<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 August 28, 1999 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
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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)541-5757
-----------------------------
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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 October 6, 1999
was 34,616,771.
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
AUGUST 28, 1999
(unaudited)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets
As at August 28, 1999 and February 27, 1999................................2
Condensed Consolidated Statements of Earnings
For the Six and Three Month Periods Ended
August 28, 1999 and August 29, 1998........................................3
Condensed Consolidated Statements of Cash Flows
For the Six Month Periods Ended
August 28, 1999 and August 29, 1998........................................4
Notes to Condensed Consolidated Financial Statements.......................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......11
Part II - Other Information........................................................12
</TABLE>
<PAGE> 3
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
(unaudited)
August 28, February 27,
1999 1999
----------------------- ----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,885 $ 15,498
Short-term investments 28,572 55,049
Accounts receivable - net 116,837 102,471
Inventories 84,541 70,212
Prepaid expenses and other current assets 5,036 5,434
Deferred tax benefit 7,710 7,369
----------------------- ----------------------
Total current assets 253,581 256,033
Property, plant and equipment, net of
accumulated depreciation and amortization 71,826 64,524
Other assets 13,961 11,777
----------------------- ----------------------
$ 339,368 $ 332,334
======================= ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ - $ 50
Accounts payable - trade 33,590 29,596
Accrued expenses and other current liabilities 49,636 40,298
Income taxes payable 11,223 6,523
----------------------- ----------------------
Total current liabilities 94,449 76,467
Long-term debt -net - 50
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 42,658,000 shares
at August 28, 1999 and 42,604,000 shares at
February 27, 1999 4,267 4,260
Additional paid-in capital 67,145 66,813
Retained earnings 294,270 275,882
Accumulated other comprehensive loss (201) (35)
----------------------- ----------------------
365,481 346,920
Less:
Common stock in treasury - at cost;
8,041,000 shares at August 28, 1999
and 5,596,000 at February 27, 1999 (120,562) (91,103)
----------------------- ----------------------
Total stockholders' equity 244,919 255,817
----------------------- ----------------------
$ 339,368 $ 332,334
======================= ======================
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE> 4
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
August 28, 1999 August 29, 1998 August 28, 1999 August 29, 1998
-------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net Sales $ 275,179 $ 261,868 $ 166,017 $ 150,888
Cost of goods sold 145,272 137,466 87,413 78,241
-------------------- ------------------- ------------------- -------------------
Gross profit 129,907 124,402 78,604 72,647
Selling, general and
administrative expenses 103,353 82,391 57,250 43,575
Net royalty income (2,841) (3,002) (1,424) (1,389)
-------------------- ------------------- ------------------- -------------------
Operating profit 29,395 45,013 22,778 30,461
Investment income, net 848 2,616 288 1,205
Minority interest in loss of
consolidated subsidiary - 285 - (31)
-------------------- ------------------- ------------------- -------------------
Earnings before provision
for income taxes 30,243 47,914 23,066 31,635
Provision for income taxes 11,855 18,926 9,042 12,496
-------------------- ------------------- ------------------- -------------------
NET EARNINGS $ 18,388 $ 28,988 $ 14,024 $ 19,139
==================== =================== =================== ===================
Net earnings per share of
common stock
Basic $ 0.53 $ 0.74 $ 0.41 $ 0.49
==================== =================== =================== ===================
Diluted $ 0.50 $ 0.69 $ 0.38 $ 0.46
==================== =================== =================== ===================
Weighted average number of
common shares outstanding
Basic 35,002,000 39,341,000 34,599,000 39,362,000
==================== =================== =================== ===================
Diluted 36,963,000 41,785,000 36,745,000 41,607,000
==================== =================== =================== ===================
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
(amounts in thousands)
<TABLE>
<CAPTION>
(unaudited)
Six Months Six Months
Ended Ended
August 28, 1999 August 29, 1998
--------------------------- ---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 18,388 $ 28,988
--------------------------- ---------------------------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Minority interest in net loss of consolidated subsidiary - (285)
Deferred income taxes (231) -
Depreciation and amortization 8,891 6,149
Provision for bad debts 603 936
Changes in operating assets and liabilities
Accounts receivable (14,968) (21,936)
Inventories (14,329) (31,872)
Prepaid expenses and other current assets 398 (791)
Other assets (2,642) (2,495)
Accounts payable - trade 3,994 21,722
Accrued expenses and other current liabilities 9,338 499
Income taxes payable 4,700 3,342
--------------------------- ---------------------------
Total adjustments (4,246) (24,731)
--------------------------- ---------------------------
Net cash provided by operating activities 14,142 4,257
--------------------------- ---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (15,735) (12,420)
Sale of short-term investments 26,201 15,443
--------------------------- ---------------------------
Net cash used in investing activities 10,466 3,023
--------------------------- ---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (100) (50)
Purchase of treasury stock (29,460) (40,472)
Proceeds from issuance of common stock 339 764
--------------------------- ---------------------------
Net cash used in financing activities (29,221) (39,758)
--------------------------- ---------------------------
Decrease in cash and cash equivalents (4,613) (32,478)
Cash and cash equivalents at beginning of period 15,498 34,616
--------------------------- ---------------------------
Cash and cash equivalents at end of period $ 10,885 $ 2,138
--------------------------- ---------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 7,135 $ 15,548
--------------------------- ---------------------------
</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
AUGUST 28, 1999
(unaudited)
(amounts in thousands)
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 six-month period ended
August 28, 1999 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 certain wholesale inventories as at August 28, 1999 and
February 27, 1999 and for the six and three month periods ended
August 28, 1999 and August 29, 1998. The "LIFO" inventory for the
six month periods ended August 28, 1999 and August 29, 1998 are
based upon end of year estimates. Inventories at August 28, 1999
and February 27, 1999 consist primarily of finished goods.
NOTE 4 - The Company has adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130), "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components in a financial statement.
Accumulated other comprehensive income as presented on the
accompanying balance sheets, consists of the changes in
unrealized gains and losses on securities. Comprehensive income
as defined includes all changes in equity during a period from
non-owner sources, as follows:
<TABLE>
<CAPTION>
Six Six Three Three
Months Ended Months Ended Months Ended Months Ended
August 28, 1999 August 29, 1998 August 28, 1999 August 29, 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net earnings $18,388 $28,988 $14,024 $19,139
Changes in unrealized gains and losses
on securities, net of tax (166) (105) (61) (48)
----- ----- ---- ----
Comprehensive Income $18,222 $28,883 $13,963 $19,091
======= ======= ======= =======
</TABLE>
-5-
<PAGE> 7
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
AUGUST 28, 1999
(unaudited)
(amounts in thousands)
NOTE 5 - Short-term investments consist primarily of government and
agency bonds, tax exempt municipal bonds and corporate bonds.
These marketable securities are classified as available-for-sale
and are adjusted to market value at the end of each accounting
period. Unrealized market gains and losses, net of deferred tax,
are reported in stockholders' equity. Realized gains and losses
on sales of investments are determined on a specific
identification basis, and are included in the consolidated
statements of earnings. For the six months ended August 28, 1999
and August 29, 1998, gross realized gains totaled $21 and $308
and gross realized losses totaled $239 and $31, respectively. For
the three months ended August 28, 1999 and August 29, 1998, gross
realized gains totaled $2 and $247 and gross realized losses
totaled $196 and $4, respectively.
The unrealized losses on available-for-sale securities which were
included in accumulated other comprehensive loss were losses of
$334 (net of deferred tax of $133) and $58 (net of deferred tax
of $23) as of August 28, 1999 and February 27, 1999,
respectively.
NOTE 6 - Basic net earnings per share excludes dilution and is
computed by dividing income available to common shareholders by
the weighted-average common shares outstanding for the period.
Diluted net earnings per share reflects the weighted-average
common shares outstanding plus the potential dilutive effect of
options which are convertible into common shares. Options which
were excluded from the calculation of diluted earnings per share
because the exercise prices of the options were greater than the
average market price of the common shares and, therefore, would
be antidilutive, were 2,436,350 during the six months ended
August 28, 1999. All options were included in the calculation of
related earnings per share during the six and three months ended
August 29, 1998.
NOTE 7 - The Company has adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which established reporting and
disclosure standards for an enterprise's operating segments.
Operating segments are defined as components of an enterprise for
which separate financial information is available and regularly
reviewed by the Company's senior management.
The Company has the following two reportable segments: Wholesale
and Outlet Retail. The Wholesale segment designs, sources,
markets, and distributes sportswear, activewear, outerwear, robes
and sleepwear for men and robes and sleepwear for ladies to
retail store customers. The Outlet Retail segment sells men's
apparel and other Nautica-branded products primarily through
outlet retail store locations directly to consumers.
-6-
<PAGE> 8
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
August 28, 1999
(unaudited)
(amounts in thousands)
Segment profit is based on earnings before income taxes. The
reportable segments are distinct business units and are
separately managed with different distribution channels.
<TABLE>
<CAPTION>
Outlet All Corporate/
Wholesale Retail Other Eliminations Totals
--------- ------ ----- ------------ ------
FOR THE SIX MONTHS ENDED AUGUST 28, 1999
<S> <C> <C> <C> <C> <C>
Net Sales $212,874 $62,305 $275,179
Segment operating profit (loss) 23,006 8,126 $2,841 $(3,730) 30,243
Segment Assets 228,737 45,744 9,267 55,620 339,368
Depreciation expense 7,403 499 219 312 8,433
FOR THE SIX MONTHS ENDED AUGUST 29, 1998
Net Sales $206,294 $55,574 $261,868
Segment operating profit (loss) 35,897 10,576 $3,002 $(1,561) 47,914
Segment Assets 220,266 39,438 11,531 53,620 324,855
Depreciation expense 5,189 395 102 178 5,864
<CAPTION>
Outlet All Corporate/
Wholesale Retail Other Eliminations Totals
--------- ------ ----- ------------ ------
FOR THE THREE MONTHS ENDED AUGUST 28, 1999
<S> <C> <C> <C> <C> <C>
Net Sales $127,119 $38,898 $166,017
Segment operating profit (loss) 17,807 6,423 $1,425 $(2,589) 23,066
Segment Assets 228,737 45,744 9,267 55,620 339,368
Depreciation expense 3,733 260 137 156 4,286
FOR THE THREE MONTHS ENDED AUGUST 29, 1998
Net Sales $116,607 $34,281 $150,888
Segment operating profit (loss) 24,017 7,386 $1,389 $(1,157) 31,635
Segment Assets 220,266 39,438 11,531 53,620 324,855
Depreciation expense 2,884 215 51 89 3,239
</TABLE>
In the Corporate/Eliminations column the segment assets primarily
consist of the Company's cash and investment portfolio and the
segment operating loss consists of corporate expenses offset by
investment income earned.
-7-
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (unaudited)
RESULTS OF OPERATIONS
For the Six Months Ended August 28, 1999:
Net sales increased 5.1% to $275.2 million in the six months ended August
28, 1999 from $261.9 million in the comparable prior year period. The increase
in sales is due primarily to increased unit volume rather than price increases.
Wholesale sales increased 3.2% to $212.9 million from $206.3 million due to the
launch of the Nautica Sport Tech, Nautica Jeans Company and Nautica Ladies Robes
and Sleepwear product lines. Outlet Retail sales increased 12.1% to $62.3
million from $55.6 million as a result of sales from new stores opened in the
last twelve months, offsetting negative comparable store sales.
Gross profit for the period was 47.2% compared to 47.5% in the comparable
prior year period. This decrease is due to the impact of lower margins on new
product lines.
Total selling, general and administrative expenses increased by $21.0
million to $103.4 million from $82.4 million. Selling, general and
administrative expenses as a percentage of net sales increased to 37.6% from
31.5% in the comparable prior year period. Such increase is principally due to
costs associated with the launch and support of new product lines.
Net royalty income decreased by $.2 million to $2.8 million from $3.0
million in the comparable prior year period. The decrease is due to the
termination of the women's sportswear license, the transition of the fragrance
license to a new licensee and the transfer of jeans from a licensed to an
"in-house" business.
Investment income decreased by $1.8 million to $.8 million from $2.6
million in the comparable prior year period. The decrease is the result of lower
average cash balances, due to the Company's stock purchase program.
The provision for income taxes decreased to 39.2% from 39.5% of earnings
before income taxes in the comparable prior year period. The decrease is due
primarily to a reduction in the effective state income tax rates.
Net earnings decreased 36.6% to $18.4 million from $29.0 million in the
comparable prior year period as a result of the factors discussed above.
-8-
<PAGE> 10
For the Three Months Ended August 28, 1999:
Net sales increased 10.0% to $166.0 million in the three months ended
August 28, 1999 from $150.9 million in the comparable prior year period. The
increase in sales is due primarily to increased unit volume rather than price
increases. Wholesale sales increased 9.0% to $127.1 million from $116.6 million
due to the launch of the Nautica Sport Tech, Nautica Jeans Company and Nautica
Ladies Robes and Sleepwear fall product lines. Outlet Retail sales increased
13.5% to $38.9 million from $34.3 million as a result of sales from new stores
opened in the last twelve months offsetting negative comparable store sales.
Gross profit for the period was 47.3% compared to 48.1% in the comparable
prior year period. This decrease is due to the impact of lower margins on new
product lines.
Total selling, general and administrative expenses increased by $13.7
million to $57.3 million from $43.6 million. Selling, general and administrative
expenses as a percentage of net sales increased to 34.5% from 28.9% in the
comparable prior year period. The increase in the percentage of net sales is
principally due to costs associated with the launch and support of new product
lines.
Net royalty income of $1.4 million was comparable to the prior year
period.
Investment income decreased by $.9 million to $.3 million from $1.2
million in the comparable prior year period. The decrease is the result of lower
average cash balances, due to the Company's stock purchase program.
The provision for income taxes decreased to 39.2% from 39.5% of earnings
before income taxes in the comparable prior year period. The decrease is due
primarily to a reduction in the effective state income tax rates.
Net earnings decreased 26.7% to $14.0 million from $19.1 million in the
comparable prior year period as a result of the factors discussed above.
-9-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended August 28, 1999, the Company generated cash
from operating activities of $14.1 million, principally from net earnings.
Increases in accounts receivable and inventory of $15.0 and $14.3 million,
respectively, due to increased sales, were financed principally by cash
generated from net earnings and increases in accounts payable and accrued
expenses. Accounts receivable was 14.4% higher than the same period in the prior
year due to increased sales and the timing of shipments, with a greater
percentage occurring in the last part of the quarter. Inventory was 14.3% lower
than the same period in the prior year due to a shift by retailers in order
delivery dates for the holiday season, particularly for outerwear. During the
six months ended August 29, 1998, the Company generated cash from operating
activities of $4.3 million, principally from net earnings. Increases in accounts
receivable and inventory of $21.9 and $31.9 million, respectively, were due to
increased sales, and were financed principally by cash generated from net
earnings, and increases in accounts payable. Accounts receivable and inventory
were higher than the same period in the prior year by 12.0% and 13.0%,
respectively. These increases were related to sales increases.
During the six months ended August 28, 1999, the Company's principal
investing activities related primarily to the continued expansion of the Nautica
in-store shop programs. The Company expects to continue to incur capital
expenditures to support the in-store shop program, open additional outlet retail
stores, and to launch and support new product lines. At August 28, 1999, there
were no other material commitments for capital expenditures.
During the six months ended August 28, 1999, the Company purchased
2,444,500 shares of its outstanding common stock at a cost of $29.5 million.
The Company has a total of $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 inventory and accounts receivable. At August
28, 1999 and February 27, 1999, letters of credit outstanding under the lines
were $60.7 million and $37.9 million, respectively, and there were no short-term
borrowings outstanding.
Historically, the Company has experienced its highest level of sales in
the second and third quarters and its lowest level in the first and fourth
quarters due to seasonal patterns. In the future, the timing of seasonal
shipments may vary by quarter. The Company anticipates that internally generated
funds from operations, existing cash balances, short-term investments and the
Company's existing credit lines will be sufficient to satisfy its cash
requirements.
INFLATION AND CURRENCY FLUCTUATIONS
The Company believes that inflation and the effect of fluctuations of the
dollar against foreign currencies have not had a material effect on the cost of
imports or the Company's results of operations.
YEAR 2000
The Company has been engaged in a process to ensure that its systems will
recognize and process transactions for the year 2000 and beyond. The Company
believes that it has implemented successfully the systems and programming
changes necessary to address year 2000 issues with respect to its internal
systems. The cost of such actions has not had a material adverse effect on the
Company's results of operations or financial condition. The Company developed a
plan which identified all systems requiring modification or replacement,
established a timeframe for ensuring its
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<PAGE> 12
year 2000 compliance and appointed a responsible party in the organization for
the particular system. The Company has finished the year 2000 testing and
implementation of the systems upgrade and will be continuously monitoring and
testing the internal systems through the end of 1999 and the early part of 2000.
The Company also has initiated discussions with its significant
suppliers, customers and financial institutions to ensure that those parties
have appropriate plans to remediate year 2000 issues when their systems
interface with the Company's systems or may otherwise impact operations.
Although the Company is not aware of any material operational issues or costs
associated with preparing its internal systems for the year 2000, there can be
no assurance that there will not be a delay in, or increased costs associated
with, the implementation of the necessary systems and changes to address the
year 2000 issues. The Company's current estimate of costs to be incurred is less
than $500,000, which is mostly being incurred internally and does not reflect
significant incremental costs. The Company and its significant suppliers,
customers, and financial institutions' inability to implement such systems and
changes could have an adverse effect on future results of operations, or
financial condition of the Company.
The Company is developing a contingency plan in order to minimize the
potential disruption of business operations that may result if the Company, its
vendors or customers fail to become year 2000 compliant.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This Quarterly Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, that are not historical
facts but rather reflect the Company's current expectations concerning future
results and events. The words "believes," "anticipates," "expects" and similar
expressions, which identify forward-looking statements, are subject to certain
risks and uncertainties, including those which are economic, competitive and
technological, that could cause actual results to differ materially from those
forecast or anticipated. 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.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosure about interest rate risk
The Company has no long-term debt, and finances capital needs through
available capital, future earnings and bank lines of credit. The Company's
exposure to market risk for changes in interest rates is primarily in its
investment portfolio. The Company, pursuant to investing guidelines, mitigates
exposure by limiting maturity, placing investments with high credit quality
issuers and limiting the amount of credit exposure to any one issuer. During the
six months ended August 28, 1999, the Company earned investment income of $.8
million. If interest rates had been 1% lower than they were during the year,
investment income would have been $.5 million lower. The market risks associated
with the investment portfolio exposure has not changed materially since February
27, 1999.
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<PAGE> 13
PART II
OTHER INFORMATION
Items I through 9. - All items are inapplicable except:
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Annual Meeting of Stockholders of Nautica Enterprises, Inc. was held
on July 1, 1999.
(b) The directors named in the Proxy Statement constituting the entire Board
of Directors were elected to one-year terms expiring in 2000, as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Harvey Sanders 31,764,937 276,580
David Chu 31,764,937 276,580
George Greenberg 31,759,202 282,315
Robert B. Bank 31,764,137 277,380
Israel Rosenzweig 31,758,931 282,586
Charles Scherer 31,764,601 276,916
Ronald G. Weiner 31,763,801 277,716
</TABLE>
(c) At the Annual Meeting, the stockholders voted upon a proposal to
reapprove the material terms of the Company's Incentive Compensation
Plan, as follows:
<TABLE>
<S> <C>
For the proposal 31,233,463
Against the proposal 752,858
Withheld 55,196
</TABLE>
The Notice of Annual Meeting of Stockholders and Proxy Statement for Nautica
Enterprises, Inc. dated May 28, 1999 was filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Distribution
- ----------- ------------
<S> <C>
3(a) Registrant's By-laws as currently in effect are incorporated herein by reference
to Registrant's Registration Statement on Form S-1 (Registration No. 33-21998).
3(b) Registrant's Certificate of Incorporation is incorporated by reference to the
Registration Statement on Form S-3 (Registration No. 33-71926), as amended by
a Certificate of Amendment dated June 29, 1995.
10(iii)(a) Registrant's Executive Incentive Stock Option Plan is incorporated by reference
herein from the Registrant's Registration Statements on Form S-8 (Registration
Number 33-1488), as amended by the Company's Registration Statement on Form S-8
(Registration Number 33-45823).
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
10(iii)(b) Registrant's 1989 Employee Incentive Stock Plan is incorporated by reference
herein from the Registrant's Registration Statement on Form S-8 (Registration
Number 33-36040).
10(iii)(c) Registrant's 1996 Stock Incentive Plan is incorporated by reference herein
from Registrant's Registration Statement on Form S-8 (Registration Number
333-55711).
10(iii)(d) Registrant's 1994 Incentive Compensation Plan is incorporated herein from the
Registrant's Annual Report on Form 10-K for the fiscal year ended February
28, 1997.
10(iii)(e) Registrant's Deferred Compensation Plan is incorporated herein by reference
from the Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1998.
10(iii)(f) Option Agreement and Royalty Agreement, each dated July 1, 1987, by and among
the Registrant and David Chu are incorporated herein by reference from the
Registrant's Registration Statement on Form S-1 (Registration No. 33-21998), and
letter agreement dated May 1, 1998 between Mr. Chu and the Registrant is
incorporated herein by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1998.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. None
-13-
<PAGE> 15
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: October 6, 1999
-------------------------
By: s/W. Donald Pennington
-------------------------------------
W. Donald Pennington
Chief Financial Officer
Date: October 6, 1999
-------------------------
-14-
<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> 6-MOS
<FISCAL-YEAR-END> MAR-04-2000
<PERIOD-START> FEB-28-1999
<PERIOD-END> AUG-28-1999
<CASH> 10,885
<SECURITIES> 28,572
<RECEIVABLES> 120,079
<ALLOWANCES> 3,242
<INVENTORY> 84,541
<CURRENT-ASSETS> 253,581
<PP&E> 112,859
<DEPRECIATION> 41,033
<TOTAL-ASSETS> 339,368
<CURRENT-LIABILITIES> 94,449
<BONDS> 0
0
0
<COMMON> 4,267
<OTHER-SE> 240,652
<TOTAL-LIABILITY-AND-EQUITY> 339,368
<SALES> 275,179
<TOTAL-REVENUES> 278,868
<CGS> 145,272
<TOTAL-COSTS> 145,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,243
<INCOME-TAX> 11,855
<INCOME-CONTINUING> 18,388
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,388
<EPS-BASIC> 0.53
<EPS-DILUTED> 0.50
</TABLE>
