MOVADO GROUP, INC.
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(Exact name of registrant as specified in its charter)
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NEW YORK |
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(State or other jurisdiction of incorporation)
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1-16497 |
13-2595932 |
(Commission File Number)
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(I.R.S. Employer Identification No.)
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650 FROM ROAD, SUITE 375 PARAMUS, NEW JERSEY |
07652-3556 |
(Address of principal executive offices)
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(Zip Code)
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(201) 267-8000
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(Registrant’s telephone number, including area code)
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Title of each class
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Trading Symbol(s)
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Name of each exchange
on which registered
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Common stock, par value $0.01 per share
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MOV
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New York Stock Exchange
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Item 2.02.
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Results of Operations and Financial Condition.
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Item 9.01.
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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99.1
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MOVADO GROUP, INC.
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By:
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/s/ Mitchell Sussis
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Name:
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Mitchell Sussis
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Title:
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Senior Vice President and General Counsel
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CONTACT: |
ICR, Inc.
Rachel Schacter/Allison Malkin
203-682-8200
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— |
Net sales increased 9.5% to $157.8 million, or 11.0% on a constant dollar basis;
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— |
Operating income of $8.8 million versus $12.9 million in the prior year period; Adjusted operating income of $10.3 million versus $14.6 million in the prior year period; and
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— |
Diluted EPS of $0.75; Adjusted diluted EPS of $0.36 compared to $0.45 in prior year period.
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— |
Operating expenses include a $1.1 million pre-tax charge, or $0.9 million after tax, representing $0.04 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT;
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— |
$0.7 million pre-tax charge, or $0.6 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to Olivia Burton;
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— |
$0.3 million pre-tax gain, or $0.2 million after tax, representing $0.01 per diluted share, associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives; and
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— |
Other non-operating income includes a $13.6 million pre-tax benefit, or $10.4 million after tax, representing $0.44 per diluted share, associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition.
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— |
Operating expenses included a $0.7 million pre-tax charge, or $0.6 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to Olivia Burton; and
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— |
$1.0 million pre-tax charge, or $0.8 million after tax, representing $0.04 per diluted share, associated with professional fees in conjunction with the MVMT acquisition.
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— |
Net sales increased 9.5% to $157.8 million compared to $144.1 million in the second quarter of fiscal 2019. Net sales on a constant dollar basis increased 11.0% compared to net sales in the second quarter of fiscal 2019.
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— |
Gross profit was $85.3 million, or 54.1% of sales, compared to $77.8 million, or 54.0% of sales, in the second quarter last year. The slight increase in gross margin percentage was primarily the result of increased leverage on fixed costs due to increased sales and favorable changes in channel and product mix mostly offset by unfavorable changes in foreign currency exchange rates.
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— |
Operating expenses were $76.6 million compared to $65.0 million in the prior year period. For the second quarter of fiscal 2020, adjusted operating expenses were $75.1 million, which excludes $0.7 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.1 million in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. Adjusted operating expenses for the second quarter of fiscal 2019 were $63.2 million, which excludes $0.7 million of expenses associated with the amortization of acquired intangible assets
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related to Olivia Burton and $1.0 million of expenses related to professional fees in conjunction with the MVMT acquisition. The increase in adjusted operating expenses was attributable to higher marketing expenses primarily due to the addition of MVMT and an increase in other operating expenses to support overall sales growth across the portfolio as well as a new joint venture in Spain.
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— |
Operating income was $8.8 million compared to operating income of $12.9 million in the second quarter of fiscal 2019. Adjusted operating income for the second quarter of fiscal 2020 was $10.3 million, which excludes $0.7 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.1 million in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in the estimate of the remaining accrual for the fiscal 2018 cost savings initiatives. For the second quarter of fiscal 2019, adjusted operating income was $14.6 million, which excludes $0.7 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.0 million of expenses related to professional fees in conjunction with the MVMT acquisition.
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— |
Non-operating income included a non-cash change in contingent consideration of $13.6 million resulting from the remeasurement of the contingent consideration liability related to the MVMT acquisition.
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The Company recorded a tax provision of $4.7 million, which equates to an effective tax rate of 21.4%, compared to a tax provision of $3.6 million, or an effective tax rate of 28.3%, in the second quarter of fiscal 2019. The Company recorded an adjusted tax provision in the second quarter of fiscal 2020 of $1.8 million or an adjusted tax rate of 17.8% compared to an adjusted tax provision of $3.9 million or an adjusted tax rate of 27.1% for the second quarter of fiscal 2019.
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Net income was $17.5 million, or $0.75 per diluted share, compared to $9.1 million, or $0.39 per diluted share, in the second quarter of fiscal 2019. Adjusted net income in the second quarter of fiscal 2020 was $8.3 million, or $0.36 per diluted share, which excludes expenses of $0.6 million, net of $0.1 million of tax, associated with the amortization of acquired intangible assets related to Olivia Burton; $0.9 million, net of $0.3 million of tax, related to the amortization of acquired intangible assets and deferred compensation related to MVMT; and gains of $10.4 million, net of $3.3 million of tax, associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition and $0.2 million, net of $0.1 million tax, from the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. Adjusted net income in the second quarter of fiscal 2019 was $10.6 million, or $0.45 per diluted share, which excludes $0.6 million of amortization expense, net of $0.1 million of tax, related to the acquisition of Olivia Burton, and $0.8 million associated with professional fees in conjunction with the MVMT acquisition, net of $0.2 million of tax.
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Net sales were $304.4 million compared to $271.2 million in the first six months of fiscal 2019, an increase of 12.2%. Net sales on a constant dollar basis increased 14.7% compared to net sales in the first six months of fiscal 2019.
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Gross profit was $164.2 million, or 54.0% of sales, compared to $145.4 million, or 53.6% of sales in the same period last year. Adjusted gross profit for the first six months of fiscal 2020, which excludes
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$0.1 million in adjustments associated with the amortization of acquisition accounting adjustments related to the MVMT acquisition, was $164.4 million, or 54.0% of net sales. The increase in adjusted gross margin percentage was primarily the result of favorable changes in channel and product mix as well as increased leverage on fixed costs due to increased sales, partially offset by unfavorable changes in foreign currency exchange rates.
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Operating expenses were $150.5 million as compared to $124.4 million in the first six months of last fiscal year. For the first six months of fiscal 2020, adjusted operating expenses were $146.9 million, which excludes $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $2.5 million in adjustments associated with the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. For the first six months of fiscal 2019, adjusted operating expenses were $121.9 million, which excludes $1.5 million of amortization expense related to the acquisition of Olivia Burton and $1.0 million of expenses related to professional fees in conjunction with the MVMT acquisition. The increase in adjusted operating expenses was attributable to higher marketing expenses primarily due to the addition of MVMT and an increase in other operating expenses to support overall sales growth across the portfolio as well as a new joint venture in Spain.
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Operating income was $13.8 million compared to operating income of $21.0 million in the first six months of fiscal 2019. Adjusted operating income for the first half of fiscal 2020 was $17.4 million, which excludes $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $2.6 million in adjustments associated with the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. Adjusted operating income for the first half of fiscal 2019, which excludes $1.5 million of amortization expense related to the acquisition of Olivia Burton and $1.0 million of expenses related to professional fees in conjunction with the MVMT acquisition, was $23.5 million.
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Non-operating income included a non-cash change in contingent consideration of $13.6 million resulting from the remeasurement of the contingent consideration liability related to the MVMT acquisition.
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The Company recorded a tax provision in the first six months of fiscal 2020 of $5.6 million as compared to a tax provision of $3.5 million in the first six months of last year. Based upon adjusted pre-tax income, the adjusted tax provision was $3.1 million in the first half of fiscal 2020 compared to an adjusted tax provision of $3.9 million in the first half of fiscal 2019.
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—
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Net income was $21.4 million, or $0.92 per diluted share, compared to $17.3 million, or $0.73 per diluted share, in the first six months of fiscal 2019. Adjusted net income for the first half of fiscal 2020 was $13.9 million, or $0.60 per diluted share, which excludes expenses of $1.1 million, net of $0.3 million of tax, associated with the amortization of acquired intangible assets related to Olivia Burton; $2.0 million, net of $0.6 million of tax, related to the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to MVMT; and gains of $10.4 million, net of $3.3 million of tax, associated with the remeasurement of the contingent consideration liability
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associated with the MVMT acquisition; and $0.2 million, net of $0.1 million tax, in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. This compares to adjusted net income in the first half of fiscal 2019 of $19.3 million, or $0.82 per diluted share, which excludes $1.2 million in amortization expense, net of $0.3 million tax, related to the acquisition of Olivia Burton and $0.8 million, net of $0.2 million tax, related to professional fees in conjunction with the MVMT acquisition.
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Three Months Ended
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Six Months Ended
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July 31,
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July 31,
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2019
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2018
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2019
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2018
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Net sales
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$
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157,816
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$
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144,093
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$
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304,365
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$
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271,242
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Cost of sales
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72,477
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66,259
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140,153
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125,884
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Gross profit
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85,339
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77,834
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164,212
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145,358
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Operating expenses
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76,563
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64,974
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150,462
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124,359
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Operating income
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8,776
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12,860
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13,750
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20,999
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Non-operating income/(expense):
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||||||||||||||||
Change in contingent consideration
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13,627
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-
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13,627
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-
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Interest expense
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(225
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)
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(162
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)
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(449
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)
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(384
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)
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Interest income
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24
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57
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45
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114
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||||||||||||
Income before income taxes
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22,202
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12,755
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26,973
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20,729
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Provision for income taxes
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4,741
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3,615
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5,588
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3,474
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Net income
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17,461
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9,140
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21,385
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17,255
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Less: Net loss attributable to noncontrolling interests
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(44
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)
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-
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(45
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)
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-
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Net income attributable to Movado Group, Inc.
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$
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17,505
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$
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9,140
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$
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21,430
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$
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17,255
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Diluted Income Per Share Information
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Net income attributable to Movado Group, Inc.
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$
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0.75
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$
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0.39
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$
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0.92
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$
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0.73
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Weighted diluted average shares outstanding
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23,292
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23,712
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23,370
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23,585
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As Reported
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Three Months Ended
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July 31,
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% Change
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|||||||||||
2019 | 2018 | |||||||||||
Total net sales, as reported
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$
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157,816
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$
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144,093
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9.5
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%
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Total net sales, constant dollar basis
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$
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159,893
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$
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144,093
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11.0
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%
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||||||
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||||||||||||
As Reported
Six Months Ended
July 31, |
% Change
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|||||||||||
2019
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2018
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|||||||||||
Total net sales, as reported
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$
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304,365
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$
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271,242
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12.2
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%
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Total net sales, constant dollar basis
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$
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311,106
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$
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271,242
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14.7
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%
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Net Sales
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Gross Profit
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Operating
Income
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Pre-tax
Income
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Provision/(Benefit) for Income Taxes
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Net Income Attributable to Movado Group, Inc.
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Diluted EPS
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||||||||||||||||||||||
Three Months Ended
July 31, 2019
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||||||||||||||||||||||||||||
As Reported (GAAP)
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$
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157,816
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$
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85,339
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$
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8,776
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$
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22,202
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$
|
4,741
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$
|
17,505
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$
|
0.75
|
||||||||||||||
Olivia Burton Costs (1)
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-
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-
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690
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690
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131
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559
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0.02
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|||||||||||||||||||||
MVMT Costs (2)
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-
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-
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1,125
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1,125
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270
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855
|
0.04
|
|||||||||||||||||||||
Change In Contingent Consideration (3)
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-
|
-
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-
|
(13,627
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)
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(3,270
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)
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(10,357
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)
|
(0.44
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)
|
|||||||||||||||||
Cost Savings Initiatives (4)
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-
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-
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(320
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)
|
(320
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)
|
(77
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)
|
(243
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)
|
(0.01
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)
|
||||||||||||||||
Adjusted Results (Non-GAAP)
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$
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157,816
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$
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85,339
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$
|
10,271
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$
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10,070
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$
|
1,795
|
$
|
8,319
|
$
|
0.36
|
||||||||||||||
Three Months Ended
July 31, 2018
|
||||||||||||||||||||||||||||
As Reported (GAAP)
|
$
|
144,093
|
$
|
77,834
|
$
|
12,860
|
$
|
12,755
|
$
|
3,615
|
$
|
9,140
|
$
|
0.39
|
||||||||||||||
Olivia Burton Costs (1)
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-
|
-
|
719
|
719
|
137
|
582
|
0.02
|
|||||||||||||||||||||
MVMT Costs (5)
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-
|
-
|
1,020
|
1,020
|
174
|
846
|
0.04
|
|||||||||||||||||||||
Adjusted Results (Non-GAAP)
|
$
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144,093
|
$
|
77,834
|
$
|
14,599
|
$
|
14,494
|
$
|
3,926
|
$
|
10,568
|
$
|
0.45
|
Net Sales |
Gross Profit
|
Operating
Income
|
Pre-tax
Income
|
Provision/(Benefit) for Income Taxes | Net Income Attributable to Movado Group, Inc. |
Diluted EPS
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||||||||||||||||||||||
Six Months Ended July 31, 2019
|
||||||||||||||||||||||||||||
As Reported (GAAP)
|
$
|
304,365
|
$
|
164,212
|
$
|
13,750
|
$
|
26,973
|
$
|
5,588
|
$
|
21,430
|
$
|
0.92
|
||||||||||||||
Olivia Burton Costs (1)
|
-
|
-
|
1,402
|
1,402
|
266
|
1,136
|
0.05
|
|||||||||||||||||||||
MVMT Costs (2)
|
-
|
140
|
2,598
|
2,598
|
624
|
1,974
|
0.08
|
|||||||||||||||||||||
Change In Contingent Consideration (3)
|
-
|
-
|
-
|
(13,627
|
)
|
(3,270
|
)
|
(10,357
|
)
|
(0.44
|
)
|
|||||||||||||||||
Cost Savings Initiatives (4)
|
-
|
-
|
(320
|
)
|
(320
|
)
|
(77
|
)
|
(243
|
)
|
(0.01
|
)
|
||||||||||||||||
Adjusted Results (Non-GAAP)
|
$
|
304,365
|
$
|
164,352
|
$
|
17,430
|
$
|
17,026
|
$
|
3,131
|
$
|
13,940
|
$
|
0.60
|
||||||||||||||
Six Months Ended July 31, 2018
|
||||||||||||||||||||||||||||
As Reported (GAAP)
|
$
|
271,242
|
$
|
145,358
|
$
|
20,999
|
$
|
20,729
|
$
|
3,474
|
$
|
17,255
|
$
|
0.73
|
||||||||||||||
Olivia Burton Costs (1)
|
-
|
-
|
1,486
|
1,486
|
282
|
1,204
|
0.05
|
|||||||||||||||||||||
MVMT Costs (5)
|
-
|
-
|
1,020
|
1,020
|
174
|
846
|
0.04
|
|||||||||||||||||||||
Adjusted Results (Non-GAAP)
|
$
|
271,242
|
$
|
145,358
|
$
|
23,505
|
$
|
23,235
|
$
|
3,930
|
$
|
19,305
|
$
|
0.82
|
(1)
|
Related to the amortization of acquired intangible assets for Olivia Burton.
|
(2)
|
Related to the amortization of acquired intangible assets, accounting adjustments and deferred compensation of MVMT.
|
(3)
|
Remeasurement of contingent consideration liability.
|
(4)
|
Change in estimate in Fiscal 2020 for severance and occupancy expenses.
|
(5)
|
Related to costs associated with the acquisition of MVMT brand.
|
July 31,
|
January 31,
|
July 31,
|
||||||||||
2019
|
2019
|
2018
|
||||||||||
ASSETS
|
||||||||||||
Cash and cash equivalents
|
$
|
134,890
|
$
|
189,911
|
$
|
175,583
|
||||||
Trade receivables, net
|
93,699
|
84,026
|
83,818
|
|||||||||
Inventories
|
200,953
|
165,311
|
171,417
|
|||||||||
Other current assets
|
32,113
|
28,898
|
37,852
|
|||||||||
Total current assets
|
461,655
|
468,146
|
468,670
|
|||||||||
Property, plant and equipment, net
|
28,248
|
26,067
|
24,533
|
|||||||||
Operating lease right-of-use assets
|
91,119
|
-
|
-
|
|||||||||
Deferred and non-current income taxes
|
24,621
|
24,503
|
8,074
|
|||||||||
Goodwill
|
131,936
|
136,033
|
55,744
|
|||||||||
Other intangibles, net
|
43,995
|
48,183
|
19,976
|
|||||||||
Other non-current assets
|
59,057
|
56,769
|
50,251
|
|||||||||
Total assets
|
$
|
840,631
|
$
|
759,701
|
$
|
627,248
|
||||||
LIABILITIES AND EQUITY
|
||||||||||||
Accounts payable
|
$
|
50,281
|
$
|
38,650
|
$
|
34,578
|
||||||
Accrued liabilities
|
43,874
|
44,429
|
41,597
|
|||||||||
Accrued payroll and benefits
|
7,333
|
18,773
|
8,457
|
|||||||||
Current operating lease liabilities
|
14,609
|
-
|
-
|
|||||||||
Income taxes payable
|
10,800
|
10,831
|
5,996
|
|||||||||
Total current liabilities
|
126,897
|
112,683
|
90,628
|
|||||||||
Loans payable to bank, non current
|
50,300
|
50,280
|
-
|
|||||||||
Deferred and non-current income taxes payable
|
26,593
|
29,242
|
29,718
|
|||||||||
Non-current operating lease liabilities
|
82,972
|
-
|
-
|
|||||||||
Other non-current liabilities
|
50,025
|
67,120
|
43,548
|
|||||||||
Redeemable noncontrolling interest
|
3,540
|
3,721
|
-
|
|||||||||
Shareholders' equity
|
500,304
|
496,655
|
463,354
|
|||||||||
Total liabilities, redeemable noncontrolling interest and equity
|
$
|
840,631
|
$
|
759,701
|
$
|
627,248
|
Six Months Ended | ||||||||
July 31, | ||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
21,430
|
$
|
17,255
|
||||
Change in contingent consideration
|
(13,627
|
)
|
-
|
|||||
Depreciation and amortization
|
7,937
|
6,495
|
||||||
Other non-cash adjustments
|
2,289
|
1,860
|
||||||
Changes in working capital
|
(50,401
|
)
|
(22,063
|
)
|
||||
Changes in non-current assets and liabilities
|
(222
|
)
|
584
|
|||||
Net cash (used in)/provided by operating activities
|
(32,594
|
)
|
4,131
|
|||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(6,948
|
)
|
(5,060
|
)
|
||||
Tradenames and other intangibles
|
(99
|
)
|
(217
|
)
|
||||
Net cash used in investing activities
|
(7,047
|
)
|
(5,277
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Repayments of bank borrowings
|
-
|
(25,000
|
)
|
|||||
Dividends paid
|
(9,196
|
)
|
(9,229
|
)
|
||||
Stock repurchase
|
(4,199
|
)
|
(2,057
|
)
|
||||
Stock awards and options exercised and other changes
|
(1,234
|
)
|
4,825
|
|||||
Net cash used in financing activities
|
(14,629
|
)
|
(31,461
|
)
|
||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(751
|
)
|
(6,621
|
)
|
||||
Net change in cash, cash equivalents, and restricted cash
|
(55,021
|
)
|
(39,228
|
)
|
||||
Cash, cash equivalents, and restricted cash at beginning of period
|
190,459
|
215,411
|
||||||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
135,438
|
$
|
176,183
|
||||
Reconciliation of cash, cash equivalents, and restricted cash:
|
||||||||
Cash and cash equivalents
|
$
|
134,890
|
$
|
175,583
|
||||
Restricted cash included in other non-current assets
|
548
|
600
|
||||||
Cash, cash equivalents, and restricted cash
|
$
|
135,438
|
$
|
176,183
|