For the fourth quarter, net sales increased 14.0% to $178.5 million compared to $156.6 million in the fourth quarter last year. On an operating basis, adjusted to exclude a special charge for the previously announced transition of the Nautica Europe business, the Company reported net earnings of $7.2 million, or $0.21 per diluted share, compared to adjusted net earnings of $0.6 million, or $0.02 per diluted share in the prior year. Net earnings under Generally Accepted Accounting Principles (“GAAP”) were $5.6 million, or $0.16 per diluted share for the fourth quarter, compared to a net loss of $8.4 million, or $0.25 on an earnings per share basis, in the prior year period.
For the full fiscal year, net sales were $693.7 million compared to $692.1 million in the prior year. Adjusted for special charges, net earnings for the year were $30.9 million, or $0.90 per diluted share, compared to adjusted net earnings of $26.2 million, or $0.76 per diluted share in the prior year period. Net earnings under GAAP were $20.7 million, or $0.60 per diluted share, compared to $17.3 million, or $0.50 per diluted share in the prior year.
The Company believes that reporting net earnings excluding certain charges provides a more meaningful comparison of its financial results. For a description of the charges during the periods reported above, please refer to Notes 1 and 2 below.
Harvey Sanders, Chairman, President and Chief Executive Officer of Nautica Enterprises, Inc., commented, “We are pleased to report that our earnings performance for the fourth quarter and full year were in line with analysts' consensus estimates. We experienced stronger than originally anticipated selling in some of our divisions which enabled us to post a double-digit sales increase for the quarter. Driving this performance was Earl Jean, Nautica Men's Jeans, Nautica Children's and the entire Nautica Sleepwear division, which now includes Men's, Women's and Junior's Sleepwear as well as Men's Underwear. We are encouraged that these results were achieved during one of the retail sector's most challenging Holiday periods.”
Mr. Sanders continued, “Fiscal 2003 was an important year as we made significant progress in strengthening our overall operations, as well as reducing the financial impact that certain under-performing businesses have had on our earnings performance. During the year, our Martinsville, Virginia distribution facility became fully operational. We are now processing all of our Nautica brands through this facility and will begin processing our John Varvatos business this month. Earl Jean is expected to begin shipping from Martinsville for Holiday 2003. In addition, the consolidation initiative and relocation of Earl Jean from Los Angeles to New York and Virginia has been successfully completed and is expected to add approximately $0.01 to $0.02 to our net earnings on an annual basis beginning in fiscal 2005.”
Mr. Sanders added, “We ended the year on a very strong note financially and are proud of our healthy balance sheet and ability to consistently generate strong free cash flow giving us the support to fund our future growth initiatives.”
Fiscal 2004 Outlook
The Company has adopted an even more conservative outlook for fiscal 2004 given the state of consumer confidence, the uncertainty with the economy as well as the continued difficulties facing the men's collection arena. The Company expects its top line to be essentially flat to the prior year and expects to achieve earnings per diluted share in the range of $0.95 to $1.00, excluding the previously announced after-tax special charges of approximately $4.2 million, or $0.13 per diluted share related to the Nautica Europe transition. Approximately $3.0 million of these special charges, or $0.09 on an earnings per share basis is expected to be recognized in the first quarter, with the balance to be recognized in the second quarter. The Company is comfortable with analysts' consensus estimate of $0.01 for the first quarter, excluding this special charge.
Mr. Sanders concluded, “Fiscal 2004 will be a continuation of the strategies we have been implementing over the past two years to improve our financial performance over the long-term. Our efforts are focused on further refining our Nautica Men's Sportswear product and implementing additional operating efficiencies throughout the organization.”