NOTES
TO MOVADO GROUP, INC.’S CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES
Organization
and Business
Movado
Group, Inc. (the "Company") designs, sources, markets and distributes quality
watches with prominent brands in almost every price category comprising the
watch industry. In fiscal 2009, the Company marketed nine distinctive brands of
watches: Movado, Ebel, Concord, ESQ, Coach, HUGO BOSS, Juicy Couture, Tommy
Hilfiger and Lacoste, which compete in most segments of the watch
market.
Movado,
Ebel and Concord watches are generally manufactured in Switzerland by
independent third party assemblers with some in-house assembly in Bienne and La
Chaux-de-Fonds, Switzerland. Movado, Ebel and Concord watches are
manufactured using Swiss movements and other components obtained from third
party suppliers. Coach, ESQ, Tommy Hilfiger, Juicy Couture, HUGO BOSS
and Lacoste watches are manufactured by independent contractors. Coach and ESQ
watches are manufactured using Swiss movements and other components purchased
from third party suppliers. Tommy Hilfiger, Juicy Couture, HUGO BOSS and Lacoste
watches are manufactured using movements and other components purchased from
third party suppliers.
In
addition to its sales to trade customers and independent distributors, through a
wholly-owned domestic subsidiary, the Company sells select models of Movado
watches, as well as proprietary Movado-branded jewelry and clocks directly to
consumers in its Movado Boutiques and operates outlet stores throughout the
United States, through which it sells discontinued models and factory
seconds.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly and majority-owned subsidiaries. Intercompany transactions and
balances have been eliminated.
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The Company uses estimates when accounting for sales
discounts, rebates, allowances and incentives, warranty, income taxes,
depreciation, amortization, contingencies, impairments and asset and liability
valuations.
Reclassification
Certain
reclassifications were made to prior years’ financial statement amounts and
related note disclosures to conform to the fiscal 2009
presentation.
Translation
of Foreign Currency Financial Statements and Foreign Currency
Transactions
The
financial statements of the Company's international subsidiaries have been
translated into United States dollars by translating balance sheet accounts at
year-end exchange rates and statement of operations accounts at average exchange
rates for the year. Foreign currency transaction gains and losses are
charged or credited to earnings as incurred. Foreign currency translation gains
and losses are reflected in the equity section of the Company's consolidated
balance sheet in Accumulated Other Comprehensive Income. The balance
of the foreign currency translation adjustment, included in Accumulated Other
Comprehensive Income, was $42.3 million and $62.0 million as of January 31, 2009
and 2008, respectively.
Cash
and Cash Equivalents
Cash
equivalents are considered all highly liquid investments with original
maturities at date of purchase of three months or less.
Trade
Receivables
Trade
receivables as shown on the consolidated balance sheet are net of
allowances. The allowance for doubtful accounts is determined through
an analysis of the aging of accounts receivable, assessments of collectability
based on historic trends, the financial condition of the Company’s customers and
an evaluation of economic conditions. The Company writes off
uncollectible trade receivables once collection efforts have been exhausted and
third parties confirm the balance is not recoverable.
The
Company's trade customers include department stores, jewelry store chains and
independent jewelers. All of the Company’s watch brands, except ESQ, are also
marketed outside the U.S. through a network of independent distributors.
Accounts receivable are stated net of doubtful accounts, returns and allowances
of $19.6 million, $36.3 million and $26.1 million at January 31, 2009, 2008 and
2007, respectively. In the fourth quarter of fiscal 2008, the Company
recorded a one-time charge of $15.0 million related to estimated sales returns
associated with the closing of certain wholesale doors in the U.S.
The
Company's concentrations of credit risk arise primarily from accounts receivable
related to trade customers during the peak selling seasons. The Company has
significant accounts receivable balances due from major national chain and
department stores. The Company's results of operations could be materially
adversely affected in the event any of these customers or a group of these
customers defaulted on all or a significant portion of their obligations to the
Company as a result of financial difficulties. As of January 31, 2009, except
for those accounts provided for in the reserve for doubtful accounts, the
Company knew of no situations with any of the Company’s major customers which
would indicate any such customer’s inability to make its required
payments.
Inventories
The
Company values its inventory at the lower of cost or market. The
Company’s U.S. inventory is valued using the first-in, first-out (FIFO)
method. The cost of finished goods and component inventories, held by
international subsidiaries, are determined using average cost. The Company’s
management regularly reviews its sales to customers and customers’ sell through
at retail to determine excess or obsolete inventory. Inventory
classified as discontinued and, together with the related
component
parts which can be assembled into saleable finished goods, is sold primarily
through the Company’s outlet stores. When management determines that finished
product is unsaleable or when it is impractical to build the remaining
components into watches for sale, a reserve is established for the cost of those
products and components to value the inventory at the lower of cost or
market. During the fiscal year ended January 31, 2009, the Company
went through a process of scrapping unsaleable inventory and components which
were reserved for and recorded as cost of sales in previous fiscal
years. Additionally in fiscal year 2009, the Company conducted its
ongoing review of unsaleable inventory and associated components resulting in no
material changes to existing reserves. During the fiscal years ended
January 31, 2008 and 2007, the Company conducted an in depth review of all its
discontinued components and watches. In doing so, the Company made an
economic decision to convert these excess quantities of discontinued inventory
into cash. As a result, the Company engaged in a liquidation through
an independent third party to sell the excess product for cash. In
addition, where it was not deemed economically feasible to invest the time,
effort and/or cost, the Company initiated efforts to cleanse the inventory and
scrap the product. The Company’s estimates, based on which it
establishes its inventory reserves, could vary significantly, either favorably
or unfavorably, from actual requirements depending on future economic
conditions, customer inventory levels, expected usage or competitive
conditions.
Property,
Plant and Equipment
Property,
plant and equipment are stated at cost less accumulated
depreciation. Depreciation of buildings is amortized using the
straight-line method based on the useful life of 40
years. Depreciation of furniture and equipment is provided using the
straight-line method based on the estimated useful lives of assets, which range
from four to ten years. Computer software is amortized using the straight-line
method over the useful life of five to ten years. Leasehold
improvements are amortized using the straight-line method over the lesser of the
term of the lease or the estimated useful life of the leasehold
improvement. Design fees and tooling costs are amortized using the
straight-line method based on the useful life of three years. Upon
the disposition of property, plant and equipment, the accumulated depreciation
is deducted from the original cost and any gain or loss is reflected in current
earnings.
Long-Lived
Assets
The
Company periodically reviews the estimated useful lives of its depreciable
assets based on factors including historical experience, the expected beneficial
service period of the asset, the quality and durability of the asset and the
Company’s maintenance policy including periodic upgrades. Changes in useful
lives are made on a prospective basis unless factors indicate the carrying
amounts of the assets may not be recoverable and an impairment write-down is
necessary.
The
Company performs an impairment review of its long-lived assets once events or
changes in circumstances indicate, in management's judgment, that the carrying
value of such assets may not be recoverable. When such a determination has been
made, management compares the carrying value of the assets with their estimated
future undiscounted cash flows. If it is determined that an impairment loss has
occurred, the loss is recognized during that period. The impairment loss is
calculated as the difference between asset carrying values and the fair value of
the long-lived assets.
During
the fourth quarter of fiscal 2009, the Company determined that the carrying
value of its long-lived assets with respect to five Movado Boutique retail
locations was not recoverable. The impairment review was performed pursuant to
SFAS No. 144 because of the economic downturn in the U.S. that
had
a
negative effect on the Company’s fourth quarter ended January 31, 2009, the
retail segments largest quarter of the year in terms of sales and
profitability. The deteriorating economy negatively affected the
Boutiques’ sales volumes. As a result, the Company recorded a non-cash pre-tax
impairment charge of $4.5 million consisting of property, plant and
equipment. The charge was calculated as the difference between the
assets’ carrying values and their estimated fair value. For the
purposes of this calculation, fair value was determined using a discounted cash
flow calculation. The impairment charge is included in the selling,
general and administrative expenses in the fiscal 2009 Consolidated Statements
of Income.
Deferred
Rent Obligations and Contributions from Landlords
The
Company accounts for rent expense under non-cancelable operating leases with
scheduled rent increases on a straight-line basis over the lease
term. The excess of straight-line rent expense over scheduled
payments is recorded as a deferred liability. In addition, the
Company receives build out contributions from landlords primarily as an
incentive for the Company to lease retail store space from the
landlords. This is also recorded as a deferred
liability. Such amounts are amortized as a reduction of rent expense
over the life of the related lease.
Capitalized
Software Costs
The
Company capitalizes certain computer software costs after technological
feasibility has been established. The costs are amortized utilizing the
straight-line method over the economic lives of the related products ranging
from five to seven years. Additionally, the Company is in the process
of implementing SAP, a business enterprise solution as the core enterprise
system. As of January 31, 2009 and January 31, 2008, $19.7 million
and $10.5 million of costs related to SAP have been capitalized,
respectively. When the SAP system goes live, it will begin to be
amortized over a period of 10 years, utilizing the straight-line
method.
Intangibles
Intangible
assets consist primarily of trademarks and are recorded at
cost. Trademarks are amortized over ten years. The Company
periodically reviews intangible assets to evaluate whether events or changes
have occurred that would suggest an impairment of carrying value. An
impairment would be recognized when expected undiscounted future operating cash
flows are lower than the carrying value. At January 31, 2009 and
2008, intangible assets at cost were $10.3 million and $11.3 million,
respectively, and related accumulated amortization of intangibles was $6.3
million and $6.9 million, respectively. Amortization expense for fiscal 2009,
2008 and 2007 was $1.0 million, $0.8 million and $0.7 million,
respectively.
Derivative
Financial Instruments
The
Company utilizes derivative financial instruments to reduce foreign currency
fluctuation risks. The Company accounts for its derivative financial instruments
in accordance with SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", (“SFAS No. 133”) as amended and interpreted, which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value. Changes in the fair value
of those instruments will be reported in earnings or other comprehensive income
depending on the use of the
derivative
and whether it qualifies for hedge accounting. The accounting for gains and
losses associated with changes in the fair value of the derivative and the
effect on the consolidated financial statements will depend on its hedge
designation and whether the hedge is highly effective in achieving offsetting
changes in the fair value of cash flows of the asset or liability
hedged.
The
Company’s risk management policy is to enter into forward exchange contracts and
purchase foreign currency options, under certain limitations, to reduce exposure
to adverse fluctuations in foreign exchange rates and, to a lesser extent, in
commodity prices related to its purchases of watches. When entered into, the
Company designates and documents these derivative instruments as a cash flow
hedge of a specific underlying exposure, as well as the risk management
objectives and strategies for undertaking the hedge
transactions. Changes in the fair value of a derivative that is
designated and documented as a cash flow hedge and is highly effective, are
recorded in other comprehensive income until the underlying transaction affects
earnings, and then are later reclassified into earnings in the same account as
the hedged transaction. The Company formally assesses, both at the
inception and at each financial quarter thereafter, the effectiveness of the
derivative instrument hedging the underlying forecasted cash flow
transaction. Any ineffectiveness related to the derivative financial
instruments’ change in fair value will be recognized in the period in which the
ineffectiveness was calculated.
The
Company uses forward exchange contracts to offset its exposure to certain
foreign currency liabilities. These forward contracts are not designated as SFAS
No. 133 hedges and, therefore, changes in the fair value of these derivatives
are recognized into earnings, thereby offsetting the current earnings effect of
the related foreign currency liabilities.
The
Company’s risk management policy includes net investment hedging of the
Company’s Swiss franc-denominated investment in its wholly-owned subsidiaries
located in Switzerland using purchased foreign currency options under certain
limitations. When entered into for this purpose, the Company designates and
documents the derivative instrument as a net investment hedge of a specific
underlying exposure, as well as the risk management objectives and strategies
for undertaking the hedge transactions. Changes in the fair value of a
derivative that is designated and documented as a net investment hedge are
recorded in other comprehensive income in the same manner as the cumulative
translation adjustment of the Company’s Swiss franc-denominated investment. The
Company formally assesses, both at the inception and at each financial quarter
thereafter, the effectiveness of the derivative instrument hedging the net
investment.
All of
the Company’s derivative instruments have liquid markets to assess fair
value. The Company does not enter into any derivative instruments for
trading purposes.
Revenue
Recognition
In the
wholesale segment, the Company recognizes its revenues upon transfer of title
and risk of loss in accordance with its FOB shipping point terms of sale and
after the sales price is fixed and determinable and collectability is reasonably
assured. In the retail segment, transfer of title and risk of loss
occurs at the time of register receipt. The Company records estimates
for sales returns, volume-based programs and sales and cash discount allowances
as a reduction of revenue in the same period that the sales are
recorded. These estimates are based upon historical analysis,
customer agreements and/or currently known factors that arise in the normal
course of business. In the fourth quarter of fiscal 2008, the Company
recorded a one-time accrual of $15.0 million related to estimated future sales
returns associated with the streamlining of the Movado brand wholesale
distribution in the U.S. for the planned
reduction
of approximately 1,400 wholesale customer doors. These sales returns
were completed during fiscal 2009.
Cost
of Sales
Costs of
sales of the Company’s products consist primarily of component costs, assembly
costs and unit overhead costs associated with the Company’s supply chain
operations in Switzerland and Asia. The Company’s supply chain
operations consist of logistics management of assembly operations and product
sourcing in Switzerland and Asia and minor assembly in Switzerland.
Selling,
General and Administrative Expenses
The
Company’s SG&A expenses consist primarily of marketing, selling,
distribution and general and administrative expenses. During the
second half of fiscal year 2009, the Company announced initiatives designed to
streamline operations, reduce expenses, and improve efficiencies and
effectiveness across the Company’s global organization.
In
fiscal year 2009, the Company recorded a total pre-tax charge of $11.1 million
related to the completion of these programs and a restructuring of certain
benefit arrangements.
Additionally, the Company recorded a
non-cash pretax impairment charge
of $4.5 million consisting of property,
plant and equipment, related to five Movado Boutiques.
Annual
marketing expenditures are based principally on overall strategic considerations
relative to maintaining or increasing market share in markets that management
considers to be crucial to the Company’s continued success as well as on general
economic conditions in the various markets around the world in which the Company
sells its products.
Selling
expenses consist primarily of salaries, sales commissions, sales force travel
and related expenses, expenses associated with Baselworld, the annual watch and
jewelry trade show and other industry trade shows and operating costs incurred
in connection with the Company’s retail business. Sales commissions vary with
overall sales levels. Retail selling expenses consist primarily of payroll
related and store occupancy costs.
Distribution
expenses consist primarily of salaries of distribution staff, rental and other
occupancy costs, security, depreciation and amortization of furniture and
leasehold improvements and shipping supplies.
General
and administrative expenses consist primarily of salaries and other employee
compensation, employee benefit plan costs, office rent, management information
systems costs, professional fees, bad debts, depreciation and amortization of
furniture and leasehold improvements, patent and trademark expenses and various
other general corporate expenses.
Warranty
Costs
All
watches sold by the Company come with limited warranties covering the movement
against defects in material and workmanship for periods ranging from two to
three years from the date of purchase, with the exception of Tommy Hilfiger
watches, for which the warranty period is ten years. In addition, the
warranty period is five years for the gold plating for Movado watch cases and
bracelets. When changes in warranty costs are experienced, the
Company will adjust the warranty accrual as required.
Warranty
liability for the fiscal years ended January 31, 2009, 2008 and 2007 was as
follows (in thousands):
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$
|
2,193
|
|
|
$
|
1,954
|
|
|
$
|
2,185
|
|
|
Provision
charged to operations
|
|
|
1,864
|
|
|
|
2,193
|
|
|
|
1,954
|
|
|
Settlements
made
|
|
|
(2,193
|
)
|
|
|
(1,954
|
)
|
|
|
(2,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
end of year
|
|
$
|
1,864
|
|
|
$
|
2,193
|
|
|
$
|
1,954
|
|
Pre-opening
Costs
Costs
associated with the opening of new boutique and outlet stores, including
pre-opening rent, are expensed in the period incurred.
Marketing
The
Company expenses the production costs of an advertising campaign at the
commencement date of the advertising campaign. Included in marketing
expenses are costs associated with co-operative advertising, media advertising,
production costs and costs of point-of-sale materials and
displays. These costs are recorded as SG&A
expenses. The Company participates in cooperative advertising
programs on a voluntary basis and receives a “separately identifiable benefit in
exchange for the consideration”. Since the amount of consideration
paid to the retailer does not exceed the fair value of the benefit received by
the Company, these costs are recorded as SG&A expenses as opposed to being
recorded as a reduction of revenue. Marketing expense for fiscal
2009, 2008 and 2007 amounted to $80.3 million, $86.2 million and $79.4 million,
respectively.
Included
in the other current assets in the consolidated balance sheets as of January 31,
2009 and 2008 are prepaid advertising costs of $2.0 million and $2.6 million,
respectively. These prepaid costs represent advertising costs paid to
licensors in advance, pursuant to the Company’s licensing agreements and
sponsorships.
Shipping
and Handling Costs
Amounts
charged to customers and costs incurred by the Company related to shipping and
handling are included in net sales and cost of goods sold,
respectively. The amounts recorded for the fiscal years ended January
31, 2009, 2008 and 2007 were insignificant.
Income
Taxes
The
Company follows SFAS No. 109, "Accounting for Income Taxes". Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax laws and tax rates, in each jurisdiction the Company operates,
and applies to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities due to a change in tax rates is recognized in income in the period
that
includes
the enactment date. In addition, the amounts of any future tax benefits are
reduced by a valuation allowance to the extent such benefits are not expected to
be realized on a more-likely-than-not basis. The Company calculates estimated
income taxes in each of the jurisdictions in which it operates. This process
involves estimating actual current tax expense along with assessing temporary
differences resulting from differing treatment of items for both book and tax
purposes.
The
Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income
Taxes”, on February 1, 2007. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with SFAS No. 109. FIN 48 also prescribes a recognition
threshold and measurement standard for the financial statement recognition and
measurement of an income tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosures and transitions. The Company previously recognized income
tax positions based on management’s estimate of whether it was reasonably
possible that a liability had been incurred for unrecognized tax benefits by
applying SFAS No. 5, Accounting for Contingencies. The provisions of
FIN 48 became effective for the Company on February 1, 2007.
Earnings
Per Share
The
Company presents net income per share on a basic and diluted
basis. Basic earnings per share is computed using weighted-average
shares outstanding during the period. Diluted earnings per share is
computed using the weighted-average number of shares outstanding adjusted for
dilutive common stock equivalents.
The
weighted-average number of shares outstanding for basic earnings per share were
24,782,000, 26,049,000 and 25,670,000 for fiscal 2009, 2008 and 2007,
respectively. For diluted earnings per share, these amounts were
increased by 772,000, 1,244,000 and 1,124,000 in fiscal 2009, 2008 and 2007,
respectively, due to potentially dilutive common stock equivalents issuable
under the Company’s stock compensation plans.
For the
year ended January 31, 2009, approximately 75,000 of potentially dilutive common
stock equivalents were excluded from the computation of dilutive earnings per
share because their effect would have been antidilutive. There were no
antidilutive shares for the year-ended January 31, 2008.
Stock-Based
Compensation
On
February 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment” (“SFAS No. 123(R)”), electing to use the modified
prospective application transition method, and accordingly, prior period
financial statements have not been restated. Under this method, the fair
value of all employee stock options granted after adoption and the unvested
portion of previously granted awards must be recognized in the Consolidated
Statements of Income. Prior to February 1, 2006, employee stock option
grants were accounted for under the intrinsic value method, which measures
compensation cost as the excess, if any, of the quoted market price of the stock
at grant date over the amount an employee must pay to acquire the
stock. Accordingly, compensation expense had not been recognized for
employee stock options granted at or above fair value. Prior to
February 1, 2006, compensation expense for restricted stock grants was reduced
as actual forfeitures of the awards occurred. SFAS No. 123(R)
requires forfeitures to be estimated at the time of grant in order to estimate
the amount of share-based awards that will ultimately vest and thus, current
period compensation
expense
for both stock options and restricted stock have been adjusted for estimated
forfeitures. See Note 12 to the Company’s Consolidated Financial
Statements for further information regarding stock-based
compensation.
Recently
Issued Accounting Standards
In
December 2007, the FASB issued SFAS No. 141(R) “Business
Combinations.” SFAS No. 141(R) states that all business combinations
(whether full, partial or step acquisitions) will result in all assets and
liabilities of an acquired business being recorded at their acquisition date
fair values. Earn-outs and other forms of contingent consideration
and certain acquired contingencies will also be recorded at fair value at the
acquisition date. SFAS No. 141(R) also states acquisition costs will
generally be expensed as incurred; in-process research and development will be
recorded at fair value as an indefinite-lived intangible asset at the
acquisition date; changes in deferred tax asset valuation allowances and income
tax uncertainties after the acquisition date generally will affect income tax
expense; and restructuring costs will be expensed in periods after the
acquisition date. This statement is effective for financial
statements issued for fiscal years beginning after December 15,
2008. The Company will apply the provisions of this standard to any
acquisitions that it completes on or after February 1, 2009.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.” This
statement amends ARB No. 51
to
establish accounting and
reporting standards for the noncontrolling interest (minority interest) in a
subsidiary and for the deconsolidation of a subsidiary. Upon its adoption,
noncontrolling interests will be classified as equity in the consolidated
balance sheets. This statement also provides guidance on a subsidiary
deconsolidation as well as stating that entities need to provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This statement is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company is currently evaluating the impact of
SFAS No. 160 on the Company’s consolidated financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133”. This
statement requires enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS No. 161 also
requires that objectives for using derivative instruments be disclosed in terms
of underlying risk and accounting designation and requires cross-referencing
within the footnotes. This statement also suggests disclosing the
fair values of derivative instruments and their gains and losses in a tabular
format. This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15,
2008. The Company is currently evaluating the impact of SFAS No. 161
on the Company’s consolidated financial statements.
NOTE
2 – INVENTORIES, NET
Inventories,
net at January 31, consisted of the following (in thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Finished
goods
|
|
$
|
146,073
|
|
|
$
|
117,027
|
|
|
Component
parts
|
|
|
81,423
|
|
|
|
76,222
|
|
|
Work-in-process
|
|
|
1,388
|
|
|
|
11,880
|
|
|
|
|
$
|
228,884
|
|
|
$
|
205,129
|
|
NOTE
3 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment at January 31, at cost, consisted of the following (in
thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Land
and buildings
|
|
$
|
3,995
|
|
|
$
|
4,285
|
|
|
Furniture
and equipment
|
|
|
60,592
|
|
|
|
62,434
|
|
|
Computer
software
|
|
|
37,953
|
|
|
|
41,529
|
|
|
Leasehold
improvements
|
|
|
40,660
|
|
|
|
42,930
|
|
|
Design
fees and tooling costs
|
|
|
10,010
|
|
|
|
10,690
|
|
|
|
|
|
153,210
|
|
|
|
161,868
|
|
|
Less:
accumulated depreciation
|
|
|
86,461
|
|
|
|
93,355
|
|
|
|
|
$
|
66,749
|
|
|
$
|
68,513
|
|
Depreciation
and amortization expense related to property, plant and equipment for fiscal
2009, 2008 and 2007 was $17.2 million, $15.8 million and $15.7 million,
respectively, which includes computer software amortization expense for fiscal
2009, 2008 and 2007 of $1.0 million, $2.0 million and $3.7 million,
respectively. Additionally, the Company recorded a non-cash pre-tax
impairment charge of $4.5 million consisting of property, plant and equipment,
related to five Movado Boutique locations.
NOTE
4 – SENIOR DEBT, PROPOSED AND COMMITTED LINES OF CREDIT
During
fiscal 1999, the Company issued $25.0 million of Series A Senior Notes (“Series
A Senior Notes”) under a Note Purchase and Private Shelf Agreement, dated
November 30, 1998 (the “1998 Note Purchase Agreement”), between the Company and
The Prudential Insurance Company of America (“Prudential”). These
notes bear interest of 6.90% per annum, mature on October 30, 2010 and are
subject to annual repayments of $5.0 million commencing October 31,
2006. These notes contained certain financial covenants including an
interest coverage ratio and maintenance of consolidated net worth and certain
non-financial covenants that restricted the Company’s activities regarding
investments and acquisitions, mergers, certain transactions with affiliates,
creation of liens, asset transfers, payment of dividends and limitation of the
amount of debt outstanding. On June 5, 2008, the Company amended its
Series A Senior Notes under an amendment to the 1998 Note Purchase Agreement (as
amended, the “First Amended 1998 Note Purchase Agreement”) with Prudential and
an affiliate of Prudential. No
additional
senior promissory notes are issuable by the Company pursuant to the First
Amended 1998 Note Purchase Agreement. Certain provisions and covenants were
modified to be aligned with covenants in the Company’s other credit
agreements. These included the interest coverage ratio, elimination of the
maintenance of consolidated net worth and the addition of a debt coverage
ratio. At January 31, 2009, $10.0 million of the Series A Senior
Notes were issued and outstanding.
As of
March 21, 2004, the Company amended its Note Purchase and Private Shelf
Agreement, originally dated March 21, 2001 (as amended, the “First Amended 2001
Note Purchase Agreement”), among the Company, Prudential and certain affiliates
of Prudential (together, the “Purchasers”). This agreement allowed
for the issuance of senior promissory notes in the aggregate principal amount of
up to $40.0 million with maturities up to 12 years from their original date of
issuance. On October 8, 2004, the Company issued, pursuant to the
First Amended 2001 Note Purchase Agreement, 4.79% Senior Series A-2004 Notes due
2011 (the "Senior Series A-2004 Notes") in an aggregate principal amount of
$20.0 million, which will mature on October 8, 2011 and are subject to annual
repayments of $5.0 million commencing on October 8, 2008. Proceeds of
the Senior Series A-2004 Notes have been used by the Company for capital
expenditures, repayment of certain of its debt obligations and general corporate
purposes. These notes contained certain financial covenants,
including an interest coverage ratio and maintenance of consolidated net worth
and certain non-financial covenants that restricted the Company’s activities
regarding investments and acquisitions, mergers, certain transactions with
affiliates, creation of liens, asset transfers, payment of dividends and
limitation of the amount of debt outstanding.
On June
5, 2008, the Company amended the First Amended 2001 Note Purchase Agreement (as
amended, the “Second Amended 2001 Note Purchase Agreement”), with Prudential and
the Purchasers. The Second Amended 2001 Note Purchase Agreement
permits the Company to issue senior promissory notes for purchase by Prudential
and the Purchasers, in an aggregate principal amount of up to $70.0 million
inclusive of the Senior Series A-2004 Notes described above, until June 5, 2011,
with maturities up to 12 years from their original date of issuance. The
remaining aggregate principal amount of senior promissory notes issuable by the
Company that may be purchased by Prudential and the Purchasers pursuant to the
Second Amended 2001 Note Purchase Agreement is $55.0 million. Certain provisions
and covenants were modified to be aligned with covenants in the Company’s other
credit agreements. These included the interest coverage ratio,
elimination of the maintenance of consolidated net worth and addition of a debt
coverage ratio. As of January 31, 2009, $15.0 million of the Senior Series
A-2004 Notes were issued and outstanding.
The
credit agreement dated as of December 15, 2005, as amended, by and between the
Company as parent guarantor, its Swiss subsidiaries, MGI Luxury Group S.A.,
Movado Watch Company SA, Concord Watch Company S.A. and Ebel Watches S.A. as
borrowers, and JPMorgan Chase Bank, N.A. (“Chase”), JPMorgan
Securities, Inc., Bank of America, N.A., PNC Bank and Citibank, N.A. (as
amended, the "Swiss Credit Agreement"), provides for a revolving credit facility
of 33.0 million Swiss francs and matures on December 15, 2010. The
obligations of the Company’s Swiss subsidiaries under this credit agreement are
guaranteed by the Company under a Parent Guarantee, dated as of December 15,
2005, in favor of the lenders. The Swiss Credit Agreement contains
financial covenants, including an interest coverage ratio, average debt coverage
ratio and limitations on capital expenditures and certain non-financial
covenants that restrict the Company’s activities regarding investments and
acquisitions, mergers, certain transactions with affiliates, creation of liens,
asset transfers, payment of dividends and limitation of the amount of debt
outstanding. Borrowings under the Swiss Credit Agreement bear interest at a rate
equal to LIBOR (as defined in the Swiss Credit Agreement) plus
a
margin
ranging from .50% per annum to .875% per annum (depending upon a leverage
ratio). As of January 31, 2009, there were no outstanding borrowings under
this revolving credit facility.
The
credit agreement dated as of December 15, 2005, as amended, by and between the
Company, MGI Luxury Group S.A. and Movado Watch Company SA, as borrowers, and
JPMorgan Chase Bank, N.A., JPMorgan Securities, Inc., Bank of America, N.A., PNC
Bank, Bank Leumi and Citibank, N.A. (as amended, the "US Credit Agreement"),
provides for a revolving credit facility of $90.0 million (including a sublimit
for borrowings in Swiss francs of up to an equivalent of $25.0 million) with a
provision to allow for a further increase of up to an additional $10.0 million,
subject to certain terms and conditions. The US Credit Agreement will mature on
December 15, 2010. The obligations of MGI Luxury Group S.A. and Movado
Watch Company SA are guaranteed by the Company under a Parent Guarantee, dated
as of December 15, 2005, in favor of the lenders. The obligations of the Company
are guaranteed by certain domestic subsidiaries of the Company under subsidiary
guarantees, in favor of the lenders. The US Credit Agreement contains
financial covenants, including an interest coverage ratio, average debt coverage
ratio and limitations on capital expenditures and certain non-financial
covenants that restrict the Company’s activities regarding investments and
acquisitions, mergers, certain transactions with affiliates, creation of liens,
asset transfers, payment of dividends and limitation of the amount of debt
outstanding. Borrowings under the US Credit Agreement bear interest, at
the Company’s option, at a rate equal to the adjusted LIBOR (as defined in the
US Credit Agreement) plus a margin ranging from .50% per annum to .875% per
annum (depending upon a leverage ratio), or the Alternate Base Rate (as defined
in the US Credit Agreement). As of January 31, 2009, $40.0 million
was outstanding under this revolving credit facility.
For the
fiscal years ending January 31, 2009 and 2008, the calculation of the financial
covenants for the Series A Senior Notes, Senior Series A-2004 Notes, the Swiss
Credit Agreement and US Credit Agreement (together the "Debt Facilities”) were
as follows (dollars in thousands):
|
|
|
Required
|
|
|
Required
|
|
|
Actual
|
|
|
Actual
|
|
|
|
|
Senior
|
|
|
Credit
|
|
|
January
31,
|
|
|
January
31,
|
|
|
Covenant
|
|
Notes
|
|
|
Facilities
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Coverage Ratio
|
|
Min.
3.50x
|
|
|
Min.
3.50x
|
|
|
|
2.45
|
x
|
|
|
16.09
|
x
|
|
Average
Debt Coverage Ratio
|
|
Max.
3.25x
|
|
|
Max.
3.25x
|
|
|
|
2.72
|
x
|
|
|
0.93
|
x
|
|
Capital
Expenditures Limit
|
|
|
n/a
|
|
|
$
|
42,608
|
|
|
$
|
22,681
|
|
|
$
|
27,392
|
|
|
Priority
Debt Limit
|
|
$
|
79,095
|
|
|
|
n/a
|
|
|
$
|
40,000
|
|
|
$
|
25,907
|
|
|
Lien
Limit
|
|
$
|
79,095
|
|
|
|
n/a
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As of
January 31, 2009, the Company was in compliance with all non-financial covenants
under the Debt Facilities. Due to the reported financial results for
fiscal 2009, the Company was in compliance with all financial covenants with the
exception of the interest coverage ratio covenant under these Debt
Facilities.
The
current results included certain charges for severance related costs associated
with the Company’s expense reduction initiatives and a restructuring of
certain benefit arrangements of $11.1 million and for asset
impairments of $4.5 million.
The Company believes that it would
have been in compliance with all covenants if these charges, which it
deems to be non-recurring in nature, were excluded from the covenant
calculations. As a result of the Company’s projections in light
of the global economic downturn, without an amendment or waiver, the Company
believes that it will continue to be in non-compliance with the interest
coverage ratio covenant, and potentially additional financial
covenants
under the Debt Facilities, for the upcoming reporting periods in fiscal year
2010. The Company has not requested a waiver as it is currently in
negotiations for a new credit facility discussed in more detail
below. Additionally, the Company has received a commitment, subject
to certain limitations described more fully below, for a three year $50 million
asset-based credit facility from Bank of America to provide available liquidity
if a new credit facility is not consummated.
As a
result of the Company’s non-compliance with the interest coverage ratio
covenant, amounts owed under the Debt Facilities have been reclassified to
current liabilities. Additionally, the Company is prohibited from
borrowing any additional funds under the Debt Facilities and the amounts owed as
of January 31, 2009 may be declared immediately due and payable by the
lenders. The lenders have not taken any action in respect to this
default, but they may do so in the future. Should the debt be
declared immediately due and payable by the lenders, the Company would be
able to satisfy such obligations through obtaining alternative financing, cash
on hand and conversion of working capital to cash.
The
components of debt as of January 31, were as follows (in
thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Swiss
Revolving Credit Facility
|
|
$
|
-
|
|
|
$
|
25,895
|
|
|
U.S.
Revolving Credit Facility
|
|
|
40,000
|
|
|
|
-
|
|
|
Series
A Senior Notes
|
|
|
10,000
|
|
|
|
15,000
|
|
|
Senior
Series A-2004 Notes
|
|
|
15,000
|
|
|
|
20,000
|
|
|
|
|
|
65,000
|
|
|
|
60,895
|
|
|
Less:
current portion
|
|
|
65,000
|
|
|
|
10,000
|
|
|
Long-term
debt
|
|
$
|
-
|
|
|
$
|
50,895
|
|
The
Company pays a facility fee on the unused portion of the committed lines of the
Swiss Credit Agreement and the US Credit Agreement. The unused
portion of the committed lines was $78.5 million at January 31, 2009, however,
as noted above, the Company is unable to access such amounts due to its
non-compliance with the interest coverage ratio covenants under the Debt
Facilities.
Aggregate
maximum and average monthly outstanding borrowings against the Company's lines
of credit, including uncommitted lines of credit, and related weighted-average
interest rates during fiscal 2009 and 2008 were as follows (dollars in
thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Maximum
borrowings
|
|
$
|
44,800
|
|
|
$
|
40,900
|
|
|
Average
monthly borrowings
|
|
$
|
27,800
|
|
|
$
|
32,200
|
|
|
Weighted-average
interest rate
|
|
|
3.0
|
%
|
|
|
2.9
|
%
|
Weighted-average
interest rates were computed based on average month-end outstanding borrowings
and applicable average month-end interest rates. For information
about the Company’s uncommitted lines of credit, see Note 5 – Uncommitted Lines
of Credit.
Through
the date of this filing, the Company is in negotiations with banking
institutions for a new three year asset-based revolving credit facility for an
amount up to $110 million (the “New Facility”). Consummation of the
New Facility is subject to (a) syndication, (b) completion of due diligence by
the banking institutions, and (c) the satisfaction of a number of additional
customary conditions precedent, certain of which are at the sole discretion of
the banking institution. The New Facility will likely include limited
financial covenants that are effective only if a minimum availability threshold
is not maintained. The New Facility will be collateralized by
substantially all of the assets of Movado Group, Inc. and its U.S. subsidiaries,
including accounts receivable and inventory, and 65% of the capital stock of
first-tier foreign subsidiaries. The New Facility will contain
various restrictions including limitations on additional debt, the payment of
dividends and repurchasing stock. The Company expects that the fees
and the interest rates under the New Facility, if consummated, will
increase to current market rates. The Company anticipates that the
New Facility will be finalized in May of 2009 and will have a term of three
years, expiring in May 2012.
As
previously mentioned, to provide for available liquidity in the event that the
New Facility is not consummated, the Company has received a commitment for a
three year $50 million asset-based credit facility from Bank of
America. The commitment is subject to the completion of due diligence
by Bank of America and the satisfaction of a number of additional customary
conditions precedent,
certain
of which are at the sole discretion of Bank of America.
In
the event the New Facility is consummated, this commitment will be
canceled.
The
Company anticipates that the New Facility or the $50 million asset-based credit
facility, if consummated, would replace the Debt Facilities . In the event
the New Facility or the $50 million asset-based credit facility is not
consummated, the Company’s financial condition and results of operations may be
materially adversely affected.
NOTE 5 – UNCOMMITTED LINES OF
CREDIT
On June
16, 2008, the Company renewed a line of credit letter agreement with Bank of
America and an amended and restated promissory note in the principal amount of
up to $20.0 million payable to Bank of America, originally dated December 12,
2005. Pursuant to the line of credit letter agreement, Bank of
America will consider requests for short-term loans and documentary letters of
credit for the importation of merchandise inventory, the aggregate amount of
which at any time outstanding shall not exceed $20.0 million. The Company's
obligations under the agreement are guaranteed by its subsidiaries, Movado
Retail Group, Inc. and Movado LLC. Pursuant to the amended and
restated promissory note, the Company promised to pay Bank of America $20.0
million, or such lesser amount as may then be the unpaid balance of all loans
made by Bank of America to the Company thereunder, in immediately available
funds upon the maturity date of June 16, 2009. The Company has the right to
prepay all or part of any outstanding amounts under the amended and restated
promissory note without penalty at any time prior to the maturity date. The
amended and restated promissory note bears interest at an annual rate equal to
either (i) a floating rate equal to the prime rate or (ii) such fixed rate as
may be agreed upon by the Company and Bank of America for an interest period
which is also then agreed upon. The amended and restated promissory note
contains various representations and warranties and events of default that
are customary for instruments of that type. As of
January 31, 2009, there were no outstanding borrowings against this line.
On July
31, 2008, the Company renewed a promissory note, originally dated December 13,
2005, in the principal amount of up to $37.0 million, at a revised amount of up
to $7.0 million, payable to Chase.
Pursuant
to the promissory note, the Company promised to pay Chase $7.0 million, or such
lesser amount as may then be the unpaid balance of each loan made or letter of
credit issued by Chase to the Company thereunder, upon the maturity date of July
31, 2009. The Company has the right to prepay all or part of any outstanding
amounts under the promissory note without penalty at any time prior to the
maturity date. The promissory note bears interest at an annual rate equal to (i)
a floating rate equal to the prime rate, (ii) a fixed rate equal to an adjusted
LIBOR plus 0.625% or (iii) a fixed rate equal to a rate of interest offered by
Chase from time to time on any single commercial borrowing. The promissory note
contains various events of default that are customary for instruments of that
type. In addition, it is an event of default for any security interest or other
encumbrance to be created or imposed on the Company's property, other than as
permitted in the lien covenant of the US Credit Agreement. Chase
issued 11 irrevocable standby letters of credit for retail and operating
facility leases to various landlords, for the administration of the Movado
Boutique private-label credit card and for Canadian payroll to the Royal Bank of
Canada totaling $1.2 million with expiration dates through March 18, 2010. As of
January 31, 2009, there were no outstanding borrowings against this promissory
note.
A Swiss
subsidiary of the Company maintains unsecured lines of credit with an
unspecified length of time with a Swiss bank. Available credit under these lines
totaled 8.0 million Swiss francs, with dollar equivalents of $6.9 million and
$7.4 million at January 31, 2009 and 2008, respectively. As of
January 31, 2009, two European banks have guaranteed obligations to third
parties on behalf of two of the Company’s foreign subsidiaries in the amount of
$1.3 million in various foreign currencies. As of January 31, 2009,
there were no outstanding borrowings against these lines.
NOTE
6 – DERIVATIVE FINANCIAL INSTRUMENTS
As of
January 31, 2009, the balance of deferred net gains on derivative financial
instruments documented as cash flow hedges included in accumulated other
comprehensive income (“AOCI”) was $1.5 million in net gains, net of tax of $1.0
million, compared to $3.8 million in net gains at January 31, 2008, net of tax
of $2.5 million and $0.1 million in net losses at January 31, 2007, net of tax
benefit of $0.1 million. The Company estimates that a substantial portion of the
deferred net gains at January 31, 2009 will be realized into earnings over the
next 12 to 24 months as a result of transactions that are expected to occur over
that period. The primary underlying transaction which will cause the amount in
AOCI to affect cost of goods sold consists of the Company’s sell through of
inventory purchased in Swiss francs. The maximum length of time the Company is
hedging its exposure to the fluctuation in future cash flows for forecasted
transactions is 24 months. For the years ended January 31, 2009, 2008 and 2007,
the Company reclassified from AOCI to earnings $2.4 million of net gains, net of
tax of $1.6 million, $0.6 million in net gains, net of tax of $0.4 million, and
$0.1 million in net losses, net of tax benefit of $0.1 million,
respectively.
During
fiscal 2009, 2008 and 2007, the Company recorded no charge related to its
assessment of the effectiveness of its derivative hedge portfolio because of the
high degree of effectiveness between the hedging instrument and the underlying
exposure being hedged.
Changes in the contracts’ fair value due to spot-forward differences are
excluded from the designated hedge relationship. The Company records
these transactions in the cost of sales of the Consolidated Statements of
Income.
The
balance of the net loss included in the cumulative foreign currency translation
adjustment associated with derivatives documented as net investment hedges was
$1.5 million, net of a tax benefit of $0.9
million as of January 31,
2009, 2008 and 2007. Under SFAS No. 133, changes in fair value of
these instruments are recognized in currency translation adjustment, a component
of AOCI, to offset the change in the value of the net investment being
hedged.
The
following presents fair value and maturities of the Company’s foreign currency
derivatives outstanding as of January 31, 2009 (in millions):
|
|
|
Fair
Value of Liability
|
|
Maturities
|
|
|
|
|
|
|
|
Forward
exchange contracts
|
|
$
|
1.1
|
|
Fiscal
2010
|
|
|
|
|
|
|
|
The
Company estimates the fair value of its foreign currency derivatives based on
quoted market prices or pricing models using current market
rates. These derivative financial instruments are currently reflected
in accrued liabilities.
NOTE
7 - FAIR VALUE MEASUREMENTS
As of
February 1, 2008, the Company adopted SFAS No. 157, “Fair Value
Measurements”, for financial assets and liabilities. FSP No. FAS
157-2, “Effective Date of FASB Statement No. 157”, delays, for one year, the
effective date of SFAS No. 157 for non-financial assets and liabilities, except
those that are recognized or disclosed in the financial statements on at least
an annual basis. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about 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. SFAS No. 157 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.
|
SFAS No.
157 requires the use of observable market data if such data is available without
undue cost and effort. The Company’s adoption of SFAS No. 157
did not result in any changes to the accounting for its financial assets and
liabilities. Therefore, the primary impact to the Company upon its
adoption of SFAS No. 157 was to expand its fair value measurement
disclosures.
The
following table presents the fair value hierarchy for those assets and
liabilities measured at fair value on a recurring basis as of January 31, 2009
(in thousands):
|
|
|
Fair Value at January
31, 2009
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
135
|
|
|
SERP
assets - employer
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750
|
|
|
SERP
assets - employee
|
|
|
13,429
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,429
|
|
|
Total
|
|
$
|
14,314
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge
derivatives
|
|
$
|
-
|
|
|
$
|
1,120
|
|
|
$
|
-
|
|
|
$
|
1,120
|
|
|
SERP
liabilities - employee
|
|
|
13,429
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,429
|
|
|
Total
|
|
$
|
13,429
|
|
|
$
|
1,120
|
|
|
$
|
-
|
|
|
$
|
14,549
|
|
The fair
values of the Company’s available-for-sale securities are based on quoted
prices. Fair values of the Company’s hedge derivatives are calculated
based on quoted foreign exchange rates, quoted interest rates and market
volatility factors. 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.
NOTE
8 - INCOME TAXES
The
provision / (benefit) for income taxes for the fiscal years ended January 31,
2009, 2008 and 2007 consists of the following components (in
thousands):
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
(7,891
|
)
|
|
$
|
3,414
|
|
|
$
|
8,168
|
|
|
U.S. State and
Local
|
|
|
249
|
|
|
|
1,681
|
|
|
|
1,147
|
|
|
Non-U.S.
|
|
|
4,001
|
|
|
|
5,672
|
|
|
|
4,168
|
|
|
|
|
|
(3,641
|
)
|
|
|
10,767
|
|
|
|
13,483
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
450
|
|
|
|
(10,635
|
)
|
|
|
509
|
|
|
U.S. State and
Local
|
|
|
-
|
|
|
|
-
|
|
|
|
(89
|
)
|
|
Non-U.S.
|
|
|
-
|
|
|
|
(963
|
)
|
|
|
-
|
|
|
|
|
|
450
|
|
|
|
(11,598
|
)
|
|
|
420
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
4,386
|
|
|
|
(5,214
|
)
|
|
|
(3,972
|
)
|
|
U.S. State and
Local
|
|
|
294
|
|
|
|
(1,307
|
)
|
|
|
(366
|
)
|
|
Non-U.S.
|
|
|
(753
|
)
|
|
|
(2,119
|
)
|
|
|
(6,675
|
)
|
|
|
|
|
3,927
|
|
|
|
(8,640
|
)
|
|
|
(11,013
|
)
|
|
Provision
/ (benefit) for income taxes
|
|
$
|
736
|
|
|
$
|
(9,471
|
)
|
|
$
|
2,890
|
|
(Loss) /
income before taxes for U.S. operations was ($29.0 million), ($4.3 million), and
$12.9 million for periods ended January 31, 2009, 2008 and 2007,
respectively. Income before taxes for non-U.S. operations was $32.3
million, $56.2 million, and $39.8 million for periods ended January 31, 2009,
2008 and 2007, respectively.
Significant
components of the Company's deferred income tax assets and liabilities for the
fiscal year ended January 31, 2009 and 2008 consist of the following (in
thousands):
|
|
|
2009
Deferred Taxes
|
|
|
2008
Deferred Taxes
|
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Net
operating loss carryforwards
|
|
$
|
15,948
|
|
|
$
|
-
|
|
|
$
|
17,364
|
|
|
$
|
-
|
|
|
Inventory
|
|
|
4,829
|
|
|
|
-
|
|
|
|
5,957
|
|
|
|
-
|
|
|
Unprocessed
returns
|
|
|
1,366
|
|
|
|
-
|
|
|
|
5,703
|
|
|
|
-
|
|
|
Receivable
allowance
|
|
|
2,188
|
|
|
|
493
|
|
|
|
2,396
|
|
|
|
715
|
|
|
Deferred
compensation
|
|
|
12,853
|
|
|
|
-
|
|
|
|
10,435
|
|
|
|
-
|
|
|
Unrepatriated
earnings
|
|
|
-
|
|
|
|
7,135
|
|
|
|
-
|
|
|
|
-
|
|
|
Hedge
derivatives
|
|
|
-
|
|
|
|
958
|
|
|
|
-
|
|
|
|
2,533
|
|
|
Depreciation/amortization
|
|
|
8,264
|
|
|
|
3,122
|
|
|
|
1,641
|
|
|
|
1,124
|
|
|
Other
|
|
|
2,507
|
|
|
|
30
|
|
|
|
2,392
|
|
|
|
53
|
|
|
|
|
|
47,955
|
|
|
|
11,738
|
|
|
|
45,888
|
|
|
|
4,425
|
|
|
Valuation
allowance
|
|
|
(7,641
|
)
|
|
|
-
|
|
|
|
(10,689
|
)
|
|
|
-
|
|
|
Total
deferred tax assets and liabilities
|
|
$
|
40,314
|
|
|
$
|
11,738
|
|
|
$
|
35,199
|
|
|
$
|
4,425
|
|
As of
January 31, 2009, the Company had foreign net operating loss carryforwards of
approximately $32.3 million, which are available to offset taxable income in
future years. Carryforward tax losses of $15.8 million were incurred
in Switzerland, primarily in the Ebel business prior to the Company’s
acquisition of the Ebel business on March 1, 2004. Effective March 1,
2004, Ebel S.A. was merged into another wholly-owned Swiss subsidiary, and a
Swiss tax ruling was obtained that allows the Ebel tax losses to offset taxable
income in the surviving entity. As part of purchase accounting, the
Company recorded net deferred tax assets for the Swiss tax losses and for the
temporary differences between the Swiss tax basis and the assigned values of the
net Ebel assets. The Company has established a partial valuation
allowance on the deferred tax assets as a result of an evaluation of expected
utilization of such tax benefits within the expiry of the tax losses through
fiscal 2016. The recognition of the tax benefit had been applied to reduce the
carrying value of acquired intangible assets to zero during fiscal 2007;
thereafter releases of the valuation allowance have been recorded as a reduction
to income tax expense. The Company recognized cash tax savings of $10.0 million
on the utilization of the Swiss tax losses during the year, and released an
additional $4.2 million valuation allowance, primarily due to the Company’s
decision to implement a tax planning strategy.
The
remaining foreign tax losses of $16.5 million are primarily related to the
Company’s operations in Japan, Germany, and the United Kingdom. A full valuation
allowance has been established on the deferred tax assets resulting from the
losses attributable to Japan due to the Company’s assessment that it is
more-likely-than-not the deferred tax assets will not be utilized within the 7
year expiry period. The Company has three subsidiaries in Germany.
Two subsidiaries are inactive; as a result the Company has determined that a
full valuation allowance is appropriate for the losses of these two
subsidiaries, even though there is no time limitation for utilization of the
losses. The third German subsidiary is currently not profitable and
further, certain expected changes in the business prevent management
from
concluding
it is more-likely-than-not the subsidiary will return to profitability in the
future. During fiscal 2009 the Company’s United Kingdom operations returned to a
loss position and the Company concluded it was more-likely-than-not the deferred
tax assets would not be realized. As a result, the Company reinstated
a full valuation allowance.
As of
January 31, 2009, the Company had domestic net operating loss carryforwards of
approximately $20.2 million, of which $2.3 million relates to excess tax
deductions associated with stock option plans which have yet to reduce income
taxes payable. Upon the utilization of these carryforwards, the
associated tax benefits of approximately $0.9 million will be recorded to
Additional Paid-in Capital.
At
January 31, 2009, the Company’s net domestic deferred tax assets amounted to
$20.8 million. Management has considered the realizability of the
deferred tax assets and has concluded that no valuation allowance should be
recorded, as it is not-more-likely-than-not that some portion or all of the
deferred tax assets will not be fully realized. In the
assessment for a valuation allowance, appropriate consideration is given to all
positive and negative evidence related to the realization of the deferred tax
assets. This assessment considers, among other matters, the nature,
frequency and severity of current and cumulative losses, forecasts of future
profitability, excess of appreciated asset value over the tax basis of net
assets, the duration of statutory carryforward periods, the Company’s experience
with operating loss and tax credit carryforwards not expiring unused, and tax
planning alternatives. The Company’s analysis of the need for a
valuation allowance recognizes that the Company has incurred a cumulative loss
for its domestic operations over its evaluation period (current year and the two
previous years), including a substantial loss for fiscal 2009. A
majority of the current loss was the result of the difficult market conditions,
as well as restructuring and impairment charges. The Company believes
it will be able to realize all of its deferred tax
assets. Consideration has also been given to the period over which
these net deferred tax assets can be realized, and the Company’s history of not
having federal tax loss carryforwards expire unused. In addition,
Management has considered a tax planning strategy that is both prudent and
feasible that will be implemented in a timely manner, if necessary, which will
allow the Company to recognize the future tax attributes by increasing taxable
income in the United States.
Management
will continue to evaluate the appropriate level of allowance on all deferred tax
assets, considering such factors as prior earnings history, expected future
earnings, carryback and carryforward periods, and tax and business strategies
that could potentially enhance the likelihood of realization of a deferred tax
asset.
The
provision / (benefit) for income taxes differ from the amount determined by
applying the U.S. federal statutory rate as follows (in thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes at the U.S. statutory rate
|
|
$
|
1,151
|
|
|
$
|
18,188
|
|
|
$
|
18,607
|
|
|
Lower
effective foreign income tax rate
|
|
|
(5,458
|
)
|
|
|
(9,303
|
)
|
|
|
(5,359
|
)
|
|
Change
in valuation allowance
|
|
|
(2,611
|
)
|
|
|
(7,292
|
)
|
|
|
(11,182
|
)
|
|
Tax
provided on repatriated earnings of foreign subsidiaries
|
|
|
165
|
|
|
|
-
|
|
|
|
-
|
|
|
Tax
provided on unrepatriated earnings of foreign subsidiaries
|
|
|
7,388
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in unrecognized tax benefits, net
|
|
|
450
|
|
|
|
(11,598
|
)
|
|
|
-
|
|
|
State
and local taxes, net of federal benefit
|
|
|
456
|
|
|
|
(214
|
)
|
|
|
379
|
|
|
Change
in investment
|
|
|
(785
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Other,
net
|
|
|
(20
|
)
|
|
|
748
|
|
|
|
445
|
|
|
Total
provision / (benefit) for income taxes
|
|
$
|
736
|
|
|
$
|
(9,471
|
)
|
|
$
|
2,890
|
|
A
provision of approximately $7.4 million has been made for federal income and
withholding taxes, net of foreign tax credits, on the future remittance of
approximately $30.0 million total undistributed retained earnings of two foreign
subsidiaries. No provision has been made for federal income or
withholding taxes which may be payable on the remittance of the remaining
undistributed retained earnings of foreign subsidiaries approximating $210.1
million at January 31, 2009, as those earnings are considered permanently
reinvested. It is not practical to estimate the amount of tax, if
any, that may be payable on the eventual distribution of these
earnings.
During
the year, the effective tax rate increased to 22.38%, primarily as a result of
the tax accrued on the future repatriation of foreign earnings, and a smaller
net benefit compared to prior years on the release of valuation allowances on
foreign tax losses. The effective tax rate excluding the benefit from the net
release of valuation allowances and the tax accrued on the future repatriation
of foreign earnings was -122.89%, primarily attributable to the income (loss)
mix. The effective tax rate for fiscal 2008 was -18.23%, primarily as a result
of the recognition of previously unrecognized tax benefits due to the settlement
of the IRS audit for fiscal years 2004 through 2006, and the release of
valuation allowances in whole or in part on Swiss, German and UK tax losses. The
effective tax rate excluding the benefits from release of the valuation
allowances and the settlement of the IRS audit was 20.62%. The
effective tax rate for fiscal 2007 was 5.44%, primarily as a result of a partial
release of the valuation allowance on the Swiss tax losses. The
effective tax rate excluding the benefit from release of the valuation allowance
was 23.26%.
The
Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income
Taxes”, on February 1, 2007. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 also prescribes a recognition threshold and measurement
standard for the financial statement recognition and measurement of an income
tax position taken or expected to be taken in a tax return. FIN 48
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosures and transitions.
The
Internal Revenue Service (“IRS”) commenced examinations of the Company’s
consolidated U.S. federal income tax returns for fiscal years 2004 through 2006
in September 2006. The examination phase concluded in January 2008,
when the Company and the IRS came to a final agreement that resulted in the
effective settlement of all three years. Pursuant to the settlement, the Company
agreed to a total tax assessment for the three years of $3.3 million ($4.8
million gross less $1.5 million foreign tax credits). During the
first quarter of fiscal 2009, the Company settled the liability with a cash
payment.
A
reconciliation of the beginning and ending amounts of gross unrecognized tax
benefits (exclusive of interest) for January 31, 2009 and 2008 are as follows
(in thousands):
|
|
|
2009
|
|
|
2008
|
|
|
Beginning
balance
|
|
$
|
10,089
|
|
|
$
|
30,052
|
|
|
Additions
based on tax positions related to the current year
|
|
|
-
|
|
|
|
477
|
|
|
Additions
for tax positions of prior years
|
|
|
184
|
|
|
|
1,915
|
|
|
Lapse
of statute of limitations
|
|
|
(6
|
)
|
|
|
(1,051
|
)
|
|
Decreases
for tax positions of prior years
|
|
|
(65
|
)
|
|
|
(21,153
|
)
|
|
Cash
settlements
|
|
|
(4,761
|
)
|
|
|
(186
|
)
|
|
F/X
fluctuations
|
|
|
(22
|
)
|
|
|
35
|
|
|
Ending
balance
|
|
$
|
5,419
|
|
|
$
|
10,089
|
|
Included
in the balance at January 31, 2009 is $2.8 million of unrecognized tax benefits
which would impact the Company’s effective tax rate, if
recognized. Interest and penalties, if any, related to unrecognized
tax benefits are recorded in income tax expense. As of January 31,
2009 and January 31, 2008, the Company had $1.0 million and $1.3 million of
accrued interest (net of tax benefit) related to unrecognized tax benefits.
During fiscal years 2009 and 2008, the Company accrued $0.3 million and $1.0
million of interest (net of tax benefit).
The
Company conducts business globally and, as a result, files income tax returns in
the U.S. federal jurisdiction and various state, local and foreign
jurisdictions. In the normal course of business, the Company is
subject to examination by taxing authorities in many countries, including such
major jurisdictions as Switzerland, Hong Kong, Canada and the United
States. The Company, with few exceptions, is no longer subject to
income tax examinations by tax authorities in state, local and foreign taxing
jurisdictions for years before the fiscal year ended January 31,
2005.
NOTE
9 - OTHER ASSETS
In fiscal
1996, the Company entered into an agreement with a trust which owned an
insurance policy issued on the lives of the Company's Chairman, Mr. Gedalio
Grinberg (“Mr. G. Grinberg”), and his spouse. Under this agreement, the trust
assigned the insurance policy to the Company as collateral to secure repayment
by the trust of interest-free loans made by the Company to the trust in amounts
equal to the premiums on said insurance policy (approximately $0.7 million per
annum). The agreement required the trust to repay the loans from the proceeds of
the policy. At January 31, 2003, the Company had outstanding loans from the
trust of $5.2 million. On April 4, 2003, the agreement was amended and restated
to transfer the policy from the trust to the Company in partial repayment of the
loan balance. The Company is the beneficiary of the policy insofar as upon the
death of Mr. G. Grinberg and his spouse, the proceeds of the policy would first
be distributed to the Company to repay the premiums paid by the Company with the
remaining proceeds distributed to the trust. On January 5, 2009, the
Company
announced
the passing of Mr. G. Grinberg. As of January 31, 2009, total
premiums paid were $10.4 million, recorded as an Other Non-Current Asset in the
Company’s Consolidated Balance Sheets, and the cash surrender value of the
policy was $11.6 million.
NOTE
10 – LEASES
The
Company leases office, distribution, retail and manufacturing facilities, and
office equipment under operating leases, which expire at various dates through
January 2019. Certain leases include renewal options and the payment
of real estate taxes and other occupancy costs. Some leases also contain
rent escalation clauses (step rents) that require additional rent amounts in the
later years of the term. Rent expense for leases with step rents is
recognized on a straight-line basis over the minimum lease term. Likewise,
capital funding and other lease concessions that are occasionally provided to
the Company, are recorded as deferred rent and amortized on a straight-line
basis over the minimum lease term as adjustments to rent
expense. Rent expense for equipment and distribution, factory and
office facilities under operating leases was approximately $17.4 million, $16.8
million and $14.4 million in fiscal 2009, 2008 and 2007,
respectively. Minimum annual rentals at January 31, 2009 under
noncancelable operating leases, which do not include real estate taxes and
operating costs, are as follows (in thousands):
|
Fiscal
Year Ended January 31,
|
|
|
|
|
|
|
|
2010
|
|
$
|
15,013
|
|
|
2011
|
|
|
14,512
|
|
|
2012
|
|
|
13,747
|
|
|
2013
|
|
|
11,512
|
|
|
2014
|
|
|
8,745
|
|
|
Thereafter
|
|
|
22,062
|
|
|
|
|
$
|
85,591
|
|
NOTE
11 – COMMITMENTS AND CONTINGENCIES
At
January 31, 2009, the Company had outstanding letters of credit totaling $1.2
million with expiration dates through March 18, 2010 compared to $1.2 million
with expiration dates through March 18, 2009 as of January 31,
2008. One bank in the domestic bank group has issued irrevocable
standby letters of credit for retail and operating facility leases to various
landlords, for the administration of the Movado Boutique private-label credit
card and for Canadian payroll to the Royal Bank of Canada.
As of
January 31, 2009, two European banks have guaranteed obligations to third
parties on behalf of two of the Company’s foreign subsidiaries in the amount of
$1.3 million in various foreign currencies compared to $2.1 million as of
January 31, 2008.
Pursuant
to the Company’s agreements with its licensors, the Company is required to pay
minimum royalties and advertising. As of January 31, 2009, the
Company’s minimum commitments related to its license agreements was $93.7
million.
The
Company had outstanding purchase obligations of $35.9 million with suppliers at
the end of fiscal 2009 for raw materials, finished watches and packaging in the
normal course of business. These purchase obligation amounts do not
represent total anticipated purchases but represent only amounts to be paid for
items required to be purchased under agreements that are enforceable, legally
binding and specify minimum quantity, price and term.
The
Company is involved from time to time in legal claims involving trademarks and
intellectual property, licensing, employee relations and other matters
incidental to the Company’s business. Although the outcome of such
items cannot be determined with certainty, the Company’s general counsel and
management believe that the final outcome would not have a material effect on
the Company’s consolidated financial position, results of operations or cash
flows.
NOTE
12 – STOCK-BASED COMPENSATION
Effective
concurrently with the consummation of the Company's public offering in the
fourth quarter of fiscal 1994, the Board of Directors and the shareholders of
the Company approved the adoption of the Movado Group, Inc. 1993 Employee Stock
Option Plan (the "Employee Stock Option Plan") for the benefit of certain
officers, directors and key employees of the Company. The Employee Stock Option
Plan was amended in fiscal 1997 and restated as the Movado Group, Inc. 1996
Stock Incentive Plan (the "Plan"). Under the Plan, as amended and restated as of
April 8, 2004, the Compensation Committee of the Board of Directors, which
consists of four of the Company's outside directors, has the authority to grant
incentive stock options and nonqualified stock options to purchase, as well as
stock appreciation rights and stock awards, up to 9,000,000 shares of common
stock. Options granted to participants under the Plan generally become
exercisable in equal installments over three or five years and remain
exercisable until the tenth anniversary of the date of grant. The option price
may not be less than the fair market value of the stock at the time the options
are granted.
On
February 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment”, electing to use the modified prospective application
transition method, and accordingly, prior period financial statements have not
been restated. Under this method, the fair value of all stock options
granted after adoption and the unvested portion of previously granted awards
must be recognized in the Consolidated Statements of Income. The
Company utilizes the Black-Scholes option-pricing model to calculate the fair
value of each option at the grant date which requires certain assumptions be
made. The expected life of stock option grants is determined using
historical data and represents the time period which the stock option is
expected to be outstanding until it is exercised. The risk free
interest rate is the
yield on
the grant date of U.S. Treasury constant maturities with a maturity date closest
to the expected life of the stock option. The expected stock price
volatility is derived from historical volatility and calculated based on the
estimated term structure of the stock option grant. The expected
dividend yield is calculated using the expected annualized dividend which
remains constant during the expected term of the option.
The
weighted-average assumptions used with the Black-Scholes option-pricing model
for the calculation of the fair value of stock option grants during the fiscal
years 2009 and 2008 were: expected term of 6.9 years for fiscal 2009 and 6.0
years for fiscal 2008; risk-free interest rate of 3.41% for fiscal 2009 and
4.32% for fiscal 2008; expected volatility of 37.83% for fiscal 2009 and 35.32%
for fiscal 2008 and dividend yield of 1.45% for fiscal 2009 and 1.03% for fiscal
2008. The weighted-average grant date fair value of options granted
during the fiscal years ended January 31, 2009 and 2008 was $8.45 and $12.06,
respectively.
Total
compensation expense for unvested stock option grants recognized during the
fiscal years ended January 31, 2009 and 2008 was approximately $0.5 million, net
of a tax benefit of $0.3 million and $1.1 million, net of a tax benefit of $0.7
million, respectively. Expense related to stock option compensation
is recognized on a straight-line basis over the vesting term. As of
January 31, 2009, there was approximately $1.3 million of unrecognized
compensation cost related to unvested stock options. These costs are
expected to be recognized over a weighted-average period of 1.6
years. Total cash received for stock option exercises during the
fiscal year ended January 31, 2009 amounted to approximately $2.5
million. Windfall tax benefits realized on these exercises were
approximately $0.5 million.
Transactions
for stock options under the Plan since fiscal 2006 are summarized as
follows:
|
|
|
Outstanding
|
|
|
Weighted-Average
|
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
January
31, 2006
|
|
|
3,169,613
|
|
|
$
|
12.96
|
|
|
Options
granted
|
|
|
144,000
|
|
|
$
|
19.86
|
|
|
Options
exercised
|
|
|
(430,873
|
)
|
|
$
|
8.96
|
|
|
Options
cancelled
|
|
|
(28,800
|
)
|
|
$
|
13.85
|
|
|
January
31, 2007
|
|
|
2,853,940
|
|
|
$
|
13.91
|
|
|
Options
granted
|
|
|
89,500
|
|
|
$
|
31.57
|
|
|
Options
exercised
|
|
|
(269,319
|
)
|
|
$
|
12.64
|
|
|
Options
cancelled
|
|
|
(20,666
|
)
|
|
$
|
14.18
|
|
|
January
31, 2008
|
|
|
2,653,455
|
|
|
$
|
14.63
|
|
|
Options
granted
|
|
|
109,250
|
|
|
$
|
21.78
|
|
|
Options
exercised
|
|
|
(229,307
|
)
|
|
$
|
11.97
|
|
|
Options
cancelled
|
|
|
(85,832
|
)
|
|
$
|
12.45
|
|
|
January
31, 2009
|
|
|
2,447,566
|
|
|
$
|
15.27
|
|
The total
intrinsic value of stock options exercised for the fiscal years ended January
31, 2009 and 2008 was approximately $2.4 million and $5.3 million,
respectively. The total fair value of the stock options vested for
the fiscal years ended January 31, 2009 and 2008 was approximately $5.2 million
and $8.7 million, respectively.
The
following table summarizes outstanding and exercisable stock options as of
January 31, 2009:
|
Range
of Exercise Prices
|
|
|
Number
Outstanding
|
|
|
Weighted-Average
Remaining Contractual Life (years)
|
|
|
Weighted-Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted-Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.02
|
|
|
|
-
|
|
|
$
|
6.01
|
|
|
|
98,740
|
|
|
|
1.3
|
|
|
$
|
4.25
|
|
|
|
98,740
|
|
|
$
|
4.25
|
|
|
$
|
6.02
|
|
|
|
-
|
|
|
$
|
9.01
|
|
|
|
78,066
|
|
|
|
2.1
|
|
|
$
|
7.25
|
|
|
|
78,066
|
|
|
$
|
7.25
|
|
|
$
|
9.02
|
|
|
|
-
|
|
|
$
|
12.01
|
|
|
|
490,122
|
|
|
|
1.2
|
|
|
$
|
10.44
|
|
|
|
490,122
|
|
|
$
|
10.44
|
|
|
$
|
12.02
|
|
|
|
-
|
|
|
$
|
15.01
|
|
|
|
301,044
|
|
|
|
4.6
|
|
|
$
|
13.69
|
|
|
|
224,382
|
|
|
$
|
13.69
|
|
|
$
|
15.02
|
|
|
|
-
|
|
|
$
|
18.01
|
|
|
|
703,417
|
|
|
|
2.7
|
|
|
$
|
15.65
|
|
|
|
675,088
|
|
|
$
|
15.59
|
|
|
$
|
18.02
|
|
|
|
-
|
|
|
$
|
21.01
|
|
|
|
568,427
|
|
|
|
4.3
|
|
|
$
|
18.47
|
|
|
|
532,096
|
|
|
$
|
18.45
|
|
|
$
|
21.02
|
|
|
|
-
|
|
|
$
|
24.01
|
|
|
|
108,750
|
|
|
|
9.2
|
|
|
$
|
22.27
|
|
|
|
3,918
|
|
|
$
|
23.55
|
|
|
$
|
24.02
|
|
|
|
-
|
|
|
$
|
27.01
|
|
|
|
25,000
|
|
|
|
7.7
|
|
|
$
|
25.85
|
|
|
|
16,667
|
|
|
$
|
25.85
|
|
|
$
|
27.02
|
|
|
|
-
|
|
|
|
+
|
|
|
|
74,000
|
|
|
|
8.3
|
|
|
$
|
32.92
|
|
|
|
31,001
|
|
|
$
|
32.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,447,566
|
|
|
|
3.5
|
|
|
$
|
15.27
|
|
|
|
2,150,080
|
|
|
$
|
14.45
|
|
The total
intrinsic value of outstanding stock options for the fiscal years ended January
31, 2009 and 2008 was approximately $0.4 million and $25.4 million,
respectively. The total intrinsic value of exercisable stock options
for the fiscal years ended January 31, 2009 and 2008 was approximately $0.4
million and $23.2 million, respectively.
Under the
Plan, the Company has the ability to grant restricted stock to certain
employees. Restricted stock grants generally vest three to five years
from the date of grant. Expense for these grants is recognized on a
straight-line basis over the vesting period. The fair value of
restricted stock grants is equal to the closing price of the Company’s
publicly-traded common stock on the grant date.
On May
31, 2006, the Compensation Committee of the Board of Directors adopted the
Executive Long Term Incentive Plan (the “LTIP”) authorized by section 9 of the
Plan. The LTIP provides for the award of “Performance Share Units”
that are equivalent, one for one, to shares of the Company’s common stock and
that vest based on the Company’s achievement of its operating margin goal for a
target fiscal year. The number of actual shares earned by a
participant is based on the Company’s actual performance at the end of the award
period and can range from 0% to 150% of the participant’s target
award. Total target awards of 189,500, 119,375, and 176,200
Performance Share Units were granted by the Compensation Committee on May 31,
2006, April 30, 2007, and April 30, 2008, respectively, that vest over three and
five year periods.
During
fiscal 2009, as a result of the Company’s performance, it became apparent that
the performance goals for certain LTIP grants would not be achieved. This
resulted in the reversal of previously accrued stock-based compensation expenses
of approximately $3.2 million. Total compensation expense for restricted
stock grants and for grants of Performance Share Units under the LTIP (together
“restricted stock”) recognized during the fiscal year ended January 31, 2009,
including the reversal of the aforementioned LTIP grants, was a benefit of
approximately $0.4 million, net of a tax of $0.2 million. For the fiscal
year ended January 31, 2008, compensation expense for restricted stock was
approximately $1.9 million, net of a tax benefit of $1.2 million. Prior to
February 1, 2006, compensation expense for restricted stock grants was reduced
as actual forfeitures of the awards
occurred.
SFAS No. 123(R) requires forfeitures to be estimated at the time of grant in
order to estimate the amount of share-based awards that will ultimately vest and
thus, current period compensation expense has been adjusted for estimated
forfeitures based on historical data. As of January 31, 2009, there was
approximately $3.4 million of unrecognized compensation cost related to unvested
restricted stock. These costs are expected to be recognized over a
weighted-average period of 2.8 years.
Transactions
for restricted stock under the Plan since fiscal 2006 are summarized as
follows:
|
|
|
Number
of Restricted Stock Units
|
|
|
Weighted-
Average Grant Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
January
31,2006
|
|
|
321,090
|
|
|
$
|
14.39
|
|
|
Units
granted
|
|
|
255,450
|
|
|
$
|
19.02
|
|
|
Units
vested
|
|
|
(102,940
|
)
|
|
$
|
10.01
|
|
|
Units
forfeited
|
|
|
(10,255
|
)
|
|
$
|
16.78
|
|
|
January
31, 2007
|
|
|
463,345
|
|
|
$
|
17.87
|
|
|
Units
granted
|
|
|
164,185
|
|
|
$
|
32.06
|
|
|
Units
vested
|
|
|
(113,410
|
)
|
|
$
|
15.28
|
|
|
Units
forfeited
|
|
|
(17,390
|
)
|
|
$
|
18.84
|
|
|
January
31, 2008
|
|
|
496,730
|
|
|
$
|
23.12
|
|
|
Units
granted
|
|
|
220,521
|
|
|
$
|
21.69
|
|
|
Units
vested
|
|
|
(95,226
|
)
|
|
$
|
18.74
|
|
|
Units
forfeited
|
|
|
(55,571
|
)
|
|
$
|
25.20
|
|
|
January
31, 2009
|
|
|
566,454
|
|
|
$
|
23.09
|
|
Restricted
stock units are exercised simultaneously when they vest and are issued from the
pool of authorized shares. The total intrinsic value of restricted stock
units that vested during the fiscal years ended January 31, 2009 and 2008 was
approximately $1.7 million and $3.5 million, respectively. The windfall tax
realized on the vested restricted stock grants for fiscal year ended January 31,
2009 were $0.2 million. The weighted-average grant date fair values for
restricted stock grants for the years ended January 31, 2009 and 2008 were
$21.69 and $32.06, respectively. Outstanding restricted stock units
had a total intrinsic value of approximately $4.4 million and $12.0 million for
fiscal years ended January 31, 2009 and 2008.
NOTE
13 – OTHER EMPLOYEE BENEFITS PLANS
The
Company maintains an Employee Savings Plan under Section 401(k) of the Internal
Revenue Code. In addition, the Company maintains defined contribution
employee benefit plans for its employees located in
Switzerland. Company contributions and expenses of administering the
plans amounted to $2.8 million, $2.5 million and $2.4 million in fiscal 2009,
2008 and 2007, respectively.
Effective
June 1, 1995, the Company adopted a defined contribution SERP. The SERP provides
eligible executives with supplemental pension benefits in addition to amounts
received under the Company's other retirement plan. The Company makes a matching
contribution which vests equally over five years. During fiscal 2009, 2008 and
2007, the Company recorded an expense related to the SERP of $0.8 million, $0.8
million and $0.7 million, respectively.
During
fiscal 1999, the Company adopted a Stock Bonus Plan for all employees not in the
SERP. Under the terms of this Stock Bonus Plan, the Company
contributes a discretionary amount to the trust established under the
plan. Each plan participant vests after five years in 100% of their
respective prorata portion of such contribution. Effective for fiscal
2006, in lieu of making any further contributions to the Stock Bonus Plan, the
Company increased the maximum amount of its 401(k) match.
On
September 23, 1994, the Company entered into a Death and Disability Benefit Plan
Agreement (the “Prior Agreement”) with the Company's Chairman, Mr. Gedalio
Grinberg. Under the terms of the agreement, in the event of Mr. G.
Grinberg's death or disability, the Company was required to make an annual
benefit payment of approximately $0.3 million to his spouse for the lesser of
ten years or her remaining lifetime. Neither the agreement nor the benefits
payable thereunder were assignable and no benefits were payable to the estates
or heirs of Mr. G. Grinberg or his spouse. On December 19, 2008, the
Company entered into a Transition and Retirement Agreement (the “Agreement”)
with Mr. G. Grinberg. Upon the effective date of the Agreement, the
Prior Agreement was terminated. The Agreement stipulates that upon
his retirement on January 31, 2009, Mr. G. Grinberg, or his spouse if he
predeceases her, would receive a payment of $0.6 million for the year ending
January 31, 2010, and annual payments of $0.5 million for each year thereafter
through the life of Mr. G. Grinberg and, if he predeceases his spouse, through
the life of his spouse. On January 5, 2009, the Company announced the
passing of Mr. G. Grinberg. For the year ending January 31, 2009, the
Company recorded an actuarially determined charge of $2.4 million related to the
Agreement. This charge was included as part of the $11.1 million
severance related charge associated with the Company’s streamlining
initiatives. Results of operations for fiscal 2008 and 2007 include
an actuarially determined charge related to the Prior Agreement of $0.3 million
and $0.2 million, respectively. As of January 31, 2009, a $4.5
million liability was recorded in the Company’s Consolidated Balance Sheets
related to the Agreement, of which $0.6 million was recorded in Accrued
Liabilities, and $3.9 million was recorded in Other Non-Current
Liabilities. As of January 31, 2008, a $1.8 million liability was
recorded in Other Non-Current Liabilities in the Company’s Consolidated Balance
Sheets related to the Prior Agreement.
NOTE
14 – COMPREHENSIVE (LOSS) / INCOME
The
components of comprehensive (loss) / income for the twelve months ended January
31, 2009, 2008 and 2007 are as follows (in thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net
income
|
|
$
|
2,315
|
|
|
$
|
60,805
|
|
|
$
|
50,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized (loss) / gain on investments, net of tax
|
|
|
(190
|
)
|
|
|
(176
|
)
|
|
|
42
|
|
|
Net
change in effective portion of hedging contracts, net of
tax
|
|
|
(2,266
|
)
|
|
|
3,942
|
|
|
|
1,246
|
|
|
Foreign
currency translation adjustment (1)
|
|
|
(19,692
|
)
|
|
|
29,817
|
|
|
|
3,346
|
|
|
Total
comprehensive (loss) / income
|
|
$
|
(19,833
|
)
|
|
$
|
94,388
|
|
|
$
|
54,772
|
|
(1) The
currency translation adjustment is not adjusted for income taxes as they relate
to permanent investments in international subsidiaries.
The
components of accumulated other comprehensive income at January 31, consisted of
the following (in thousands):
|
|
|
Fiscal
Year Ended
|
|
|
|
|
January
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net
unrealized (loss) / gain on investments, net of tax
|
|
$
|
(34
|
)
|
|
$
|
156
|
|
|
Net
unrealized gain on hedging contracts, net of tax
|
|
|
1,485
|
|
|
|
3,751
|
|
|
Cumulative
foreign currency translation adjustment
|
|
|
42,291
|
|
|
|
61,983
|
|
|
Accumulated
other comprehensive income
|
|
$
|
43,742
|
|
|
$
|
65,890
|
|
NOTE
15 – SEGMENT INFORMATION
The
Company follows SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." The statement 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 primarily in two operating
segments: Wholesale and Retail. The Company’s Wholesale
segment includes the designing, manufacturing and distribution of quality
watches, in addition to revenue generated from after sales service activities
and shipping. The Retail segment includes the Movado Boutiques and outlet
stores.
The
Company divides its business into two major geographic
segments: 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 are principally conducted in Europe, Asia, Canada, the
Middle East, South America and the Caribbean. The Company’s
international assets are substantially located in Switzerland.
Operating
Segment Data as of and for the Fiscal Year Ended January 31, (in
thousands):
|
|
|
Net
Sales
|
|
|
Operating
Income / (Loss) (1) (2)
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Wholesale
|
|
$
|
371,349
|
|
|
$
|
466,431
|
|
|
$
|
445,674
|
|
|
$
|
8,702
|
|
|
$
|
50,210
|
|
|
$
|
48,132
|
|
|
Retail
|
|
|
89,508
|
|
|
|
93,119
|
|
|
|
87,191
|
|
|
|
(5,312
|
)
|
|
|
567
|
|
|
|
4,187
|
|
|
Consolidated
total
|
|
$
|
460,857
|
|
|
$
|
559,550
|
|
|
$
|
532,865
|
|
|
$
|
3,390
|
|
|
$
|
50,777
|
|
|
$
|
52,319
|
|
|
|
|
Total
Assets
|
|
|
Capital
Expenditures
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Wholesale
|
|
$
|
515,517
|
|
|
$
|
580,665
|
|
|
$
|
20,051
|
|
|
$
|
19,684
|
|
|
$
|
12,757
|
|
|
Retail
|
|
|
48,473
|
|
|
|
65,551
|
|
|
|
2,630
|
|
|
|
7,708
|
|
|
|
7,421
|
|
|
Consolidated
total
|
|
$
|
563,990
|
|
|
$
|
646,216
|
|
|
$
|
22,681
|
|
|
$
|
27,392
|
|
|
$
|
20,178
|
|
|
|
|
Depreciation
and Amortization
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Wholesale
|
|
$
|
12,047
|
|
|
$
|
11,466
|
|
|
$
|
11,617
|
|
|
Retail
|
|
|
6,410
|
|
|
|
5,218
|
|
|
|
4,963
|
|
|
Consolidated
total
|
|
$
|
18,457
|
|
|
$
|
16,684
|
|
|
$
|
16,580
|
|
Geographic
Segment Data as of and for the Fiscal Year Ended January 31, (in
thousands):
|
|
|
Net
Sales (3)
|
|
|
Operating
(Loss) Income (1) (2)
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
United
States
|
|
$
|
255,337
|
|
|
$
|
328,212
|
|
|
$
|
366,656
|
|
|
$
|
(31,264
|
)
|
|
$
|
(18,066
|
)
|
|
$
|
7,704
|
|
|
International
|
|
|
205,520
|
|
|
|
231,338
|
|
|
|
166,209
|
|
|
|
34,654
|
|
|
|
68,843
|
|
|
|
44,615
|
|
|
Consolidated
total
|
|
$
|
460,857
|
|
|
$
|
559,550
|
|
|
$
|
532,865
|
|
|
$
|
3,390
|
|
|
$
|
50,777
|
|
|
$
|
52,319
|
|
|
|
|
Total
Assets
|
|
|
Long-Lived
Assets
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
United
States
|
|
$
|
289,567
|
|
|
$
|
341,846
|
|
|
$
|
50,369
|
|
|
$
|
51,544
|
|
|
International
|
|
|
274,423
|
|
|
|
304,370
|
|
|
|
16,380
|
|
|
|
16,969
|
|
|
Consolidated
total
|
|
$
|
563,990
|
|
|
$
|
646,216
|
|
|
$
|
66,749
|
|
|
$
|
68,513
|
|
|
(1)
|
Fiscal
2009 Wholesale Operating Income included an $11.1 million charge related
to the Company’s cost savings initiatives and a restructuring of certain
benefit arrangements, of which $7.4 million was recorded in the United
States and $3.7 million was recorded in the International
segment.
|
|
(2)
|
Fiscal
2009 United States and Retail Operating Loss includes a non-cash
impairment charge of $4.5 million recorded in accordance with SFAS No.
144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”.
|
|
(3)
|
The
United States and international net sales are net of intercompany sales of
$253.3 million, $275.2 million and $258.3 million for the twelve months
ended January 31, 2009, 2008 and 2007,
respectively.
|
NOTE
16 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The
following table presents unaudited selected interim operating results of the
Company for fiscal 2009 and 2008 (in thousands, except per share
amounts):
|
|
|
Quarter
|
|
|
|
|
1
st
|
|
|
2
nd
|
|
|
3
rd
|
|
|
4
th
|
|
|
Fiscal
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
101,353
|
|
|
$
|
129,689
|
|
|
$
|
135,846
|
|
|
$
|
93,969
|
|
|
Gross
profit
|
|
$
|
65,020
|
|
|
$
|
83,903
|
|
|
$
|
86,202
|
|
|
$
|
52,507
|
|
|
Net
income / (loss)
|
|
$
|
1,249
|
|
|
$
|
8,136
|
|
|
$
|
15,729
|
|
|
$
|
(22,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income / (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
|
$
|
0.33
|
|
|
$
|
0.64
|
|
|
$
|
(0.93
|
)
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
0.32
|
|
|
$
|
0.62
|
|
|
$
|
(0.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
101,363
|
|
|
$
|
139,467
|
|
|
$
|
180,153
|
|
|
$
|
138,567
|
|
|
Gross
profit
|
|
$
|
61,652
|
|
|
$
|
83,346
|
|
|
$
|
109,887
|
|
|
$
|
81,797
|
|
|
Net
income
|
|
$
|
2,400
|
|
|
$
|
12,264
|
|
|
$
|
26,528
|
|
|
$
|
19,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.09
|
|
|
$
|
0.47
|
|
|
$
|
1.02
|
|
|
$
|
0.75
|
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
0.45
|
|
|
$
|
0.97
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As each quarter is
calculated as a discrete period, the sum of the four quarters may not equal the
calculated full year amount. This is in accordance with prescribed
reporting requirements.
NOTE
17 - SUPPLEMENTAL CASH FLOW INFORMATION
The
following is provided as supplemental information to the consolidated statements
of cash flows (in thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,434
|
|
|
$
|
3,407
|
|
|
$
|
3,760
|
|
|
Income taxes
|
|
$
|
13,042
|
|
|
$
|
11,542
|
|
|
$
|
13,751
|
|
Additionally,
as of January 15, 2009, the Company declared a $1.2 million cash dividend, which
was subsequently paid in February 2009.
NOTE
18 – OTHER INCOME, NET
The
components of other income, net for fiscal 2009, 2008 and 2007 are as follows
(in thousands):
|
|
|
Fiscal
Year Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on proceeds from insurance premiums (a)
|
|
$
|
681
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Gain
on sale of building (b)
|
|
|
-
|
|
|
|
-
|
|
|
|
374
|
|
|
Sale
of artwork (c)
|
|
|
-
|
|
|
|
-
|
|
|
|
848
|
|
|
Sale
of rights to web domain (d)
|
|
|
-
|
|
|
|
-
|
|
|
|
125
|
|
|
Other
income, net
|
|
$
|
681
|
|
|
$
|
-
|
|
|
$
|
1,347
|
|
(a) The
Company recorded a pre-tax gain for the fiscal year ended January 31, 2009 of
$0.7 million on the collection of life insurance proceeds from policies covering
the Company’s former Chairman.
(b) The
Company recorded a pre-tax gain for the fiscal year ended January 31, 2007 of
$0.4 million on the sale of a building acquired on March 1, 2004 in the
acquisition of Ebel. The Company received cash proceeds from the sale
of $0.7 million. The building was classified as an asset held for sale in other
current assets.
(c) The
Company recorded a pre-tax gain for the fiscal year ended January 31, 2007 of
$0.8 million on the sale of a piece of artwork acquired in February
1988. The Company received cash proceeds from the sale of $1.0
million. The artwork was classified as a non-current
asset.
(d) The
Company recorded a pre-tax gain for the fiscal year ended January 31, 2007 of
$0.1 million on the sale of the rights to a web domain name. The
Company received cash from the sale of $0.1 million. There was no
cost basis on the balance sheet for the domain name.
NOTE
19 – TREASURY STOCK
On
December 4, 2007, the Board of Directors authorized a program to repurchase up
to one million shares of the Company’s common stock. Shares of common
stock were repurchased from time to time
as market
conditions warranted either through open market transactions, block purchases,
private transactions or other means. The objective of the program was
to reduce or eliminate earnings per share dilution caused by the shares of
common stock issued upon the exercise of stock options and in connection with
other equity based compensation plans. As of April 14, 2008, the
Company had completed the one million share repurchase during the fourth quarter
of fiscal 2008 and the first quarter of fiscal 2009, at a total cost of
approximately $19.4 million, or $19.41 per share.
On April
15, 2008, the Board of Directors announced a new authorization to repurchase up
to an additional one million shares of the Company’s common
stock. Under this authorization, the Company has the option to
repurchase shares over time, with the amount and timing of repurchases depending
on market conditions and corporate needs. The Company entered into a
Rule 10b5-1 plan to facilitate repurchases of its shares under this
authorization. A Rule 10b5-1 plan permits a company to repurchase
shares at times when it might otherwise be prevented from doing so, provided the
plan is adopted when the company is not aware of material non-public
information. The Company may suspend or discontinue the repurchase of
stock at any time. Under this share repurchase program, as of January
31, 2009, the Company had repurchased a total of 937,360 shares of common stock
in the open market during the first and second quarters of fiscal year 2009 at a
total cost of approximately $19.5 million or $20.79 per share.
In
addition to the shares repurchased pursuant to the Company’s share repurchase
programs, an aggregate of 102,662 shares have been repurchased during the twelve
months ended January 31, 2009 as a result of the surrender of shares in
connection with the vesting of certain restricted stock awards and the exercise
of certain stock options. At the election of an employee, shares
having an aggregate value on the vesting date equal to the employee’s
withholding tax obligation may be surrendered to the Company.
NOTE
20 – STREAMLINING INITIATIVES
During
the second half of fiscal 2009, the Company announced initiatives designed to
streamline operations, reduce expenses, and improve efficiencies and
effectiveness across the Company’s global organization. Throughout
fiscal 2009, the Company recorded a total pre-tax charge of $11.1 million, of
which $8.7 million related to severance related accruals and $2.4 million
related to the “Transition and Retirement Agreement” with the Company's former
Chairman (see Note 13 – Other Employee Benefits Plans). These
expenses were recorded in SG&A expenses in the Consolidated Statements of
Income. The Company expects that substantially all of the severance
related liability will be paid during fiscal 2010.
A summary
rollforward of severance related accruals is as follows (in
thousands):
|
|
|
Severance related
|
|
|
Balance
at April 30, 2008
|
|
$
|
-
|
|
|
Provision
charged
|
|
|
2,192
|
|
|
Balance
at July 31, 2008
|
|
|
2,192
|
|
|
Provision
charged
|
|
|
3,393
|
|
|
Severance
paid
|
|
|
(2,759
|
)
|
|
Balance
at October 31, 2008
|
|
|
2,826
|
|
|
Provision
charged
|
|
|
3,094
|
|
|
Severance
paid
|
|
|
(1,511
|
)
|
|
Balance
at January 31, 2009
|
|
$
|
4,409
|
|
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