~ Third Quarter Adjusted Diluted Earnings Per Share of $0.12 and
Diluted Loss Per Share of $0.85 on a GAAP Basis ~ ~ Company's GAAP
Results Include Significant Non-Cash Tax Charges of $23 Million, or
$0.92 Per Diluted Share ~ PARAMUS, N.J., Dec. 9
/PRNewswire-FirstCall/ -- Movado Group, Inc. (NYSE: MOV), today
announced third quarter and nine-month results for the period ended
October 31, 2009. For the third quarter, adjusted diluted earnings
per share were $0.12 compared to $0.53 in fiscal 2009 (see attached
table for reconciliation of GAAP to non-GAAP measures). On a GAAP
basis, diluted loss per share in the third quarter of fiscal 2010
was $0.85 and included a $23 million, or $0.92 per diluted share,
non-cash tax charge and a $0.06 per diluted share charge for sales
of excess discontinued product. This compares to diluted earnings
per share of $0.62 in the prior year period, which included a $0.10
per diluted share charge related to the implementation of the
Company's expense reduction plan announced in August 2008. Third
Quarter Fiscal 2010 -- Net sales in the third quarter of fiscal
2010 were $129.0 million compared to $135.8 million in the same
period last year. Net sales for the quarter included $8.4 million
of sales of excess discontinued product. -- Gross profit was $60.3
million, or 46.8% of sales, compared to $85.4 million, or 62.9% of
sales, in the same period last year. The decline in gross profit as
a percent of sales primarily reflects the impact of sales of excess
discontinued product, a shift in the channel mix and product mix as
well as the impact of currency fluctuations. Excluding the impact
of the sale of excess discontinued product, gross profit as a
percent of sales was 52.0%. -- Operating expenses decreased $13.4
million, or 18.9%, to $57.4 million versus $70.8 million in the
same period last year, primarily as a result of the Company's cost
reduction plan. -- Operating profit was $2.9 million, which
included the sale of excess discontinued product compared to $14.6
million in the same period last year, which included a $3.4 million
charge related to the implementation of the Company's expense
reduction plan announced in August 2008. Excluding the
aforementioned items in the third quarter of fiscal 2010 and fiscal
2009, adjusted operating profit was $5.3 million compared to $18.0
million, respectively (see attached table for reconciliation of
GAAP to non-GAAP measures). -- In the third quarter of fiscal 2010,
the Company recorded a non-cash tax charge of $23 million, or $0.92
per diluted share, which included a $20.8 million charge to record
valuation allowances on the Company's U.S. net deferred tax assets
as well as a $2.2 million charge for taxes accrued on the future
repatriation of foreign earnings. -- Net loss in the quarter was
$20.9 million compared to net income of $15.7 million in the same
period last year. Adjusting for the aforementioned items recorded
in fiscal 2010 and fiscal 2009, adjusted net income was $3.0
million in the third quarter of fiscal 2010 compared to adjusted
net income of $13.4 million in the prior year period (see attached
table for reconciliation of GAAP to non-GAAP measures). -- Adjusted
EBITDA was $9.9 million compared to $22.5 million in the same
period last year (see attached table for reconciliation of GAAP to
non-GAAP measures). Nine-Month Results Fiscal 2010 -- Net sales for
the nine-month period of fiscal 2010 were $286.2 million compared
to $366.9 million in the same period last year. Net sales for the
nine-month period of fiscal 2010 included $13.6 million of sales of
excess discontinued product. -- Gross profit was $147.7 million, or
51.6% of sales, compared to $232.9 million, or 63.5% of sales, last
year. The decline in gross profit as a percent of sales primarily
reflects the impact of sales of excess discontinued product, a
shift in the channel mix and product mix as well as the impact of
currency fluctuations. -- Operating expenses decreased $50.5
million, or 24.6%, to $155.1 million versus $205.6 million last
year, primarily as a result of the Company's cost reduction plan.
-- Operating loss was $7.4 million, which included the sale of
excess discontinued product compared to operating income of $27.4
million in the year-ago period, which included a $5.6 million
charge related to the Company's aforementioned expense reduction
plan (see attached table for reconciliation of GAAP to non-GAAP
measures). -- Net loss was $31.1 million compared to net income of
$25.1 million in the year-ago period. Adjusting for the
aforementioned items recorded in fiscal 2010 and fiscal 2009,
adjusted net loss was $5.3 million, or $0.22 per diluted share,
compared to adjusted net income of $24.7 million, or $0.96 per
diluted share (see attached table for reconciliation of GAAP to
non-GAAP measures). -- Adjusted EBITDA was $10.0 million compared
to $46.6 million in the same period last year (see attached table
for reconciliation of GAAP to non-GAAP measures). Efraim Grinberg,
President and Chief Executive Officer, stated, "We are very
disappointed in our third quarter and year-to-date results. We
experienced higher levels of destocking in the marketplace than
originally anticipated as retailers continued to focus on very
tight inventory control. Further, the unprecedented level of U.S.
jewelry retailers closing their operations and liquidating
inventory has had a significant impact on our business. However,
the decisive actions we have taken since 2008 are continuing to
help us navigate the challenges of the macroeconomic environment
and protect our business. Sales of the Movado brand and our
licensed brands at our retail customers remain strong and generally
outpace our retail partners' watch department sales." Rick Cote,
Executive Vice President and Chief Operating Officer, stated, "We
recognize that our margin performance for the quarter is well below
expectations, which is primarily the result of a product and
channel mix shift, inventory reductions and greater than expected
currency impact due to unusual and unfavorable swings in the U.S.
dollar. On a positive note, we have reduced expenses by 25% for the
year-to-date period through the solid execution of our expense
management program. We have also returned to positive cash flow in
the quarter, increased our cash position to $50 million and reduced
our outstanding debt to $25 million." Fiscal 2010 Guidance The
Company has revised its guidance for fiscal 2010 and now estimates
fiscal 2010 net loss per share to range from approximately $1.40
per fully diluted share to $1.50 per fully diluted share on a GAAP
basis, including a $0.94 non-cash tax charge; an $0.08 charge for
the sale of excess discontinued product; and a $0.03 charge for
debt financing. This guidance is predicated on a revised sales
outlook taking into consideration the higher than anticipated level
of inventory destocking and industry liquidation sales related to
retailers going out of business, resulting in an expected 20% sales
decline for the year. The Company's revised guidance assumes no new
unusual charges for the fourth quarter of fiscal 2010. The
Company's management will host a conference call today, December
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 adjusted operating income, which
is operating income excluding severance related expense and sales
of excess discontinued product, and adjusted net income, which is
net income excluding severance related expenses, sales of excess
discontinued product, refinancing related expenses and non-cash tax
charges 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 presenting adjusted EBITDA, which is
adjusted net income excluding interest, taxes, depreciation and
amortization because the Company believes that adjusted EBITDA is a
useful performance measure for assessing the performance of the
Company's ongoing operating activities, as it reflects the
Company's earnings trends without the impact of certain non-cash
charges and is frequently used by investors and other interested
parties in the evaluation of companies in our industry. 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 to differ materially from those
expressed in, or implied by, these statements. These risks and
uncertainties may include, but are not limited to: actual or
perceived weakness in the U.S. and global economy and fluctuations
in consumer spending and disposable income, the Company's ability
to successfully implement the new Movado brand strategy, the
ability of the new Movado brand strategy to improve the Company's
net sales, profitability and other results of operations, the
Company's ability to successfully introduce and sell new products,
the Company's ability to successfully integrate the operations of
newly acquired and/or licensed brands without disruption to its
other business activities, changes in consumer demand for the
Company's products, risks relating to the fashion and retail
industry, import restrictions, competition, seasonality, the
ability of the Company's U.S. operations to generate sufficient
income to use accumulated tax losses, commodity price and exchange
rate fluctuations, changes in local or global economic conditions,
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 Nine Months Ended October 31, October 31, -----------
----------- 2009 2008 2009 2008 ---- ---- ---- ---- Net sales
$128,966 $135,846 $286,242 $366,888 Cost of sales 68,618 50,405
138,544 133,944 ------ ------ ------- ------- Gross profit 60,348
85,441 147,698 232,944 Selling, general and administrative expenses
57,409 70,821 155,098 205,571 ------ ------ ------- -------
Operating (loss) / income 2,939 14,620 (7,400) 27,373 Interest
expense (1,080) (691) (3,797) (2,191) Interest income 16 413 87
1,893 --- --- --- ----- (Loss) /income before income taxes and
noncontrolling interests 1,875 14,342 (11,110) 27,075 Provision for
/(benefit from) income taxes 22,519 (1,434) 19,725 1,802 Net income
attributed to noncontrolling interests 226 47 232 159 --- --- ---
--- Net (loss) /income attributed to Movado Group, Inc. ($20,870)
$15,729 ($31,067) $25,114 ======== ======= ======== ======= Net
(loss) /income per diluted share ($0.85) $0.62 ($1.27) $0.97
Weighted diluted average shares outstanding 24,558 25,225 24,509
25,792 MOVADO GROUP, INC. Reconciliation tables (in thousands,
except per share data) (Unaudited) Three Months Ended Nine Months
Ended October 31, October 31, ----------- ----------- 2009 2008
2009 2008 ---- ---- ---- ---- Operating (loss) / income (GAAP)
$2,939 $14,620 ($7,400) $27,373 Sales of excess discontinued
inventory (1) 2,376 - 3,089 - Severance related expenses (2) -
3,393 - 5,585 --- ----- --- ----- Adjusted operating (loss) /
income (non-GAAP) 5,315 18,013 (4,311) 32,958 Depreciation and
amortization 4,576 4,518 14,346 13,615 ----- ----- ------ ------
Adjusted EBITDA (non-GAAP) $9,891 $22,531 $10,035 $46,573 ======
======= ======= ======= Three Months Ended Nine Months Ended
October 31, October, 31 ----------- ----------- 2009 2008 2009 2008
---- ---- ---- ---- Net (loss) / income (GAAP) ($20,870) $15,729
($31,067) $25,114 Sales of excess discontinued inventory (1) 1,485
- 1,931 - Severance related expenses (2) - 2,579 - 4,245
Refinancing expenses and fees (3) - - 839 - Tax adjustments (4)
22,950 (3,740) 22,950 (3,740) Representative tax rate (5) (560)
(1,136) 40 (956) ---- ------ -- ---- Adjusted net (loss) / income
(non-GAAP) $3,005 $13,432 ($5,307) $24,663 ====== ======= =======
======= Adjusted net (loss) / income per share (non-GAAP) $0.12
$0.53 ($0.22) $0.96 Weighted diluted average shares outstanding
24,946 25,225 24,509 25,792 (1) Losses associated with sales of
excess discontinued inventory. (2) Charges related to the
implementation of the Company's expense reduction plans. (3)
Expenses and fees associated with the refinancing and repayment of
the Company's former credit and note agreements which included a
non-cash pre-tax charge of $0.2 million related to the accelerated
recognition of deferred financing costs and a pre-tax charge of
$1.1 million for fees due to the former lenders. Both charges were
recorded in Interest Expense on the Consolidated Statements of
Income. (4) Actual taxes in the current period primarily reflect a
non-cash $20.8 million charge to record valuation allowances on the
Company's U.S. deferred tax assets and liabilities and a non-cash
$2.2 million charge for taxes accrued on the future repatriation of
foreign earnings. Actual taxes in the prior period primarily
reflect utilization of the acquired Ebel net operating loss tax
carryforward. (5) To present financials at a representative 24%
effective tax rate for all periods presented. MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) October 31,
January 31, October 31, 2009 2009 2008 ---- ---- ---- ASSETS ------
Cash and cash equivalents $49,478 $86,621 $85,077 Trade
receivables, net 105,469 76,710 118,464 Inventories, net 228,766
228,884 236,734 Other current assets 35,711 47,863 42,245 ------
------ ------ Total current assets 419,424 440,078 482,520 -------
------- ------- Property, plant and equipment, net 58,142 66,749
71,359 Deferred income taxes 10,014 23,449 17,753 Other non-current
assets 28,648 33,714 34,761 ------ ------ ------ Total assets
$516,228 $563,990 $606,393 ======== ======== ======== LIABILITIES
AND EQUITY ---------------------- Loan payable to banks $- $40,000
$- Current portion of long-term debt - 25,000 10,000 Accounts
payable 17,373 20,794 33,146 Accrued liabilities 43,760 47,686
50,010 Deferred and current income taxes payable 484 430 392 ---
--- --- Total current liabilities 61,617 133,910 93,548 ------
------- ------ Long-term debt 24,910 - 59,324 Deferred and
non-current income taxes payable 6,116 6,856 6,706 Other
non-current liabilities 20,763 22,459 21,279 Noncontrolling
interests 1,970 1,506 1,560 Shareholders' equity 400,852 399,259
423,976 ------- ------- ------- Total liabilities and equity
$516,228 $563,990 $606,393 ======== ======== ======== DATASOURCE:
Movado Group Inc. CONTACT: Leigh Parrish or Stephanie Rich, both of
Financial Dynamics, +1-212-850-5600 Web Site:
http://www.movadogroup.com/
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