<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, 1997 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 July 14, 1997 was
38,705,571.
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MAY 31, 1997
(Unaudited)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
As at May 31, 1997 and February 28, 1997......................... 2
Condensed Consolidated Statements of Earnings
For the Three Month Periods Ended
May 31, 1997 and 1996........................................... 3
Condensed Consolidated Statements of Cash Flows
For the Three Month Periods Ended
May 31, 1997 and 1996........................................... 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 28,
1997 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 65,327,769 $ 71,887,201
Accounts receivable - net 52,891,291 60,571,809
Inventories 73,402,462 61,304,697
Prepaid expenses and other current assets 4,546,832 4,306,521
Deferred tax benefit 5,774,938 5,774,938
------------ ------------
Total current assets 201,943,292 203,845,166
Property, plant and equipment, net of
accumulated depreciation and amortization 46,020,647 42,719,253
Other assets 6,178,377 4,828,663
------------ ------------
$254,142,316 $251,393,082
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable - trade 29,314,268 20,562,099
Accrued expenses and other current liabilities 25,478,434 24,779,371
Income taxes payable 5,968,329 2,213,591
------------ ------------
Total current liabilities 60,811,031 47,605,061
Long-term debt -net 100,000 150,000
Minority Interest 277,220 510,157
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 41,774,641 shares
at May 31, 1997 and 41,770,841 shares at
February 28, 1997 4,177,464 4,177,084
Additional paid-in capital 55,530,151 55,502,729
Retained earnings 168,427,322 160,756,735
------------ ------------
228,134,937 220,436,548
Less:
Common stock in treasury - at cost;
3,070,070 shares at May 31, 1997
and 2,270,070 at February 28, 1997 35,180,872 17,308,684
------------ ------------
Total stockholders' equity 192,954,065 203,127,864
------------ ------------
$254,142,316 $251,393,082
============ ============
</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>
Three Months Ended
May 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net Sales $ 95,807,047 $ 76,137,760
Cost of goods sold 51,488,057 41,519,954
------------ ------------
Gross profit 44,318,990 34,617,806
Selling, general and administrative expenses 33,771,802 27,042,547
Net royalty (income) (1,195,200) (772,320)
------------ ------------
Operating profit 11,742,388 8,347,579
Interest income, net 808,987 704,430
Minority interest in net loss of consolidated subsidiary 232,937 --
------------ ------------
Earnings before provision for income taxes 12,784,312 9,052,009
Provision for income taxes 5,113,725 3,620,800
------------ ------------
NET EARNINGS $ 7,670,587 $ 5,431,209
============ ============
Earnings per share of common stock $ 0.18 $ 0.13
============ ============
Weighted average number of shares of common and
common equivalent shares outstanding 41,969,187 42,955,635
============ ============
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,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,670,587 $ 5,431,209
------------ ------------
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Minority interest in net loss of consolidated subsidiary (232,937) --
Depreciation and amortization 2,088,967 1,374,493
Provision for accounts receivable allowances and sales
returns and discounts 435,981 55,943
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:
Accounts receivable 7,244,537 2,327,855
Inventories (12,097,765) (11,285,040)
Prepaid expenses and other current assets (240,311) 1,179,912
Other assets (1,599,221) (136,996)
Accounts payable 8,752,169 7,372,399
Accrued expenses and other current liabilities 699,063 478,229
Income taxes payable 3,754,738 1,609,916
------------ ------------
Total adjustments 8,805,221 2,976,711
------------ ------------
Net cash provided by operating activities 16,475,808 8,407,920
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (5,140,854) (3,976,352)
Purchase of short-term investments (25,100,000) --
------------ ------------
Net cash used in investing activities (30,240,854) (3,976,352)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) (50,000)
Purchase of treasury stock (17,872,188) --
Proceeds from issuance of common stock, net 27,802 413,913
------------ ------------
Net cash (used in) provided by financing activities (17,894,386) 363,913
------------ ------------
(Decrease) increase in cash and cash equivalents (31,659,432) 4,795,481
Cash and cash equivalents at beginning of period 71,887,201 61,047,522
------------ ------------
Cash and cash equivalents at end of period $ 40,227,769 $ 65,843,003
Short-term investments at end of period 25,100,000 --
------------ ------------
Cash and short-term investments at end of period $ 65,327,769 $ 65,843,003
============ ============
Supplemental Information:
Cash payments for the periods ended:
Interest expense $ 7,210 $ 9,974
============ ============
Income taxes $ 1,366,819 $ 2,013,613
============ ============
</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, 1997
(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, 1997 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, 1997 and February 28, 1997 and for the
three month periods ended May 31, 1997 and 1996. The "Lifo"
inventory for the three month periods ended May 31, 1997 and 1996
are based upon end of year estimates. Inventories at May 31, 1997
and February 28, 1997 consist primarily of finished goods.
NOTE 4 - Short-term investments consist primarily of government and
agency bonds, taxable municipal bonds, tax exempt municipal bonds
and corporate bonds. The Company accounts for these investments
using Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS NO. 115"). This standard requires that
certain debt and equity securities be adjusted to market value at
the end of each accounting period. At May 31, 1997, all
securities covered under SFAS No. 115 were designated as
available for sale and are stated at market value. Market value
of securities approximated their cost and, accordingly, no
realized market gains or losses were reported in a separate
component of stockholders' equity. Realized gains and losses on
sales of investments will be determined on a specific
identification basis.
Cash and short-term investments at May 31, 1997, are summarized as
follows:
<TABLE>
<CAPTION>
MARKET/COST
-----------
<S> <C>
CASH AND CASH EQUIVALENTS $40,227,769
SHORT-TERM INVESTMENTS
Government & Agency Bonds 8,909,722
Taxable Municipal Bonds 402,200
Tax Exempt Municipal Bonds 1,145,282
Corporate Bonds 12,408,654
Other 2,234,142
-----------
SHORT-TERM INVESTMENTS 25,100,000
-----------
CASH AND SHORT-TERM INVESTMENTS $65,327,769
===========
</TABLE>
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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, 1997
(Unaudited)
RESULTS OF OPERATIONS
For the Three Months Ended May 31, 1997:
Consolidated net sales increased 25.8% to $95.8 million in the three
months ended May 31, 1997 as compared to $76.1 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 primarily
attributable to the opening of new stores.
Consolidated gross profit increased in the three months ended May 31,
1997 to 46.3% of net sales, as compared to 45.5% 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
decreased to 35.2% in the three months ended May 31, 1997 as compared to 35.5%
in the comparable prior year period. The net decrease resulted from the ability
to leverage these expenses with increased volume.
Net royalty income increased by $423,000 to $1,195,000 in the three
months ended May 31, 1997 as compared to $772,000 in the comparable prior year
period. The increase is a result of increased royalty revenue from new and
existing licensees.
Interest income increased by $105,000 to $809,000 in the three months
ended May 31, 1997 as compared to the comparable prior year period. The increase
is the result of higher average cash balances and an increase in the rate of
return on investments.
The provision for income taxes remained constant at 40.0% of earnings
before income taxes for the three month period ended May 31, 1997 as compared to
the comparable prior year period.
Net earnings increased 41.2% to $7.7 million in the three months ended
May 31, 1997 from $5.4 million in the comparable prior year period as a result
of the factors discussed above.
- 6 -
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended May 31, 1997, the Company generated cash
from operating activities of $16.5 million principally from net earnings and
higher cash receipts from increased sales. Increases in inventories of $12.1
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, 1996, the Company generated
cash from operating activities of $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, 1997, the Company's principal
investing activities related to the continued expansion of the in-store shop
program. The Company expects to continue to incur capital expenditures to expand
such in-store shop program. At May 31, 1997, there were no other material
commitments for capital expenditures.
During the three months ended May 31, 1997, the Company repurchased
800,000 shares of its common stock. The shares purchased completed the Board
approved stock repurchase plan to repurchase 1,500,000 shares of the Company's
common stock. The remaining shares were purchased at an aggregate cost of $17.9
million.
The Company has $100.0 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, 1997
and February 28, 1997, respectively, letters of credit outstanding under the
lines were $72.3 million and $43.9 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.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Certain statements included in this report, including the words
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The Company
undertakes no obligation to republish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company in this report, as well
as the Company's periodic reports on Forms 10-K and 10-Q and other filings with
the Securities and Exchange Commission.
- 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: /s/ Harvey Sanders
------------------------------------
Harvey Sanders
Chairman of the Board
and President
Date: July 14, 1997
By: /s/ Neal S. Nackman
------------------------------------
Neal S. Nackman
V.P. Finance and
Chief Accounting Officer
Date: July 14, 1997
- 9 -
<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-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 40,227,769
<SECURITIES> 25,100,000
<RECEIVABLES> 59,569,239
<ALLOWANCES> 1,677,948
<INVENTORY> 73,402,462
<CURRENT-ASSETS> 4,546,832
<PP&E> 63,851,139
<DEPRECIATION> 17,830,492
<TOTAL-ASSETS> 254,142,316
<CURRENT-LIABILITIES> 60,811,031
<BONDS> 0
0
0
<COMMON> 4,177,464
<OTHER-SE> 188,776,601
<TOTAL-LIABILITY-AND-EQUITY> 254,142,316
<SALES> 95,807,047
<TOTAL-REVENUES> 97,811,234
<CGS> 51,488,057
<TOTAL-COSTS> 51,488,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,784,312
<INCOME-TAX> 5,113,725
<INCOME-CONTINUING> 7,670,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,670,587
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
