Restructuring Provision

6 Months Ended

Jul. 31, 2020

NOTE 6 – RESTRUCTURING PROVISION

On June 29, 2020, the Company committed to a Restructuring Plan as part of the Company’s corporate initiatives to reducing operating expenses and adjusting cash flows in light of the ongoing economic challenges resulting from the COVID-19 pandemic and its impact on the Company’s business. The Restructuring Plan has been substantially completed during the second quarter of the Company’s current fiscal year, although cash severance will be paid over time and such payments are expected to continue into the next fiscal year. Of the total provision incurred, approximately $8.0 million is expected to result in cash expenditures with the remaining $6.6 million resulting in non-cash use. The Company expects annual savings in the range of $14 million to $16 million as it relates to severance, employee related and properties (contained within Other in table below).

A summary rollforward of the provision related to the Company’s corporate initiatives, including the provision associated with the Restructuring Plan, is as follows for the three months ended July 31, 2020 (in thousands):

	Balance April 30, 2020		Provision		Non-Cash Use			Cash Payments			Balance July 31, 2020
Restructuring Plan:
Severance and Employee Related	$	—	$	6,966	$	—		$	(1,160	)	$	5,806
Other		—		402		(198	)		(115	)		89
Corporate Initiative:
Severance and Employee Related		936		—		—			(395	)		541
Inventory		3,507		—		(47	)		—			3,460
Accounts receivable		1,075		—		—			—			1,075
Other		1,722		—		(1,518	)		(167	)		37
Total	$	7,240	$	7,368	$	(1,763	)	$	(1,837	)	$	11,008

A summary rollforward of the provision related to the Company’s corporate initiatives, including the provision associated with the Restructuring Plan, is as follows for the six months ended July 31, 2020 (in thousands):

	Balance January 31, 2020		Provision		Non-Cash Use			Cash Payments			Balance July 31, 2020
Restructuring Plan:
Severance and Employee Related (1)	$	—	$	6,966	$	—		$	(1,160	)	$	5,806
Other (2)		—		402		(198	)		(115	)		89
Corporate Initiative:
Severance and Employee Related (1)		—		936		—			(395	)		541
Inventory (3)		—		3,507		(47	)		—			3,460
Accounts receivable (4)		—		1,075		—			—			1,075
Other (2)		—		1,722		(1,518	)		(167	)		37
Total	$	—	$	14,608	$	(1,763	)	$	(1,837	)	$	11,008

The following amounts are included in the Consolidated Balance Sheet at July 31, 2020:

(1)

$5.9 million included in Accrued payroll and benefits and $0.4 million included in Capital in excess of par value.

(2)

Balance included in Accrued liabilities.

(3)

Reserve included in Inventories.

(4)

Reserve included in Trade receivable, net.

Included in Other is approximately a $1.5 million write-off related to unrefunded deposits for a canceled global customer event.

The corporate initiative costs by operating segment are as follows:

	For the Three Months Ended April 30, 2020 Provision		For the Three Months Ended July 31, 2020 Provision		For the Six Months Ended July 31, 2020 Total
Watch and Accessory Brands:
United States	$	4,704	$	6,631	$	11,335
International		2,536		737		3,273
Total Watch and Accessory Brands		7,240		7,368		14,608
Total Company Stores		—		—		—
Total Consolidated	$	7,240	$	7,368	$	14,608

Cost of sales	$	3,508	$	—	$	3,508
Selling, general and administrative		3,732		7,368		11,100
Total	$	7,240	$	7,368	$	14,608