 19,618,494 19,140,265
Income taxes payable 2,980,850 1,370,934
------------ ------------
Total current liabilities 45,462,105 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 41,498,732 shares
at May 31, 1996 and 41,354,806 shares at
February 29, 1996 4,149,873 4,135,480
Additional paid-in capital 53,236,492 52,836,972
Retained earnings 122,147,605 116,716,396
------------ ------------
179,533,970 173,688,848
Less:
Common stock in treasury - at cost;
1,570,070 shares at May 31, 1996
and February 29, 1996 550,560 550,560
------------ ------------
Total stockholders' equity 178,983,410 173,138,288
------------ ------------
$224,595,515 $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>
Three Months Ended
May 31,
--------------------------------
1996 1995
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<S> <C> <C>
Net Sales $ 76,137,760 $ 61,448,458
Cost of goods sold 41,519,954 34,735,357
------------ ------------
Gross profit 34,617,806 26,713,101
Selling, general and administrative expenses 27,042,547 21,517,097
Net royalty (income) (772,320) (412,450)
------------ ------------
Operating profit 8,347,579 5,608,454
Interest income, net 704,430 711,766
------------ ------------
Earnings before provision for income taxes 9,052,009 6,320,220
Provision for income taxes 3,620,800 2,527,165
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Net earnings $ 5,431,209 $ 3,793,055
============ ============
Earnings per share of common stock $ 0.13 $ 0.09
============ ============
Weighted average number of shares of
common stock outstanding 42,955,635 41,700,728
============ ============
Cash dividends per common share none none
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
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<PAGE> 5
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
---------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,431,209 $ 3,793,055
------------ ------------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 1,374,493 1,097,937
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:
Accounts receivable, net 2,383,798 1,055,357
Inventories (11,285,040) (14,902,152)
Prepaid expenses and other current assets 1,179,912 590,296
Other assets (136,996) (190,969)
Accounts payable 7,372,399 9,297,838
Accrued expenses and other current liabilities 478,229 (1,729,235)
Income taxes payable 1,609,916 1,281,026
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Total adjustments 2,976,711 (3,499,902)
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Net cash provided by operating activities 8,407,920 293,153
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,976,352) (1,498,196)
------------ ------------
Net Cash used in investing activities (3,976,352) (1,498,196)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) (50,000)
Proceeds from issuance of common stock 413,913 173,565
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Net cash provided by financing activities 363,913 123,565
------------ ------------
Increase (decrease) in cash and cash equivalents 4,795,481 (1,081,478)
Cash and cash equivalents at beginning of period 61,047,522 49,153,556
------------ ------------
Cash and cash equivalents at end of period $ 65,843,003 $ 48,072,078
============ ============
Supplemental Information:
Cash payments for the periods ended:
Interest expense $ 20,998 $ 17,334
============ ============
Income taxes $ 2,013,613 $ 1,916,299
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
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<PAGE> 6
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MAY 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 three month period
ended May 31, 1996 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 May 31, 1996 and February 29,
1996 and for the three month periods ended May 31, 1996 and
1995. The "Lifo" inventory for the three month periods ended
May 31, 1996 and 1995 are based upon end of year estimates.
Inventories at May 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 to be
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 has been adjusted to reflect the stock split.
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<PAGE> 7
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAY 31, 1996
(Unaudited)
RESULTS OF OPERATIONS
For the Three Months Ended May 31, 1996:
Consolidated net sales increased 23.9% to $76.1 million in the three
months ended May 31, 1996 as compared to $61.4 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 May 31,
1996 to 45.5% of net sales, as compared to 43.5% 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 increased to 35.5% in the three months ended May 31, 1996 as compared to
35.0% in the comparable prior year period. The net increase resulted from an
increase in shipping expenses as a percentage of net sales, partially offset by
decreases in selling, production and general and administrative expenses. The
increase in shipping expenses as a percentage of net sales was primarily due to
the expansion of the Company's warehouse and distribution facilities. The
decreases in selling, production and general and administrative expenses as a
percentage of net sales resulted from economies of scale achieved with sales
growth.
Net royalty income increased by $360,000 in the three months ended May
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 May 31, 1996 as compared to
the comparable prior year period.
Net earnings increased 43.2% to $5.4 million in the three months ended
May 31, 1996 from $3.8 million in the comparable prior year period as a result
of the factors discussed above.
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<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended May 31, 1996, the Company generated cash
from operating activities of approximately $8.4 million principally from net
earnings. Increases in inventories of $11.3 million, resulting from increased
sales levels, were financed by cash generated from net earnings, increases in
accounts payable-trade and decreases in accounts receivable. During the three
months ended May 31, 1995, the Company generated cash from its operating
activities of $293,000. Net earnings of $3.8 million plus increases in accounts
payable and income taxes payable were offset by an increase in inventories of
$14.9 million. The increase in inventory was 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 orders for shipments to be made in
the future.
During the three months ended May 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 in-store shops. The
expected cost of the warehouse expansion is approximately $14.0 million. The
Company will utilize its existing cash during construction and will consider
financing alternatives for the project following its completion. At May 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 May 31, 1996
and February 29, 1996, respectively, letters of credit outstanding under the
lines were $48.3 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.
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<PAGE> 9
PART II
OTHER INFORMATION
Items I through 9. - All items are inapplicable except:
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3. Certificate of Amendment of the Certificate of Incorporation
of the Company
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K. None
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<PAGE> 10
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.
By: Harvey Sanders
--------------------------------
Harvey Sanders
Chairman of the Board
and President
Date: July 11, 1996
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By: Neal S. Nackman
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Neal S. Nackman
V.P. Finance and
Chief Accounting Officer
Date: July 11, 1996
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<PAGE> 11
EXHIBIT INDEX
Exhibit No. Description
3 Certificate of Amendment of the
Certificate of Incorporation of
Nautica Enterprises, Inc.
27 Financial Data Schedule
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<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION OF
NAUTICA ENTERPRISES, INC.
Nautica Enterprises, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, in the
manner prescribed by Section 141 of the General Corporation Law of Delaware,
duly adopted resolutions proposing and declaring advisable the following
amendment to the Certificate of Incorporation:
RESOLVED, that the text of Article Fifth, Section 1(a) of the
Corporation's Certificate of Incorporation be amended to read in its
entirety as follows:
"Section 1. (a) The corporation is authorized to issue two
classes of shares to be designated, respectively, "common stock" and
"preferred stock". The total number of such shares which the
corporation shall have the authority to issue shall be One Hundred Two
Million (102,000,000). The total number of shares of common stock
authorized to be issued shall be One Hundred Million (100,000,000),
$.10 par value per share, and the total number of shares of preferred
stock authorized to be issued shall be Two Million (2,000,000), $.01
par value per share."
SECOND: That said amendment was duly adopted by the
stockholders of the Corporation in accordance with the
<PAGE> 2
provisions of Section 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, NAUTICA ENTERPRISES, INC. has caused this
certificate to be signed by its President and attested to its Assistant
Secretary, this 2nd day of July, 1996.
NAUTICA ENTERPRISES, INC.
By: /s/ Harvey Sanders
---------------------------
Harvey Sanders
President
Attest:
By: /s/ Neal Nackman
-------------------------------
Neal Nackman
Assistant Secretary
<PAGE> 3
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
BE IT REMEMBERED that, on July 2, 1996, before me, a Notary
Public duly authorized by law to take acknowledgment of deeds, personally came
Harvey Sanders, President of Nautica Enterprises, Inc., who duly signed the
foregoing instrument before me and acknowledged that such signing is his act and
deed, and that such instrument as executed is the act and deed of said
corporation, and that the facts stated therein are true.
GIVEN under my hand on July 2, 1996.
/s/
--------------------------
Notary Public
<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> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 65,843,003
<SECURITIES> 0
<RECEIVABLES> 44,440,371
<ALLOWANCES> (1,120,000)
<INVENTORY> 65,520,529
<CURRENT-ASSETS> 182,430,601
<PP&E> 45,699,207
<DEPRECIATION> (12,372,816)
<TOTAL-ASSETS> 224,595,515
<CURRENT-LIABILITIES> 45,462,105
<BONDS> 150,000
0
0
<COMMON> 4,149,873
<OTHER-SE> 174,833,537
<TOTAL-LIABILITY-AND-EQUITY> 224,595,515
<SALES> 76,137,760
<TOTAL-REVENUES> 77,621,799
<CGS> 41,519,954
<TOTAL-COSTS> 41,519,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,052,009
<INCOME-TAX> 3,620,800
<INCOME-CONTINUING> 5,431,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,431,209
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
