PARAMUS, N.J., April 9 /PRNewswire-FirstCall/ -- Movado Group, Inc.
(NYSE: MOV), today reported results for its fourth quarter and
fiscal year ended January 31, 2009. Efraim Grinberg, President and
Chief Executive Officer, stated, "We are operating in the most
challenging economic environment that I have seen in my 30 years in
the watch industry. Fiscal 2009 was extremely difficult as we
experienced the dual impact on our business of weak consumer
spending and increasingly aggressive curtailment of retailers'
replenishment orders, particularly in January, which resulted in
our recording a loss for the fourth quarter. We believe our retail
customers will continue to focus on lowering their inventory levels
during the first half of this year. Accordingly, we expect lower
sales throughout the first half of fiscal 2010 with an improvement
during the second half of the year as retailers start to replenish
inventory in preparation for the holiday selling season. Our
greatest assets continue to be our strong brands and we believe
that strong brands like Movado Group's will be well positioned to
rebound when we begin to exit the recessionary environment." Rick
Cote, Executive Vice President and Chief Operating Officer, stated,
"We continue to take decisive actions to improve our cost
structure, preserve cash, maintain a strong balance sheet and
appropriately fund our business for future growth. Through the
various expense reduction programs we are implementing across our
global operations, we expect to realize a combined $50 million to
$60 million in annualized cost savings, the majority of which
should be realized in fiscal 2010. Additionally, recognizing the
severity of the current environment and the importance of cash, we
have eliminated our quarterly dividend. Given our reported fourth
quarter fiscal 2009 financial results, we are not in compliance
with one of the financial covenants in our current credit
agreements. We are in negotiations with our lenders to establish a
new $110 million three year asset-based loan facility and, in the
meantime, have executed a commitment letter for a $50 million three
year asset-based credit facility. With that said, we also expect
that our cash on hand and the cash from conversion of working
capital should be sufficient to finance our ongoing business." Full
Fiscal Year 2009 Performance Fiscal 2009 adjusted net income was
$14.2 million, or $0.55 per fully diluted share, compared to
adjusted net income of $46.6 million, or $1.71 per fully diluted
share in fiscal 2008 (see attached table for a reconciliation of
GAAP to non-GAAP measures). Fiscal 2009 net income was $2.3
million, or $0.09 per fully diluted share, compared to net income
of $60.8 million, or $2.23 per fully diluted share in fiscal 2008.
The Company's full year fiscal 2009 net income included the
following one-time items: (i) a pre-tax charge of $11.1 million, or
$0.30 per diluted share, resulting from the Company's previously
announced expense reduction plans, (ii) a pre-tax, non-cash
impairment charge of $4.5 million, or $0.11 per diluted share,
related to five Movado boutiques, which the Company continues to
operate; and (iii) the tax impact of a non-cash tax provision
recorded in the fourth quarter of fiscal 2009 for the future
repatriation of $30 million in funds from the Company's
international operations. This was mostly offset by the tax benefit
of the utilization of a Swiss net operating loss carryforward (NOL)
acquired with the Ebel brand in fiscal 2005, which was recorded in
the third quarter of fiscal 2009. Net sales in fiscal 2009
decreased 17.6% from last year to $460.9 million. Year-ago net
sales included $31.2 million of excess discontinued product sales
and a one-time accrual of $15.0 million for product returns
associated with the Company's closure of approximately 1,400
wholesale doors selling the Movado brand in the United States.
Adjusting for these items recorded in fiscal 2008, net sales for
fiscal 2009 decreased 15.2%. Gross margin in fiscal 2009 was 62.4%
of sales compared to 60.2% last year. Adjusting for the
aforementioned items recorded in fiscal 2008, gross margin in the
year-ago period was 64.0% of sales. Gross profit in fiscal 2009 was
$287.6 million versus $336.7 million last year. Year-ago adjusted
gross profit was $347.7 million. Adjusting for the previously
mentioned items recorded in both fiscal 2009 and fiscal 2008,
operating profit in fiscal 2009 was $19.0 million compared to $61.8
million in fiscal 2008 (see attached table for a reconciliation of
GAAP to non-GAAP measures). Without adjustments, operating profit
in fiscal 2009 was $3.4 million compared to $50.8 million in fiscal
2008. Fourth Quarter Performance The Company recorded a fourth
quarter adjusted net loss of $10.5 million, or $0.42 per fully
diluted share, compared to adjusted net income of $10.8 million, or
$0.40 per fully diluted share in fiscal 2008 (see attached table
for a reconciliation of GAAP to non-GAAP measures). Fourth quarter
fiscal 2009 net loss was $22.8 million, or a loss of $0.92 per
fully diluted share, compared to net income of $19.6 million, or
$0.72 per fully diluted share in fiscal 2008. The Company's fiscal
2009 fourth quarter results included the following one-time items:
(i) a pre-tax charge of $5.5 million, or $0.15 per diluted share,
resulting from the Company's previously announced expense reduction
plans, (ii) a non-cash impairment charge of $4.5 million, or $0.12
per diluted share, related to the aforementioned Movado Boutiques,
which the Company continues to operate; and (iii) a $7.4 million
non-cash tax provision, or $0.30 per diluted share, primarily
related to the future repatriation of $30 million in funds from the
Company's international operations. Net sales for the fourth
quarter of fiscal 2009 decreased 32.2% from last year to $94.0
million. Year-ago net sales included the aforementioned one-time
accrual of $15.0 million and $8.9 million of excess discontinued
product sales. Adjusting for these items recorded in the fourth
quarter of fiscal 2008, net sales for the fourth quarter of fiscal
2009 decreased 35.0%. Gross margin in the fourth quarter of fiscal
2009 was 55.9% of sales compared to 59.0% last year. In light of
the challenging economic environment, the unusual deterioration in
gross margin was primarily due to fluctuations in currency, the
heightened promotional activity in the Company's Movado Boutiques,
and the impact of the overall mix of business. Adjusting for the
aforementioned items recorded in the fourth quarter of fiscal 2008,
gross margin in the year-ago period was 64.3% of sales. Gross
profit in the fiscal 2009 fourth quarter was $52.5 million versus
$81.8 million last year. In the year-ago period adjusted gross
profit was $93.0 million. Adjusting for the previously mentioned
items recorded in the fourth quarters of both fiscal 2009 and
fiscal 2008, the Company recorded an operating loss for the fiscal
2009 fourth quarter of $13.9 million compared to operating income
of $14.2 million in fiscal 2008 (see attached table for a
reconciliation of GAAP to non-GAAP measures). Without adjustments,
the operating loss in the fourth quarter of fiscal 2009 was $24.0
million compared to operating profit of $3.2 million in fiscal
2008. Update on Credit Agreements The Company is in negotiations
with its banking partners to enter into a new $110 million three
year asset-based loan agreement. Due to the aforementioned
financial results inclusive of the impairment charge and charges
associated with the Company's expense reduction programs, Movado
Group is not in compliance with a financial covenant in its current
credit agreements. Regardless of the outcome of these discussions
with its banking partners, the Company has already executed a
commitment for a $50 million three year asset-based credit facility
from Bank of America, subject to due diligence and other customary
conditions. The new three year facility will be used to replace the
Company's current domestic outstanding debt. In the Company's
financial statements, all amounts owed under related borrowings as
of January 31, 2009 have been reclassified to current liabilities.
The Company believes that its cash on hand and the cash from
conversion of working capital will be sufficient to finance Movado
Group's ongoing business. Update on Dividend Policy The Company
announced that its Board of Directors has decided not to declare a
quarterly cash dividend. The decision to discontinue the dividend
is based on the Company's desire to retain capital during this
challenging economic environment. The Board will evaluate the
reinstitution of a quarterly dividend once the economy has
stabilized and the Company has returned to an appropriate level of
profitability. Any new credit facilities provided to the Company
may restrict or prohibit the payment of future dividends. Fiscal
2010 Guidance While the economic environment remains extremely
uncertain, Movado Group estimates it will be slightly profitable in
fiscal 2010, excluding any unusual items. The Company anticipates a
loss that could, in an order of magnitude, approximate $1.00 per
diluted share during the first half of the year reflecting the
continued weak consumer spending environment and retailers' lack of
replenishment -- the effects of which are expected to be amplified
given that this is historically the Company's seasonally smaller
half of the year. The Company anticipates that this loss will be
offset by gains during the second half of fiscal 2010, as a
predominant portion of the Company's savings initiatives are
planned to be realized during the latter half and as retailers
purchase inventory in advance of the holiday season. The Company's
management will host a conference call today, April 9th at 10:00
a.m. Eastern Time. A live broadcast of the call will be available
on the Company's website: http://www.movadogroup.com/. This call
will be archived online within one hour of the completion of the
conference call. Movado Group, Inc. designs, sources, and
distributes Movado, Ebel, Concord, ESQ, Coach, Tommy Hilfiger, HUGO
BOSS, Juicy Couture and LACOSTE watches worldwide, and operates
Movado boutiques and company stores in the United States. In this
release, the Company presents certain adjusted financial measures
that are not calculated according to generally accepted accounting
principles in the United States ("GAAP"). These non-GAAP financial
measures are designed to complement the GAAP financial information
presented in this release and management believes they present
information regarding the Company that is useful to investors. The
non-GAAP financial measures presented should not be considered in
isolation from or as a substitute for the comparable GAAP financial
measure. The Company is presenting net sales, gross profit and
gross margin excluding fiscal 2008 excess discontinued product
sales and a fiscal 2008 one-time accrual for product returns
associated with the Movado brand strategy because the Company
believes that it is useful to investors to eliminate the effect of
these unusual items in order to improve the comparability of the
Company's results for the periods presented. The Company is also
presenting adjusted operating profit, which is operating profit
excluding the impact of the fiscal 2008 product return reserve
provision, the fiscal 2009 impairment charge relating to five
Movado Boutiques and fiscal 2009 severance-related expenses related
to the Company's expense reduction plan and a restructuring of
certain benefit arrangements. The Company is also presenting
adjusted net income (and associated per share measures), which is
net income excluding the diluted impact of the fiscal 2008 product
return reserve provision, the fiscal 2009 impairment charge
relating to five Movado Boutiques, the fiscal 2009
severance-related expenses related to the Company's expense
reduction plan and a restructuring of certain benefit arrangements,
the favorable impact of a 2008 IRS audit settlement, the further
utilization in both fiscal 2008 and 2009 of NOLs from the Ebel
acquisition and tax accrued in fiscal 2009 on the future
repatriation of foreign earnings. Management believes that
presenting adjusted diluted earnings per share is useful for
investors because it improves comparability of results for the
periods presented by eliminating items that affect those line items
that are not expected to recur, although such items may, in fact,
recur in the future. This press release contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company has tried,
whenever possible, to identify these forward-looking statements
using words such as "expects," "anticipates," "believes,"
"targets," "goals," "projects," "intends," "plans," "seeks,"
"estimates," "may," "will," "should" and similar expressions.
Similarly, statements in this press release that describe the
Company's business strategy, outlook, objectives, plans, intentions
or goals are also forward-looking statements. Accordingly, such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the Company's
actual results, performance or achievements and levels of future
dividends, if any, to differ materially from those expressed in, or
implied by, these statements. These risks and uncertainties may
include, but are not limited to: general economic and business
conditions which may impact disposable income of consumers in the
United States and the other significant markets where the Company's
products are sold, uncertainty regarding such economic and business
conditions, general uncertainty related to possible terrorist
attacks and the impact on consumer spending, changes in consumer
preferences and popularity of particular designs, new product
development and introduction, competitive products and pricing,
seasonality, availability of alternative sources of supply in the
case of the loss of any significant supplier, the loss of
significant customers, the Company's dependence on key employees
and officers, the ability to successfully integrate the operations
of acquired businesses without disruption to other business
activities, the continuation of licensing arrangements with third
parties, the ability to secure and protect trademarks, patents and
other intellectual property rights, the ability to lease new stores
on suitable terms in desired markets and to complete construction
on a timely basis, the continued availability to the Company of
financing and credit on favorable terms, business disruptions,
disease, general risks associated with doing business outside the
United States including, without limitation, import duties,
tariffs, quotas, political and economic stability, and success of
hedging strategies with respect to currency exchange rate
fluctuations, and the other factors discussed in the Company's
Annual Report on Form 10-K and other filings with the Securities
and Exchange Commission. These statements reflect the Company's
current beliefs and are based upon information currently available
to it. Be advised that developments subsequent to this press
release are likely to cause these statements to become outdated
with the passage of time. MOVADO GROUP, INC. Consolidated
Statements of Income (in thousands, except per share data)
(Unaudited) Three Months Ended Twelve Months Ended January 31,
January 31, ----------- ----------- 2009 2008 2009 2008 ---- ----
---- ---- Net sales $93,969 $138,567 $460,857 $559,550 Cost of
sales 41,462 56,770 173,225 222,868 ------ ------ ------- -------
Gross profit 52,507 81,797 287,632 336,682 Selling, general and
administrative expenses 76,490 78,618 284,242 285,905 ------ ------
------- ------- Operating (loss) / income (23,983) 3,179 3,390
50,777 Other income 681 - 681 - Interest expense (724) (801)
(2,915) (3,472) Interest income 239 1,293 2,132 4,666 --- -----
----- ----- (Loss) / income before income taxes and minority
interests (23,787) 3,671 3,288 51,971 (Benefit) / provision for
income tax (1,066) (16,162) 736 (9,471) Minority interests 78 220
237 637 -- --- --- --- Net (loss) / income $(22,799) $19,613 $2,315
$60,805 ======== ======= ====== ======= Net (loss) / income per
diluted share $(0.92) $0.72 $0.09 $2.23 Number of shares
outstanding 24,782 27,201 25,554 27,293 MOVADO GROUP, INC.
Reconciliation tables (in thousands, except per share data)
(Unaudited) Three Months Ended Twelve Months Ended January 31,
January 31, ----------- ----------- 2009 2008 2009 2008 ---- ----
---- ---- Operating (loss) / income (GAAP) $(23,983) $3,179 $3,390
$50,777 Severance related expenses (1) 5,536 - 11,122 - Retail
impairment (2) 4,526 - 4,526 - Return reserve provision (3) -
11,000 - 11,000 --- ------ --- ------ Adjusted operating (loss) /
income (non-GAAP) $(13,921) $14,179 $19,038 $61,777 ========
======= ======= ======= Three Months Ended Twelve Months Ended
January 31, January 31, ----------- ----------- 2009 2008 2009 2008
---- ---- ---- ---- Net (loss) / income (GAAP) $(22,799) $19,613
$2,315 $60,805 Severance related expenses (1) 3,770 - 7,574 -
Retail impairment (2) 2,851 - 2,851 - Return reserve provision (3)
- 6,600 - 6,600 Tax adjustments (4) 5,669 (15,430) 1,414 (20,814)
----- ------- ----- ------- Adjusted net (loss) / income (non-GAAP)
$(10,509) $10,783 $14,154 $46,591 ======== ======= ======= =======
Number of shares outstanding 24,782 27,201 25,554 27,293 Adjusted
net (loss) / income per share (non-GAAP) $(0.42) $0.40 $0.55 $1.71
(1) Charges related to the implementation of the Company's expense
reduction plan. (2) Non-cash impairment charge related to five
Movado boutiques. (3) Non-cash charge to sales returns reserve due
to closing of certain wholesale doors in the U.S. The reserve
represented a $15.0 million reduction in net sales with a related
$11.0 million reduction in operating profit. (4) To present
financials at a representative 24% effective tax rate for the
current period and a 25% effective tax rate for the prior period.
Actual taxes in fiscal 2009 include tax accrued on the future
repatriation of foreign earnings of $7.4 million. Actual taxes in
fiscal 2008 include a favorable settlement of an IRS audit of $12.5
million. Actual taxes in both periods reflect the utilization of
the acquired Ebel net operating loss carryforward. MOVADO GROUP,
INC. CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) January
31, January 31, 2009 2008 ---- ---- ASSETS ------ Cash and cash
equivalents $86,621 $169,551 Trade receivables, net 76,710 94,328
Inventories 228,884 205,129 Other current assets 47,863 50,317
------ ------ Total current assets 440,078 519,325 ------- -------
Property, plant and equipment, net 66,749 68,513 Deferred income
taxes 23,449 20,024 Other non-current assets 33,714 38,354 ------
------ Total assets $563,990 $646,216 ======== ======== LIABILITIES
AND EQUITY ---------------------- Loans payable to banks $40,000 $-
Current portion of long-term debt 25,000 10,000 Accounts payable
20,794 38,397 Accrued liabilities 47,686 42,770 Deferred and
current taxes payable 430 8,526 --- ----- Total current liabilities
133,910 99,693 ------- ------ Long-term debt - 50,895 Deferred and
non-current income taxes 6,856 6,363 Other liabilities 22,459
24,205 Minority Interests 1,805 1,865 Shareholders' equity 398,960
463,195 ------- ------- Total liabilities and equity $563,990
$646,216 ======== ======== DATASOURCE: Movado Group, Inc. CONTACT:
Leigh Parrish or Stephanie Rich, both of FD, +1-212-850-5600, for
Movado Group, Inc. Web Site: http://www.movadogroup.com/
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