SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
NAUTICA ENTERPRISES INC.
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(Name of Registrant as Specified In Its Charter)
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LOGO
YOUR VOTE IS IMPORTANT TO THE FUTURE OF YOUR COMPANY AND YOUR INVESTMENT
PLEASE VOTE THE ENCLOSED WHITE PROXY CARD TODAY
June 17, 2003
Dear Fellow Nautica Enterprises, Inc. Stockholder:
We strongly urge you to re-elect your entire eight-member Board of
Directors at Nautica Enterprises' Annual Meeting on July 8, 2003 and enable your
Company to continue the progress it is making in generating growth and building
value for all stockholders.
YOUR COMPANY'S BOARD IS COMPRISED OF EIGHT HIGHLY QUALIFIED INDIVIDUALS
COMMITTED TO BUILDING STOCKHOLDER VALUE. This Board, with senior management, has
developed and is overseeing the implementation of a Three-Phase Strategy
intended to transform your Company to fuel growth and build value for
stockholders. Your Company today is making substantial progress in fulfilling
this plan. We strongly believe that continuing the course set by the Board and
senior management -- without interruption -- is in the best interest of all
Nautica Enterprises stockholders.
As you may know, a group led by Barington Companies Equity Partners, L.P.
("Barington") has initiated a distracting and disruptive proxy fight to elect
three of their nominees to your Company's Board to replace three incumbent
directors. They also seek to change certain of your Company's By-laws.
WE URGE YOU TO PROTECT YOUR BEST INTERESTS BY REJECTING BARINGTON'S PROXY
SOLICITATION, THE BARINGTON NOMINEES AND THE OTHER BARINGTON PROPOSAL, AND BY
SIGNING, DATING, AND RETURNING THE ENCLOSED WHITE PROXY CARD TO ELECT YOUR
COMPANY'S ENTIRE EIGHT-MEMBER BOARD.
YOUR COMPANY'S BOARD IS COMMITTED TO BUILDING STOCKHOLDER VALUE
OUR BRANDS: A POWERFUL PLATFORM FOR GROWTH
Nautica Enterprises today enjoys a number of key strengths, not least of
which is the worldwide recognition and global strength of our Nautica brand.
Global sales of Nautica-branded products increased 7.6% over the 2001-2003
Fiscal years.
In fact, Nautica-branded products, including those licensed by the Company
to other manufacturers, achieved approximately $2 billion in sales (at retail
value) during this time period, reflecting both worldwide demand for our
merchandise and the global power and popularity of our brand. We're also
encouraged by the success that we have had with our recently added Earl Jean
brand, which helped us to diversify our brand portfolio and enter additional
distribution channels at higher gross margins.
OUR TRANSFORMATION STRATEGY: A THREE-PHASE PLAN
Recognizing the challenges presented by a continuing weak retail
environment -- particularly in our core Nautica Men's Sportswear category, and
in our primary department store distribution channel -- Nautica Enterprises has
been pursuing a three-phase
strategy of transformation designed to grow our businesses and build stockholder
value.
A cornerstone of this strategy is flexibility: We are constantly analyzing our
performance, with specific targets and timetables set for each business. We are
ready to move quickly in implementing performance improvement measures, and,
where necessary, to eliminate underperforming contributors such as Nautica
Europe. OUR OBJECTIVE IS TO CREATE VALUE THAT WILL BE RECOGNIZED IN THE MARKET
FOR SHARES OF NAUTICA ENTERPRISES' COMMON STOCK.
PHASE ONE: MAXIMIZING OPERATIONAL EFFICIENCIES
Initiatives we began in fiscal year 2002 to maximize the operational
efficiency of your Company are now largely completed. From streamlining our
distribution to improving key metrics such as gross margins and inventory
productivity, Phase One of our strategy has been an unqualified success. The
consolidation of our distribution facilities into one state-of-the-art center in
Martinsville, Virginia is generating cost savings of $0.07 to $0.08 per share,
or $3 to $4 million, annually and has resulted in improved transit time and
lower freight expenses.
We are also pleased with our gross margin improvements, up from 41.1% for
the 2002 fiscal year to 42.7% for the 2003 fiscal year, with a projected
increase to 43.2% for the 2004 fiscal year. Our inventory productivity is
similarly impressive, with inventory turns up 18% from fiscal 2002 to fiscal
2003, which has generated significant working capital improvements.
PHASE TWO: RATIONALIZING BUSINESSES FOR IMPROVED PERFORMANCE
We are currently taking additional actions to rationalize our businesses
for improved performance -- actions that we expect to be substantially completed
by the end of the 2004 fiscal year (February 28, 2004). We have successfully
transitioned our Earl Jean operations from Los Angeles to New York and are in
the process of eliminating our investment exposure in Nautica Europe. At the
same time, we are pursuing cost reduction opportunities in connection with our
Rockefeller Plaza store in New York and exploring licensing and other growth
initiatives for our John Varvatos business.
Most importantly, we are intensely focused on improving the performance of
our Nautica Men's Sportswear business. With new leadership installed in May
2003, we plan to return to our fashion roots and concentrate on our traditional
core outerwear, swimwear and activewear categories. Supporting this initiative
is an enhanced marketing and advertising plan.
PHASE THREE: ENHANCING STOCKHOLDER VALUE OVER THE LONG TERM
DIVERSIFICATION AND BRAND EXPANSION
Central to our longer-term strategy for enhancing stockholder value is a
program of diversification and brand expansion that leverages the power of our
brands and extends it into high-growth areas. We have already experienced a
number of key successes, including our Nautica Men's Jeans business -- currently
one of the best-trending young men's lines in department stores -- and in our
Nautica Sleepwear and Underwear lines, which generated double-digit net sales
growth in the 2003 fiscal year. In addition, our Nautica Children's line has
become a growth vehicle in the outlet distribution channel, yielding strong
operating margins, and our licensing expansion into home collection, women's
swimwear and fragrance has yielded favorable results.
Going forward, we have planned a number of diversification and brand
expansion initiatives that will allow us to leverage our existing infrastructure
more fully. These include the expansion of our Earl Jean brand into new market
categories, as well as the Fall 2003 launch of Nautica Necessities -- our infant
clothing line -- and Nautica Men's Jeans, Sleepwear and Underwear.
A STRONG BALANCE SHEET PROVIDES AMPLE RESOURCES FOR NEW INITIATIVES
To maximize flexibility as we pursue our disciplined transformation
strategy, Nautica Enterprises has consciously maintained a strong balance sheet,
providing the means with which to fund our diversification and brand extension
plans, as well as a range of possible future initiatives to enhance stockholder
value. YOUR COMPANY'S BALANCE SHEET IS UNMATCHED AMONG ITS INDUSTRY PEERS: WE
HAVE VIRTUALLY NO BANK DEBT, STRONG FREE CASH FLOW -- $36.3 MILLION FOR THE 2001
FISCAL YEAR, $46.9 MILLION FOR THE 2002 FISCAL YEAR AND $36.4 MILLION FOR THE
2003 FISCAL YEAR -- AND $83 MILLION IN CASH ON OUR BALANCE SHEET AT THE END OF
THE 2003 FISCAL YEAR, WHICH ENABLES US TO PURSUE POTENTIAL ACQUISITIONS.
YOUR COMPANY'S BOARD IS COMMITTED TO STRONG CORPORATE GOVERNANCE
The discipline and focus that the senior management brings to your Company
is mirrored in your Company's commitment to strong corporate governance.
Executive compensation is regularly reviewed by the Board's compensation
committee, which is composed entirely of independent directors. According to
independent studies provided to the compensation committee, the Company's
executive compensation is consistent with practices at other companies across
our industry peer group.
Moreover, your Board endorses and is committed to full compliance with all
corporate governance requirements under the new Sarbanes-Oxley guidelines and
the proposed NASDAQ National Market rules. Accordingly, your Company's Board
intends to search for and add two new independent directors by the Company's
annual meeting in 2004. We intend to appoint highly qualified directors with the
appropriate experience and relationships who are committed to serving YOUR best
interests.
BARINGTON: NOT COMMITTED TO SERVING YOUR BEST INTERESTS
Barington Companies Equity Partners, L.P., led by James A. Mitarotonda, who
wants a seat on your Company's Board, IS AN INVESTMENT FIRM THAT IN THE PAST TWO
YEARS ALONE HAS ENGAGED IN SUCCESSIVE PROXY FIGHTS AGAINST SIX PRIMARILY
MICRO-CAP COMPANIES IN THE INTERNET AND FINANCIAL SERVICES FIELDS. Barington
made its first investment in Nautica Enterprises only seven weeks before filing
its proxy proposal and now seeks substantial control of your Company by
obtaining three board seats. From their history, Barington and its nominees, Mr.
Mitarotonda, William J. Fox, and Michael Steinberg, have:
- No direct experience in the apparel manufacturing industry;
- A trail of quick-buck strikes at unrelated businesses;
- No track record for building sustained stockholder value.
In short, we believe placing Barington's nominees on your Company's Board
is NOT in the best interests of all stockholders.
YOUR COMPANY'S BOARD AND SENIOR MANAGEMENT TOGETHER ARE THE RIGHT TEAM ON
THE RIGHT TRACK. Our strategy for transformation is yielding results at a
challenging time in the men's apparel business, and we possess the funding,
infrastructure, management skills and expertise for significant further
progress. At the same time, we remain committed to exploring fully all
opportunities to enhance stockholder value in a manner that is sustaining and
for the long term.
In short, we urge you to protect your investment and enable Nautica
Enterprises to stay focused on a successful transformation by re-electing the
entire Board.
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED WHITE PROXY CARD TO ELECT YOUR
COMPANY'S ENTIRE EIGHT-MEMBER BOARD.
Thank you for your attention to this important matter.
Sincerely,
/s/ Harvey Sanders
Harvey Sanders
Chairman and Chief Executive Officer
FORWARD-LOOKING STATEMENTS
Certain statements made in this letter and other written or oral statements
made by or on behalf of the Company may contain "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on the Company's current expectations of future events and
are subject to a number of risks and uncertainties that may cause the Company's
actual results to differ materially from those described in the forward-looking
statements. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. These factors and
uncertainties include, among others: the risk that new businesses of the Company
will not be integrated successfully; the risk that the Company will experience
operational difficulties with its distribution facility; the overall level of
consumer spending on apparel; dependence on sales to a limited number of large
department store customers; risks related to extending credit to customers;
actions of existing or new competitors and changes in economic, political or
health conditions in the markets where the Company sells or sources its
products, including with respect to SARS; downturn or generally reduced shopping
activity caused by public safety concerns; risks associated with consolidations,
restructurings and other ownership changes in the retail industry; changes in
trends in the market segments in which the Company competes; risks associated
with uncertainty relating to the Company's ability to launch, support and
implement new product lines; effects of competition; changes in the costs of raw
materials, labor and advertising; the ability to secure and protect trademarks
and other intellectual property rights; risks associated with the relocation of
Earl Jean, Inc.; the risk that the cost of transitioning the Nautica Europe
business to licensing or other key arrangements will be more than anticipated or
that the Company will not be able to negotiate acceptable terms; and, the impact
that any labor disruption at the Company's ports of entry could have on timely
product deliveries. These and other risks and uncertainties are disclosed from
time to time in the Company's filings with the Securities and Exchange
Commission, including the "Forward-Looking and Cautionary Statements" section of
the Company's Annual Report on Form 10-K for the fiscal year ended March 1,
2003, in the Company's press releases and in oral statements made by or with the
approval of authorized personnel. The Company assumes no obligation to update
any forward-looking statements as a result of new information or future events
or developments.
If you have any questions about the proxy solicitation or need additional
information
about the Nautica Enterprises stockholders' meeting, please contact
MacKenzie Partners, Inc. as set forth below:
(MACKENZI LOGO)
105 Madison Avenue
New York, New York 10016
proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or
TOLL-FREE (800) 322-2885