<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 November 30, 1995 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.
- --------------------------------------------------------------------------------
(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
---------------------------
- --------------------------------------------------------------------------------
(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 January 9, 1996
was 19,885,065
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOVEMBER 30, 1995
(Unaudited)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
As at November 30, 1995 and February 28, 1995..................... 2
Condensed Consolidated Statements of Earnings
For the Nine Month and Three Month Periods Ended
November 30, 1995 and 1994....................................... 3
Condensed Consolidated Statements of Cash Flows
For the Nine Month and Three Month Periods Ended
November 30, 1995 and 1994....................................... 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
November 30, February 28,
1995 1995
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 54,205,960 $ 49,153,556
Accounts receivable - net 52,366,910 37,362,801
Inventories (Note 3) 52,588,809 48,876,065
Prepaid expenses and other current assets 3,472,115 5,389,979
Deferred tax benefit 2,511,279 2,511,279
------------- ---------------
Total current assets 165,145,073 143,293,680
Property, plant and equipment, net of
accumulated depreciation and amortization 27,015,069 18,759,795
Other assets (Note 4) 8,823,545 6,302,031
------------- ---------------
$ 200,983,687 $ 168,355,506
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable 12,157,901 12,534,381
Accrued expenses and other current liabilities 20,232,477 15,631,659
Income taxes payable 4,569,461 589,115
------------- ---------------
Total current liabilities 37,009,839 28,805,155
Long-term debt - net 200,000 250,000
Stockholders' equity:
Preferred stock - par value $.01, authorized,
2,000,000 shares; no shares issued
Common stock - par value $.10, authorized,
20,000,000 shares; issued 20,661,012 shares
at November 30, 1995 and 20,416,110 shares at
February 28, 1995 2,066,101 2,041,611
Additional paid-in capital 53,918,594 53,079,214
Retained earnings 108,339,713 84,730,086
------------- ---------------
164,324,408 139,850,911
Less:
Common stock in treasury - at cost 785,035
shares at November 30, 1995
and February 28, 1995 550,560 550,560
------------- ---------------
Total stockholders' equity 163,773,848 139,300,351
------------- ---------------
$ 200,983,687 $ 168,355,506
============= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 4
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
November 30, November 30,
---------------------------------- ----------------------------------
1995 1994 1995 1994
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 232,821,187 $ 194,817,341 $ 90,818,599 $ 86,977,771
-------------- -------------- -------------- --------------
Cost and expenses:
Cost of goods sold 129,442,235 110,606,475 49,591,128 49,543,998
Designing, selling, shipping, general
and administrative expenses 67,305,834 57,192,314 22,602,866 22,126,494
-------------- -------------- -------------- --------------
196,748,069 167,798,789 72,193,994 71,670,492
-------------- -------------- -------------- --------------
Earnings from operations 36,073,118 27,018,552 18,624,605 15,307,279
-------------- -------------- -------------- --------------
Other income (Expense):
Interest income 1,771,639 1,267,483 501,307 431,756
Royalty and licensing income, net 1,504,624 662,033 717,363 276,328
Other 0 (736,458) 0 0
-------------- -------------- -------------- --------------
3,276,263 1,193,058 1,218,670 708,084
-------------- -------------- -------------- --------------
Earnings before provision for incom 39,349,381 28,211,610 19,843,275 16,015,363
Provision for income taxes 15,739,754 10,577,470 7,937,306 6,514,052
-------------- -------------- -------------- --------------
Net earnings $ 23,609,627 $ 17,634,140 $ 11,905,969 $ 9,501,311
============== ============== ============== ==============
Earnings per share of common stock $ 1.11 $ 0.85 $ 0.56 $ 0.46
============== ============== ============== ==============
Weighted average number of shares of
common stock outstanding 21,301,879 20,823,095 21,327,595 20,838,095
============== ============== ============== ==============
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>
Nine Months Ended
November 30,
----------------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 23,609,627 $ 17,634,140
------------- ---------------
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 3,331,869 2,494,052
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:
Accounts receivable (15,004,109) (19,349,148)
Inventories (3,712,744) (8,832,301)
Prepaid expenses and other current assets 1,917,864 630,593
Other assets (281,408) (267,871)
Accounts payable (376,480) 5,364,012
Accrued expenses and other current liabilities 4,600,818 4,826,901
Income taxes payable 3,980,346 1,533,451
------------- ---------------
Total adjustments (5,543,844) (13,600,311)
------------- ---------------
Net cash provided by operating activities 18,065,783 4,033,829
------------- ---------------
Cash flows from investing activities:
Purchase of property, plant and equipment (11,327,249) (3,078,182)
Long-Term investment (2,500,000) (2,500,000)
------------- ---------------
Net Cash used in investing activities (13,827,249) (5,578,182)
------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) (50,000)
Proceeds from issuance of common stock under
stock options 863,870 260,861
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Net cash provided by financing activities 813,870 210,861
------------- ---------------
Increase (decrease) in cash and cash equivalents 5,052,404 (1,333,492)
Cash and cash equivalents at beginning of period 49,153,556 44,854,155
------------- ---------------
Cash and cash equivalents at end of period $ 54,205,960 $ 43,520,663
============= ===============
Supplemental Information:
Cash payments for the periods ended:
Interest expense $ 49,896 $ 42,736
============= ===============
Income taxes $ 12,602,820 $ 9,485,576
============= ===============
</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
NOVEMBER 30, 1995
(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 nine month and three
month periods ended November 30, 1995 and 1994 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 of November 30, 1995 and February
28, 1995 and for the nine and three month periods ended
November 30, 1995 and 1994. The "Lifo" inventory for the nine
and three month periods ended November 30, 1995 and 1994 are
based upon end of year estimates. Inventories at November 30,
1995 and February 28, 1995 consist primarily of finished
goods.
NOTE 4 - Included in other assets (non-current) at November 30,
1995 are long-term investments of $5,000,000. The investments
are carried at cost which approximates market value at
November 30, 1995.
5
<PAGE> 7
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOVEMBER 30, 1995
(Unaudited)
RESULTS OF OPERATIONS
For the Nine Months Ended November 30, 1995:
Consolidated net sales increased 19.5% to $232.8 million in the nine
months ended November 30, 1995 as compared to $194.8 million in the comparable
prior year period. This 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 shop-within-a-store
program, sales to new retail customers and to additional retail locations of
existing customers, and the continued growth of the basic stock replenishment
program for the Anchor group of Nautica products. 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 nine months ended November
30, 1995 to 44.4% of net sales, as compared to 43.2% in the comparable prior
year period. The net increase resulted primarily from a shift in sales mix to
higher margin products and to an increase in retail operations.
Designing, selling, shipping and general and administrative expenses as
a percentage of net sales decreased to 28.9% in the nine months ended November
30, 1995 as compared to 29.4% in the comparable prior year period. The net
decrease, as a percentage of sales, resulted from economies of scale achieved
with sales growth.
Net royalty income increased $843,000 in the nine months ended November
30, 1995 as compared to the comparable prior year period. The increase is a
result of increased royalty revenue from new and existing licensees.
Interest income increased approximately $504,000 in the nine months
ended November 30, 1995 as compared to the comparable prior year period due to
higher average cash balances during the period and to an increase in the rate of
return on investments. In the prior year period other expense of $736,000
represents a write-off of costs associated with the Company's evaluation of its
warehouse and distribution facilities location.
The provision for income taxes increased to 40.0% of earnings before
income taxes for the nine month period ended November 30, 1995 as compared to
37.5% in the comparable prior year period. The prior year's rate was unusually
low due to tax relief provided by the State of Maine which reduced the corporate
tax rate and to the inclusion of a one time refund of taxes previously paid.
Net earnings increased approximately 34% to $23.6 million in the nine
months ended November 30, 1995 from $17.6 million in the comparable prior year
period as a result of the factors discussed above.
6
<PAGE> 8
For the Three Months Ended November 30, 1995:
Consolidated net sales increased 4.4% to $90.8 million in the three
months ended November 30, 1995 as compared to $87.0 million in the comparable
prior year period. This 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 shop-within-a-store
program, sales to new retail customers and to additional retail locations of
existing customers, and the continued growth of the basic stock replenishment
program for the Anchor group of Nautica products. These increases were offset by
the discontinued lower margin Christian Dior business which experienced 70% of
it's sales volume in the third quarter of the prior year. 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 November
30, 1995 to 45.4% of net sales, as compared to 43.0% in the comparable prior
year period. The net increase resulted primarily from a shift in sales mix to
higher margin products and to an increase in retail operations.
Designing, selling, shipping and general and administrative expenses,
as a percentage of net sales decreased to 24.9% in the three months ended
November 30, 1995 as compared to 25.4% in the comparable prior year period. The
net decrease resulted primarily from economies of scale achieved with sales
growth.
Net royalty income increased $441,000 in the three months ended
November 30, 1995 as compared to the comparable prior year period. The increase
is a result of increased royalty revenue from new and existing licensees.
Interest income remained relatively constant during the period.
The provision for income taxes decreased to 40.0% of earnings before
income taxes for the three month period ended November 30, 1995 as compared to
40.7% in the comparable prior year period. The decrease is primarily due to a
lower estimated effective state tax rate in the current year.
Net earnings increased approximately 25% to $11.9 million in the three
months ended November 30, 1995 from $9.5 million in the comparable prior year
period as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 30, 1995 the Company generated
cash from operating activities of $18.1 million principally from net earnings.
Increases in inventories of $3.7 million and accounts receivable of $15.0
million, resulting from increased sales levels, were financed by cash generated
from net earnings and from increases primarily in accrued expenses. During the
nine months ended November 30, 1994 the Company generated cash from its
operating activities of $4.0 million principally from net earnings. Increases in
inventories of 8.8 million and accounts receivable of $19.3 million, resulting
from increased sales levels, were financed by cash generated from net earnings
and increases primarily in accounts payable and accrued expenses.
During the nine months ended November 30, 1995 the Company's principal
investing activities related to the expansion of the Company's warehouse and
distribution facilities and the continued expansion of retail shops. The
expected cost of the expansion is approximately $14.0 million. The Company will
utilize its existing cash and lines of credit during construction and will
consider financing alternatives for the project following its completion. At
November 30, 1995 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 November 30,
1995 letters of credit outstanding under the lines were $26.5 million and there
were no short-term borrowings outstanding.
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.
7
<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 27. Financial Data Schedule
(b) Reports on Form 8-K. None
8
<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: January 11, 1996
---------------------------------
By: Neal S. Nackman
-----------------------------
Neal S. Nackman
V.P. Finance and
Principal Financial Officer
Date: January 11, 1996
---------------------------------
9
<PAGE> 11
EXHIBIT INDEX
-------------
Exhibit 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> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 54,205,960
<SECURITIES> 0
<RECEIVABLES> 53,854,807
<ALLOWANCES> (1,487,897)
<INVENTORY> 52,588,809
<CURRENT-ASSETS> 165,145,073
<PP&E> 37,643,842
<DEPRECIATION> (10,628,773)
<TOTAL-ASSETS> 200,983,687
<CURRENT-LIABILITIES> 37,009,839
<BONDS> 200,000
0
0
<COMMON> 2,066,101
<OTHER-SE> 161,707,747
<TOTAL-LIABILITY-AND-EQUITY> 200,983,687
<SALES> 232,821,187
<TOTAL-REVENUES> 236,097,450
<CGS> 129,442,235
<TOTAL-COSTS> 129,442,235
<OTHER-EXPENSES> 67,305,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,349,381
<INCOME-TAX> 15,739,754
<INCOME-CONTINUING> 23,609,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,609,627
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
</TABLE>
