UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended April 30, 2016
¨ |
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: 1-16497
MOVADO GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
New York |
|
13-2595932 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(IRS Employer Identification No.) |
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|
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650 From Road, Ste. 375 Paramus, New Jersey |
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07652-3556 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(201) 267-8000
(Registrant’s telephone number, including area code)
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 that past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,’’ “accelerated filer’’ and “smaller reporting company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer x |
Non-accelerated filer ¨ |
Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the registrant’s Common Stock and Class A Common Stock as of May 19, 2016 were 16,365,727 and 6,644,105, respectively.
Index to Quarterly Report on Form 10-Q
April 30, 2016
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Page |
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Part I |
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Item 1. |
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Consolidated Balance Sheets at April 30, 2016, January 31, 2016 and April 30, 2015 |
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3 |
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Consolidated Statements of Operations for the three months ended April 30, 2016 and April 30, 2015 |
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4 |
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5 |
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Consolidated Statements of Cash Flows for the three months ended April 30, 2016 and April 30, 2015 |
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6 |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
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Item 3. |
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24 |
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Item 4. |
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24 |
Part II |
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25 |
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Item 1. |
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25 |
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Item 1A. |
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25 |
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Item 2. |
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25 |
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Item 6. |
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27 |
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28 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MOVADO GROUP, INC.
(In thousands, except share and per share amounts)
(Unaudited)
|
April 30, |
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January 31, |
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April 30, |
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|||
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2016 |
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2016 |
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2015 |
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ASSETS |
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Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
203,909 |
|
|
$ |
228,188 |
|
|
$ |
185,828 |
|
Trade receivables, net |
|
75,771 |
|
|
|
71,030 |
|
|
|
73,472 |
|
Inventories |
|
178,388 |
|
|
|
162,465 |
|
|
|
183,904 |
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Other current assets |
|
36,472 |
|
|
|
27,352 |
|
|
|
37,705 |
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Total current assets |
|
494,540 |
|
|
|
489,035 |
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|
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480,909 |
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|
|
|
|
|
|
|
|
|
|
|
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Property, plant and equipment, net |
|
37,247 |
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|
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38,553 |
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|
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44,354 |
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Deferred and non-current income taxes |
|
20,697 |
|
|
|
20,323 |
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|
|
19,791 |
|
Other non-current assets |
|
41,578 |
|
|
|
37,259 |
|
|
|
39,483 |
|
Total assets |
$ |
594,062 |
|
|
$ |
585,170 |
|
|
$ |
584,537 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
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Current liabilities: |
|
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|
|
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Loans payable to bank, current |
$ |
— |
|
|
$ |
5,000 |
|
|
$ |
25,000 |
|
Accounts payable |
|
27,677 |
|
|
|
27,308 |
|
|
|
25,647 |
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Accrued liabilities |
|
37,191 |
|
|
|
39,617 |
|
|
|
37,899 |
|
Income taxes payable |
|
893 |
|
|
|
6,257 |
|
|
|
1,130 |
|
Total current liabilities |
|
65,761 |
|
|
|
78,182 |
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|
|
89,676 |
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|
|
|
|
|
|
|
|
|
|
|
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Loans payable to bank |
|
35,000 |
|
|
|
35,000 |
|
|
|
— |
|
Deferred and non-current income taxes payable |
|
3,008 |
|
|
|
2,640 |
|
|
|
3,727 |
|
Other non-current liabilities |
|
30,875 |
|
|
|
28,201 |
|
|
|
30,484 |
|
Total liabilities |
|
134,644 |
|
|
|
144,023 |
|
|
|
123,887 |
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|
|
|
|
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Commitments and contingencies (Note 8) |
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Equity: |
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Preferred Stock, $0.01 par value, 5,000,000 shares authorized; no shares issued |
|
— |
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|
|
— |
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|
|
— |
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Common Stock, $0.01 par value, 100,000,000 shares authorized; 27,124,011, 26,962,656 and 26,926,331 shares issued and outstanding, respectively |
|
271 |
|
|
|
270 |
|
|
|
269 |
|
Class A Common Stock, $0.01 par value, 30,000,000 shares authorized; 6,644,105, 6,644,105 and 6,644,105 shares issued and outstanding, respectively |
|
66 |
|
|
|
66 |
|
|
|
66 |
|
Capital in excess of par value |
|
180,562 |
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|
|
178,118 |
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|
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176,524 |
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Retained earnings |
|
393,113 |
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392,788 |
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358,992 |
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Accumulated other comprehensive income |
|
86,171 |
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|
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68,505 |
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|
|
95,221 |
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Treasury Stock, 10,742,285, 10,664,512 and 9,662,176 shares, respectively, at cost |
|
(201,397 |
) |
|
|
(199,195 |
) |
|
|
(172,515 |
) |
Total Movado Group, Inc. shareholders' equity |
|
458,786 |
|
|
|
440,552 |
|
|
|
458,557 |
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Noncontrolling interests |
|
632 |
|
|
|
595 |
|
|
|
2,093 |
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Total equity |
|
459,418 |
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|
|
441,147 |
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|
|
460,650 |
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Total liabilities and equity |
$ |
594,062 |
|
|
$ |
585,170 |
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|
$ |
584,537 |
|
See Notes to Consolidated Financial Statements
3
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
Three Months Ended April 30, |
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|||||
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2016 |
|
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2015 |
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Net sales |
$ |
114,063 |
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$ |
120,461 |
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Cost of sales |
|
52,746 |
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|
|
58,012 |
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Gross profit |
|
61,317 |
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|
|
62,449 |
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Selling, general, and administrative |
|
55,939 |
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|
|
55,574 |
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Operating income |
|
5,378 |
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|
|
6,875 |
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Interest expense |
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(375 |
) |
|
|
(152 |
) |
Interest income |
|
57 |
|
|
|
53 |
|
Income before income taxes |
|
5,060 |
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|
|
6,776 |
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Provision for income taxes (Note 9) |
|
1,723 |
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|
|
3,135 |
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Net income |
|
3,337 |
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|
|
3,641 |
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Less: Net income attributed to noncontrolling interests |
|
29 |
|
|
|
19 |
|
Net income attributed to Movado Group, Inc. |
$ |
3,308 |
|
|
$ |
3,622 |
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Basic income per share: |
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|
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Weighted basic average shares outstanding |
|
23,073 |
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|
|
24,279 |
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Net income per share attributed to Movado Group, Inc. |
$ |
0.14 |
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$ |
0.15 |
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Diluted income per share: |
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|
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|
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Weighted diluted average shares outstanding |
|
23,349 |
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|
|
24,569 |
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Net income per share attributed to Movado Group, Inc. |
$ |
0.14 |
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|
$ |
0.15 |
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|
|
|
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Dividends declared per share |
$ |
0.13 |
|
|
$ |
0.11 |
|
See Notes to Consolidated Financial Statements
4
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS)
(In thousands)
(Unaudited)
|
Three Months Ended April 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Comprehensive income / (loss), net of taxes: |
|
|
|
|
|
|
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Net income including noncontrolling interests |
$ |
3,337 |
|
|
$ |
3,641 |
|
Net unrealized gain on investments, net of tax of $2 and $4, respectively |
|
6 |
|
|
|
10 |
|
Net change in effective portion of hedging contracts, net of tax benefit of $46 and $100, respectively |
|
(232 |
) |
|
|
(508 |
) |
Foreign currency translation adjustments |
|
17,900 |
|
|
|
(3,137 |
) |
Comprehensive income including noncontrolling interests |
|
21,011 |
|
|
|
6 |
|
Less: Comprehensive income attributed to noncontrolling interests |
|
37 |
|
|
|
17 |
|
Total comprehensive income / (loss) attributed to Movado Group, Inc. |
$ |
20,974 |
|
|
$ |
(11 |
) |
See Notes to Consolidated Financial Statements
5
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Three Months Ended April 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income including noncontrolling interests |
$ |
3,337 |
|
|
$ |
3,641 |
|
Adjustments to reconcile net income to net cash (used in) operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
2,901 |
|
|
|
2,981 |
|
Transactional losses / (gains) |
|
111 |
|
|
|
(774 |
) |
Write-down of inventories |
|
359 |
|
|
|
330 |
|
Deferred income taxes |
|
69 |
|
|
|
283 |
|
Stock-based compensation |
|
2,409 |
|
|
|
1,520 |
|
Excess tax shortfall / (benefit) from stock-based compensation |
|
103 |
|
|
|
(42 |
) |
Operating efficiency initiatives and other items |
|
— |
|
|
|
2,670 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Trade receivables |
|
(3,603 |
) |
|
|
685 |
|
Inventories |
|
(11,287 |
) |
|
|
(14,205 |
) |
Other current assets |
|
(4,944 |
) |
|
|
(3,959 |
) |
Accounts payable |
|
(360 |
) |
|
|
(2,079 |
) |
Accrued liabilities |
|
(3,378 |
) |
|
|
4,044 |
|
Income taxes payable |
|
(5,595 |
) |
|
|
(5,914 |
) |
Other non-current assets |
|
(3,351 |
) |
|
|
(1,641 |
) |
Other non-current liabilities |
|
2,248 |
|
|
|
1,286 |
|
Net cash (used in) operating activities |
|
(20,981 |
) |
|
|
(11,174 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
(538 |
) |
|
|
(1,461 |
) |
Short-term investment |
|
(156 |
) |
|
|
— |
|
Restricted cash deposits |
|
(1,070 |
) |
|
|
— |
|
Trademarks and other intangibles |
|
(226 |
) |
|
|
(94 |
) |
Net cash (used in) investing activities |
|
(1,990 |
) |
|
|
(1,555 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from bank borrowings |
|
— |
|
|
|
25,000 |
|
Repayments of bank borrowings |
|
(5,000 |
) |
|
|
— |
|
Stock options exercised and other changes |
|
(1,204 |
) |
|
|
(513 |
) |
Excess tax (shortfall) / benefit from stock-based compensation |
|
(103 |
) |
|
|
42 |
|
Dividends paid |
|
(2,983 |
) |
|
|
(2,636 |
) |
Stock repurchase |
|
(943 |
) |
|
|
(22,154 |
) |
Net cash (used in) financing activities |
|
(10,233 |
) |
|
|
(261 |
) |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
8,925 |
|
|
|
(1,034 |
) |
Net (decrease) in cash and cash equivalents |
|
(24,279 |
) |
|
|
(14,024 |
) |
Cash and cash equivalents at beginning of period |
|
228,188 |
|
|
|
199,852 |
|
Cash and cash equivalents at end of period |
$ |
203,909 |
|
|
$ |
185,828 |
|
See Notes to Consolidated Financial Statements
6
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The accompanying interim unaudited consolidated financial statements have been prepared by Movado Group, Inc. (the “Company”), in a manner consistent with that used in the preparation of the annual audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016 (the “2016 Annual Report on Form 10-K”). The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the financial position and results of operations for the periods presented. The consolidated balance sheet data at January 31, 2016 is derived from the audited annual financial statements, which are included in the Company’s 2016 Annual Report on Form 10-K and should be read in connection with these interim unaudited financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.
NOTE 1 – RECLASSIFICATIONS
Certain reclassifications were made to prior years’ financial statement amounts and related note disclosures to conform to fiscal 2017 presentation. As a result of early adoption of ASU 2015-17, “Income Taxes: Balance Sheet Classification of Deferred Taxes,” current deferred tax assets and liabilities were reclassified to non-current in all periods presented.
NOTE 2 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value into three broad levels as follows:
|
· |
Level 1 – Quoted prices in active markets for identical assets or liabilities. |
|
· |
Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. |
|
· |
Level 3 – Unobservable inputs based on the Company’s assumptions. |
The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in thousands) as of April 30, 2016 and 2015 and January 31, 2016:
|
|
|
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Fair Value at April 30, 2016 |
|
|||||||||||||
|
|
Balance Sheet Location |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
Other current assets |
|
$ |
281 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
281 |
|
Short-term investment |
|
Other current assets |
|
|
159 |
|
|
|
— |
|
|
|
— |
|
|
|
159 |
|
SERP assets - employer |
|
Other non-current assets |
|
|
1,185 |
|
|
|
— |
|
|
|
— |
|
|
|
1,185 |
|
SERP assets - employee |
|
Other non-current assets |
|
|
27,073 |
|
|
|
— |
|
|
|
— |
|
|
|
27,073 |
|
Hedge derivatives |
|
Other current assets |
|
|
— |
|
|
|
719 |
|
|
|
— |
|
|
|
719 |
|
Total |
|
$ |
28,698 |
|
|
$ |
719 |
|
|
$ |
— |
|
|
$ |
29,417 |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP liabilities - employee |
|
Other non-current liabilities |
|
$ |
27,073 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,073 |
|
Hedge derivatives |
|
Accrued liabilities |
|
|
— |
|
|
|
199 |
|
|
|
— |
|
|
|
199 |
|
Total |
|
$ |
27,073 |
|
|
$ |
199 |
|
|
$ |
— |
|
|
$ |
27,272 |
|
7
|
|
|
|
Fair Value at January 31, 2016 |
|
|||||||||||||
|
|
Balance Sheet Location |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
Other current assets |
|
$ |
268 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
268 |
|
SERP assets - employer |
|
Other non-current assets |
|
|
1,168 |
|
|
|
— |
|
|
|
— |
|
|
|
1,168 |
|
SERP assets - employee |
|
Other non-current assets |
|
|
24,853 |
|
|
|
— |
|
|
|
— |
|
|
|
24,853 |
|
Hedge derivatives |
|
Other current assets |
|
|
— |
|
|
|
64 |
|
|
|
— |
|
|
|
64 |
|
Total |
|
$ |
26,289 |
|
|
$ |
64 |
|
|
$ |
— |
|
|
$ |
26,353 |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP liabilities - employee |
|
Other non-current liabilities |
|
$ |
24,853 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
24,853 |
|
Hedge derivatives |
|
Accrued liabilities |
|
|
— |
|
|
|
1,163 |
|
|
|
— |
|
|
|
1,163 |
|
Total |
|
$ |
24,853 |
|
|
$ |
1,163 |
|
|
$ |
— |
|
|
$ |
26,016 |
|
|
|
|
|
Fair Value at April 30, 2015 |
|
|||||||||||||
|
|
Balance Sheet Location |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
Other current assets |
|
$ |
327 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
327 |
|
Long-term investment |
|
Other non-current assets |
|
|
— |
|
|
|
— |
|
|
|
1,264 |
|
|
|
1,264 |
|
SERP assets - employer |
|
Other non-current assets |
|
|
1,520 |
|
|
|
— |
|
|
|
— |
|
|
|
1,520 |
|
SERP assets - employee |
|
Other non-current assets |
|
|
26,047 |
|
|
|
— |
|
|
|
— |
|
|
|
26,047 |
|
Hedge derivatives |
|
Other current assets |
|
|
— |
|
|
|
866 |
|
|
|
— |
|
|
|
866 |
|
Total |
|
$ |
27,894 |
|
|
$ |
866 |
|
|
$ |
1,264 |
|
|
$ |
30,024 |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP liabilities - employee |
|
Other non-current liabilities |
|
$ |
26,047 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
26,047 |
|
Hedge derivatives |
|
Accrued liabilities |
|
|
— |
|
|
|
690 |
|
|
|
— |
|
|
|
690 |
|
Total |
|
$ |
26,047 |
|
|
$ |
690 |
|
|
$ |
— |
|
|
$ |
26,737 |
|
The fair values of the Company’s available-for-sale securities are based on quoted prices. The fair value of the short-term investment, which is a guaranteed investment certificate, is based on its purchase price plus one half of a percent calculated annually. The fair value of the long-term investment at April 30, 2015 was based on the purchase price plus eight percent calculated annually. During the second quarter of fiscal 2016, this investment converted to common and preferred shares of a privately held company, accounted for under the cost method, with a carrying value of $1.3 million. This investment is tested quarterly for impairment. During the three months ended April 30, 2016 no impairment was recorded for this investment. The assets related to the Company’s defined contribution supplemental executive retirement plan (“SERP”) consist of both employer (employee unvested) and employee assets which are invested in investment funds with fair values calculated based on quoted market prices. The SERP liability represents the Company’s liability to the employees in the plan for their vested balances. The hedge derivatives are entered into by the Company principally to reduce its exposure to Swiss franc and Euro exchange rate risks. Fair values of the Company’s hedge derivatives are calculated based on quoted foreign exchange rates and quoted interest rates. The carrying amount of debt approximated fair value as of April 30, 2016.
8
NOTE 3 – EQUITY
The components of equity for the three months ended April 30, 2016 and 2015 are as follows (in thousands):
|
|
Movado Group, Inc. Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Common Stock (1) |
|
|
Class A Common Stock (2) |
|
|
Capital in Excess of Par Value |
|
|
Retained Earnings |
|
|
Treasury Stock |
|
|
Accumulated Other Comprehensive Income |
|
|
Noncontrolling Interests |
|
|
Total |
|
||||||||
Balance, January 31, 2016 |
|
$ |
270 |
|
|
$ |
66 |
|
|
$ |
178,118 |
|
|
$ |
392,788 |
|
|
$ |
(199,195 |
) |
|
$ |
68,505 |
|
|
$ |
595 |
|
|
$ |
441,147 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,308 |
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
3,337 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,983 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,983 |
) |
Stock repurchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(943 |
) |
|
|
|
|
|
|
|
|
|
|
(943 |
) |
Stock options exercised, net of tax of $103 |
|
|
1 |
|
|
|
|
|
|
|
(49 |
) |
|
|
|
|
|
|
(1,259 |
) |
|
|
|
|
|
|
|
|
|
|
(1,307 |
) |
Supplemental executive retirement plan |
|
|
|
|
|
|
|
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
2,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,409 |
|
Net unrealized gain on investments, net of tax of $2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
Net change in effective portion of hedging contracts, net of tax benefit of $46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232 |
) |
|
|
|
|
|
|
(232 |
) |
Foreign currency translation adjustment (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,892 |
|
|
|
8 |
|
|
|
17,900 |
|
Balance, April 30, 2016 |
|
$ |
271 |
|
|
$ |
66 |
|
|
$ |
180,562 |
|
|
$ |
393,113 |
|
|
$ |
(201,397 |
) |
|
$ |
86,171 |
|
|
$ |
632 |
|
|
$ |
459,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (1) |
|
|
Class A Common Stock (2) |
|
|
Capital in Excess of Par Value |
|
|
Retained Earnings |
|
|
Treasury Stock |
|
|
Accumulated Other Comprehensive Income |
|
|
Noncontrolling Interests |
|
|
Total |
|
||||||||
Balance, January 31, 2015 |
|
$ |
268 |
|
|
$ |
66 |
|
|
$ |
174,826 |
|
|
$ |
358,006 |
|
|
$ |
(149,811 |
) |
|
$ |
98,854 |
|
|
$ |
2,076 |
|
|
$ |
484,285 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,622 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
3,641 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,636 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,636 |
) |
Stock repurchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,154 |
) |
|
|
|
|
|
|
|
|
|
|
(22,154 |
) |
Stock options exercised, net of tax benefit of $42 |
|
|
1 |
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
(550 |
) |
|
|
|
|
|
|
|
|
|
|
(471 |
) |
Supplemental executive retirement plan |
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
1,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,520 |
|
Net unrealized gain on investments, net of tax of $4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
10 |
|
Net change in effective portion of hedging contracts, net of tax benefit of $100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(508 |
) |
|
|
|
|
|
|
(508 |
) |
Foreign currency translation adjustment (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,135 |
) |
|
|
(2 |
) |
|
|
(3,137 |
) |
Balance, April 30, 2015 |
|
$ |
269 |
|
|
$ |
66 |
|
|
$ |
176,524 |
|
|
$ |
358,992 |
|
|
$ |
(172,515 |
) |
|
$ |
95,221 |
|
|
$ |
2,093 |
|
|
$ |
460,650 |
|
(1) |
Each share of common stock is entitled to one vote per share on all matters submitted to a vote of the shareholders. |
(2) |
Each share of class A common stock is entitled to 10 votes per share on all matters submitted to a vote of the shareholders. Each holder of class A common stock is entitled to convert, at any time, any and all of such shares into the same number of shares of common stock. Each share of class A common stock is converted automatically into common stock in the event that the beneficial or record ownership of such shares of class A common stock is transferred to any person, except to certain family members or affiliated persons deemed “permitted transferees” pursuant to the Company’s Restated Certificate of Incorporation as amended. The class A common stock is not publicly traded, and consequently, there is currently no established public trading market for these shares. |
(3) |
The currency translation adjustment is not adjusted for income taxes to the extent that it relates to permanent investments of earnings in international subsidiaries. |
9
NOTE 4 – SEGMENT AND GEOGRAPHIC INFORMATION
The Company follows accounting guidance related to disclosures about segments of an enterprise and related information. This guidance requires disclosure of segment data based on how management makes decisions about allocating resources to segments and measuring their performance.
The Company conducts its business in two operating segments: Wholesale and Retail. The Company’s Wholesale segment includes the designing, manufacturing and distribution of watches of quality luxury brands and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Retail segment includes the Company’s retail outlet locations.
The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 23.4%, 10.0%, 8.5% and 5.4%, respectively, of the Company’s total net sales for the three months ended April 30, 2016. For the three months ended April 30, 2015, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 18.6%, 11.0%, 8.7% and 8.1%, respectively, of the Company’s total net sales. Substantially all of the Company’s International assets are located in Switzerland and Hong Kong.
Operating Segment Data for the Three Months Ended April 30, 2016 and 2015 (in thousands):
|
Net Sales |
|
|||||
|
2016 |
|
|
2015 |
|
||
Wholesale: |
|
|
|
|
|
|
|
Luxury brands category |
$ |
42,036 |
|
|
$ |
44,903 |
|
Licensed brands category |
|
56,840 |
|
|
|
60,842 |
|
After-sales service and all other |
|
3,082 |
|
|
|
3,852 |
|
Total Wholesale |
|
101,958 |
|
|
|
109,597 |
|
Retail |
|
12,105 |
|
|
|
10,864 |
|
Consolidated total |
$ |
114,063 |
|
|
$ |
120,461 |
|
|
Operating Income |
|
|||||
|
2016 |
|
|
2015 |
|
||
Wholesale |
$ |
4,569 |
|
|
$ |
5,925 |
|
Retail |
|
809 |
|
|
|
950 |
|
Consolidated total |
$ |
5,378 |
|
|
$ |
6,875 |
|
|
Total Assets |
|
|||||||||
|
April 30, 2016 |
|
|
January 31, 2016 |
|
|
April 30, 2015 |
|
|||
Wholesale |
$ |
570,014 |
|
|
$ |
562,547 |
|
|
$ |
563,947 |
|
Retail |
|
24,048 |
|
|
|
22,623 |
|
|
|
20,590 |
|
Consolidated total |
$ |
594,062 |
|
|
$ |
585,170 |
|
|
$ |
584,537 |
|
Geographic Location Data for the Three Months Ended April 30, 2016 and 2015 (in thousands):
|
Net Sales |
|
|
Operating (Loss) / Income |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
United States (1) |
$ |
60,057 |
|
|
$ |
64,584 |
|
|
$ |
(1,393 |
) |
|
$ |
2,429 |
|
International (2) |
|
54,006 |
|
|
|
55,877 |
|
|
|
6,771 |
|
|
|
4,446 |
|
Consolidated total |
$ |
114,063 |
|
|
$ |
120,461 |
|
|
$ |
5,378 |
|
|
$ |
6,875 |
|
United States and International net sales are net of intercompany sales of $83.5 million and $81.5 million for the three months ended April 30, 2016 and 2015, respectively.
(1) |
The United States operating loss included $8.8 million and operating income included $7.1 million of unallocated corporate expenses for the three months ended April 30, 2016 and 2015, respectively. |
10
(2) |
The International operating income included $7.0 million and $8.8 million of certain intercompany profits related to the Company’s supply chain operations for the three months ended April 30, 2016 and 2015, respectively. |
|
Total Assets |
|
|||||||||
|
April 30, 2016 |
|
|
January 31, 2016 |
|
|
April 30, 2015 |
|
|||
United States |
$ |
209,325 |
|
|
$ |
215,053 |
|
|
$ |
214,062 |
|
International |
|
384,737 |
|
|
|
370,117 |
|
|
|
370,475 |
|
Consolidated total |
$ |
594,062 |
|
|
$ |
585,170 |
|