Movado Group, Inc. Announces Fourth Quarter and Fiscal 2014 Results
~ Fourth Quarter Adjusted Operating Income Increases 43.5% to
~ Fiscal 2014 Adjusted Net Sales Increase 13.3% to
~ Fiscal 2014 Adjusted Earnings Per Share Increase to
~ Board Approves 25% Increase in the Company’s Regular Quarterly Dividend ~
~ Company Introduces Fiscal 2015 Guidance Expecting Net Sales of
In the fourth quarter of fiscal 2014, the Company recorded a pre-tax
charge of
In the fourth quarter of fiscal 2013, the Company recorded certain
unusual items including the pre-tax charge of
Fourth Quarter Fiscal 2014 Results on an Adjusted Basis (see attached table for GAAP and non-GAAP measures)
-
Adjusted net sales increased 9.0% to
$140.1 million compared to the prior year period. Adjusted net sales exclude the impact of the$7.8 million charge in the fourth quarter of fiscal 2014 for anticipated sales returns related to the ESQ reallocation strategy described above, as well as the$4.9 million charge related to the Coach repositioning initiative in the fourth quarter of fiscal 2013. Adjusted net sales on a constant dollar basis increased 8.4% compared to the prior year period. - Adjusted gross margin was 53.0% compared to adjusted gross margin of 52.6% last year, excluding the charge to gross profit for anticipated sales returns and the write down of excess inventory related to the ESQ reallocation strategy, in addition to the duty refund in the fourth quarter of fiscal 2014 and the Coach repositioning initiative in the fourth quarter of fiscal 2013.
-
Adjusted operating expenses increased
$2.3 million or 4.0% to$59.9 million in the fourth quarter of fiscal 2014 from$57.6 million in the fourth quarter last year. Adjusted operating expenses excludes the$2.0 million pre-tax charge related to a contribution to theMovado Group Foundation and a$0.8 million write down of excess displays and point of sale materials related to the ESQ reallocation strategy. -
Adjusted operating income in the fourth quarter increased 43.5% to
$14.4 million compared to$10.0 million in the prior year period. - The adjusted effective tax rate for the fourth quarter was 15.1% which compares to (7.7%) in the fourth quarter of fiscal 2013.
-
Adjusted net income was
$12.0 million , or$0.46 per diluted share, compared to$10.5 million , or$0.41 per diluted share, for the same period in the prior year. -
Adjusted EBITDA increased to
$17.9 million compared to adjusted EBITDA of$12.6 million in the fourth quarter of fiscal 2013.
Fourth Quarter Fiscal 2014 Results on a GAAP Basis
-
Net sales in the fourth quarter were
$132.3 million compared to$123.6 million in the fourth quarter of fiscal 2013 led by growth in the licensed brand category. -
Gross profit was
$69.3 million , or 52.4% of sales, compared to$62.7 million , or 50.7% of sales, in the fourth quarter last year. -
Operating expenses increased
$5.1 million , or 8.8%, to$62.6 million in the fourth quarter of fiscal 2014 from$57.6 million in the fourth quarter last year. -
Operating income totaled
$6.6 million compared to operating income of$5.1 million in the same period last year. -
The Company reported a tax benefit of
$0.8 million in the fourth quarter of fiscal 2014, compared to the$3.1 million tax benefit recorded in the prior year period. -
Net income was
$7.2 million , or$0.28 per diluted share, in the fourth quarter of fiscal 2014 compared to$7.9 million , or$0.31 per diluted share, in the fourth quarter of fiscal 2013. -
EBITDA was
$10.2 million compared to EBITDA of$7.7 million in the fourth quarter of fiscal 2013. (See attached table for GAAP and Non-GAAP measures.)
Full Year Fiscal 2014 Results on an Adjusted Basis (see attached table for GAAP and non-GAAP measures)
-
Adjusted net sales increased by 13.3% to
$578.1 million compared to fiscal 2013. Adjusted net sales exclude the impact of the$7.8 million charge for anticipated sales returns related to the ESQ reallocation strategy in the fourth quarter of fiscal 2014 mentioned above, as well as the$4.9 million charge related to the Coach repositioning initiative in the fourth quarter of fiscal 2013. Adjusted net sales on a constant dollar basis increased 12.7%. - Adjusted gross margin was 53.7% of sales compared to adjusted gross margin of 55.4% of sales last year, which excludes the charge to gross profit for anticipated sales returns and the write down of excess inventory related to the ESQ reallocation strategy, in addition to the duty refund in the fourth quarter of fiscal 2014 and the Coach repositioning initiative in the fourth quarter of fiscal 2013.
-
Adjusted operating expenses increased
$9.2 million or 4.1% to$234.8 million in fiscal 2014 from$225.5 million last year. Adjusted operating expenses in fiscal 2014 excludes the$2.0 million pre-tax charge related to a contribution to theMovado Group Foundation and a$0.8 million write down of excess displays and point of sale materials related to the ESQ reallocation strategy. Adjusted operating expenses in fiscal 2013 excludes a$3.0 million pre-tax contribution to theMovado Group Foundation . -
Adjusted operating income for fiscal 2014 increased 31.9% to
$75.5 million as compared to$57.2 million for fiscal 2013. - The adjusted effective tax rate for fiscal 2014 was 27.8% which compares to 24.6% in fiscal 2013.
-
Adjusted net income was
$53.6 million , or$2.07 per diluted share, for fiscal 2014 compared to$42.1 million , or$1.64 per diluted share, for the prior year. -
Adjusted EBITDA totaled
$87.7 million in fiscal 2014 compared to$67.9 million in fiscal 2013.
Full Year Fiscal 2014 Results on a GAAP Basis
-
Net sales in fiscal 2014 were
$570.3 million compared to$505.5 million in fiscal 2013 driven by growth in both the accessible luxury and licensed brand categories. -
Gross profit was
$305.3 million , or 53.5% of sales, compared to$277.9 million , or 55.0% of sales last year. -
Operating expenses increased
$9.0 million , or 3.9%, to$237.5 million from$228.5 million last year. -
Operating income increased to
$67.7 million compared to operating income of$49.3 million in the prior year. -
The Company recorded a tax provision of
$17.4 million in fiscal 2014 compared to a tax benefit of$8.8 million in the prior year. -
Net income was
$50.9 million , or$1.97 per diluted share, in fiscal 2014. This compares to net income of$57.1 million , or$2.22 per diluted share, in fiscal 2013. -
EBITDA was
$80.0 million in fiscal 2014 compared to$60.0 million in the prior year. (See attached table for GAAP and Non-GAAP measures.)
Rick Coté, President and Chief Operating Officer, stated, “Our strong
fourth quarter and full year financial results reflect the continued
positive momentum and pace of our business. For the full year, we
increased adjusted net sales by 13.3% and grew adjusted operating income
31.9% and adjusted earnings per share to
Mr. Coté also added, “Looking at fiscal 2015, our strategies are in
place to continue this momentum with the ESQ reallocation strategy
announced today, as well as continued benefit from Coach and Ferrari.
Our balance sheet remains exceptionally strong with our net cash
position of
Fiscal 2015 Guidance
The Company provided guidance for fiscal 2015 which is on a comparable
basis to non-GAAP fiscal 2014 results adjusted for the unusual items
noted above. In fiscal 2015, the Company anticipates that net sales will
increase approximately 10.7% to
Quarterly Dividend Increase
The Company also announced that the Board of Directors approved a 25%
increase in the Company’s quarterly cash dividend to
Conference Call
The Company’s management will host a conference call and audio webcast
to discuss its results today,
In this release, the Company presents certain financial measures that
are not calculated according to generally accepted accounting principles
in
The Company is also presenting EBITDA and adjusted EBITDA. EBITDA is calculated as the sum of the Company’s operating income under GAAP plus the amount of the Company’s depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to eliminate the charge for the ESQ reallocation strategy, the charge for the Coach brand repositioning, the duty refund and the charitable donations. The Company believes that EBITDA is useful as a performance measure since it gives investors a measure of the Company's ability to generate cash to service its debt and other cash expenditures and believes that Adjusted EBITDA is also useful as a performance measure since it gives investors information about the EBITDA of the Company without the effect of certain items that the Company believes are not characteristic of its usual operations. The Company is also presenting adjusted net income, adjusted earnings per share and adjusted effective tax rate, which is net income, earnings per share and effective tax rate under GAAP adjusted to eliminate the after tax impact of the charge for the ESQ reallocation strategy, the charge for the Coach brand repositioning, the duty refund, the sale of a building, charitable donations and the reversal of a domestic valuation allowance and other tax matters. The Company believes that adjusted net income, adjusted earnings per share and adjusted effective tax rate are useful measures of performance for the same reason that it believes Adjusted EBITDA is useful. Additionally, the Company is presenting constant currency information to provide a framework to assess how its business performed excluding the effects of foreign currency exchange rate fluctuations in the current year. The Company believes this information is useful to investors to facilitate comparisons of operating results. These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measures, and the methods of their calculation may differ substantially from similarly titled measures used by other companies.
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Company has tried, whenever possible, to identify these forward-looking
statements using words such as “expects,” “anticipates,”
“believes,” “targets,” “goals,” “projects,” “intends,” “plans,” “seeks,”
“estimates,” “may,” “will,” “should” and similar expressions. Similarly,
statements in this press release that describe the Company's business
strategy, outlook, objectives, plans, intentions or goals are also
forward-looking statements. Accordingly, such forward-looking statements
involve known and unknown risks, uncertainties and other factors that
could cause the Company's actual results, performance or achievements
and levels of future dividends to differ materially from those expressed
in, or implied by, these statements. These risks and uncertainties may
include, but are not limited to general economic and business conditions
which may impact disposable income of consumers in
MOVADO GROUP, INC. | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
January 31, | January 31, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Net sales | $ | 132,259 | $ | 123,594 | $ | 570,255 | $ | 505,478 | ||||||||||||
Cost of sales | 63,005 | 60,914 | 264,994 | 227,596 | ||||||||||||||||
Gross profit | 69,254 | 62,680 | 305,261 | 277,882 | ||||||||||||||||
Operating expenses | 62,641 | 57,561 | 237,519 | 228,536 | ||||||||||||||||
Operating income | 6,613 | 5,119 | 67,742 | 49,346 | ||||||||||||||||
Other income | - | - | 1,526 | - | ||||||||||||||||
Interest expense | (142 | ) | (147 | ) | (436 | ) | (434 | ) | ||||||||||||
Interest income | 33 | 60 | 86 | 144 | ||||||||||||||||
Income before income taxes | 6,504 | 5,032 | 68,918 | 49,056 | ||||||||||||||||
Provision for / (benefit from) income taxes | (793 | ) | (3,068 | ) | 17,373 | (8,812 | ) | |||||||||||||
Net income | 7,297 | 8,100 | 51,545 | 57,868 | ||||||||||||||||
Less: Net income attributed to noncontrolling interests | 104 | 181 | 668 | 785 | ||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 7,193 | $ | 7,919 | $ | 50,877 | $ | 57,083 | ||||||||||||
Per Share Information: | ||||||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 0.28 | $ | 0.31 | $ | 1.97 | $ | 2.22 | ||||||||||||
Weighted diluted average shares outstanding | 25,822 | 25,824 | 25,849 | 25,664 |
MOVADO GROUP, INC. | |||||||||||||||||
GAAP and Non-GAAP Measures | |||||||||||||||||
(In thousands, except percentage data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
As Reported | % Change | % Change | |||||||||||||||
Three Months Ended | % Change | Constant | Adjusted | ||||||||||||||
January 31, | As Reported | Dollar | Constant Dollar (1) | ||||||||||||||
2014 | 2013 | ||||||||||||||||
Total net sales | $ | 132,259 | $ | 123,594 | 7.0 | % | 6.4 | % | 8.4 | % | |||||||
As Reported | % Change | % Change | |||||||||||||||
Twelve Months Ended | % Change | Constant | Adjusted | ||||||||||||||
January 31, | As Reported | Dollar | Constant Dollar (1) | ||||||||||||||
2014 | 2013 | ||||||||||||||||
Total net sales | $ | 570,255 | $ | 505,478 | 12.8 | % | 12.2 | % | 12.7 | % |
(1) | In the current year, net sales were adjusted for a charge related to the ESQ reallocation strategy and in the prior period, net sales were adjusted for a charge related to the repositioning of the Coach watch brand. | |
MOVADO GROUP, INC. | ||||||||||||||||||||
GAAP and Non-GAAP Measures | ||||||||||||||||||||
(In thousands, except percentage and per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
January 31, | January 31, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Operating income (GAAP) | $ | 6,613 | $ | 5,119 | $ | 67,742 | $ | 49,346 | ||||||||||||
ESQ strategy (1) | 8,263 | - | 8,263 | - | ||||||||||||||||
Duty refund (2) | (2,500 | ) | - | (2,500 | ) | - | ||||||||||||||
Charitable contribution (3) | 2,000 | - | 2,000 | 3,000 | ||||||||||||||||
Coach sales allowance (4) | - | 4,900 | - | 4,900 | ||||||||||||||||
Adjusted operating income (non-GAAP) | 14,376 | 10,019 | 75,505 | 57,246 | ||||||||||||||||
Depreciation and amortization | 3,540 | 2,572 | 12,233 | 10,608 | ||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 17,916 | $ | 12,591 | $ | 87,738 | $ | 67,854 | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
January 31, | January 31, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Net income attributed to Movado Group, Inc. (GAAP) | $ | 7,193 | $ | 7,919 | $ | 50,877 | $ | 57,083 | ||||||||||||
ESQ strategy (1) | 5,123 | - | 5,123 | - | ||||||||||||||||
Duty refund (2) | (1,550 | ) | - | (1,550 | ) | - | ||||||||||||||
Charitable contribution (3) | 1,240 | - | 1,240 | 1,860 | ||||||||||||||||
Building sale (5) | - | - | (1,099 | ) | - | |||||||||||||||
Tax settlements and release of tax reserves (6) |
- | - | (1,000 | ) | - | |||||||||||||||
Coach sales allowance (4) | - | 3,443 | - | 3,443 | ||||||||||||||||
Tax adjustment (7) | - | (461 | ) | - | (461 | ) | ||||||||||||||
Valuation allowance (8) | - | (381 | ) | - | (19,790 | ) | ||||||||||||||
Adjusted net income attributed to Movado Group, Inc. (non-GAAP) | $ | 12,006 | $ | 10,520 | $ | 53,591 | $ | 42,135 | ||||||||||||
Adjusted effective tax rate (non-GAAP) | 15.1 | % | -7.7 | % | 27.8 | % | 24.6 | % | ||||||||||||
Adjusted net income attributed to Movado Group, Inc. per share (non-GAAP) | $ | 0.46 | $ | 0.41 | $ | 2.07 | $ | 1.64 | ||||||||||||
Weighted diluted average shares outstanding | 25,822 | 25,824 |
|
25,849 | 25,664 | |||||||||||||||
(1) | Reflects a charge related to the Company's decision to reduce the presence of ESQ Movado in certain retail doors while expanding the Movado brand offering. | |
(2) | Reflects a duty refund on drawback claims filed to recover duty payments made by the Company in calendar years 2008 through 2011. | |
(3) | Reflects a contribution to the Movado Group Foundation. | |
(4) | Reflects a charge related to the repositioning of the Coach watch brand. | |
(5) | Reflects a gain on a sale of a building in Switzerland. | |
(6) | Reflects favorable tax settlement and the release of uncertain tax positions. | |
(7) | Represents a settlement related to foreign taxes. | |
(8) | Reflects the reversal of the valuation allowance on certain of the Company's U.S. net deferred tax assets. |
MOVADO GROUP, INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
January 31, | January 31, | |||||||||
2014 | 2013 | |||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | 157,659 | $ | 167,889 | ||||||
Short-term investments | 33,099 | - | ||||||||
Trade receivables | 68,683 | 61,398 | ||||||||
Inventories | 181,305 | 167,256 | ||||||||
Other current assets | 44,564 | 37,556 | ||||||||
Total current assets | 485,310 | 434,099 | ||||||||
Property, plant and equipment, net | 47,796 | 44,501 | ||||||||
Deferred income taxes | 14,891 | 22,749 | ||||||||
Other non-current assets | 30,613 | 25,013 | ||||||||
Total assets | $ | 578,610 | $ | 526,362 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Accounts payable | $ | 33,598 | $ | 22,075 | ||||||
Accrued liabilities | 29,118 | 34,794 | ||||||||
Accrued payroll and benefits | 14,455 | 16,342 | ||||||||
Deferred and current income taxes payable | 6,422 | 275 | ||||||||
Total current liabilities |
83,593 | 73,486 | ||||||||
Deferred and non-current income taxes payable | 3,518 | 5,637 | ||||||||
Other non-current liabilities | 25,509 | 21,547 | ||||||||
Noncontrolling interests | 2,686 | 2,002 | ||||||||
Shareholders' equity | 463,304 | 423,690 | ||||||||
Total liabilities and equity | $ | 578,610 | $ | 526,362 |
MOVADO GROUP, INC. | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Twelve Months Ended | ||||||||||||
January 31, | ||||||||||||
2014 | 2013 | |||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 51,545 | $ | 57,868 | ||||||||
Depreciation and amortization | 12,233 | 10,608 | ||||||||||
Other non-cash adjustments | 10,421 | (9,145 | ) | |||||||||
Changes in working capital | (16,862 | ) | (20,670 | ) | ||||||||
Changes in non-current assets and liabilities | (2,821 | ) | 120 | |||||||||
Net cash provided by operating activities | 54,516 | 38,781 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Capital expenditures | (16,707 | ) | (15,978 | ) | ||||||||
Proceeds from sale of an asset held for sale | 2,196 | - | ||||||||||
Short-term investments | (33,099 | ) | - | |||||||||
Trademarks | (285 | ) | (285 | ) | ||||||||
Net cash (used in) investing activities | (47,895 | ) | (16,263 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Dividends paid | (6,637 | ) | (36,684 | ) | ||||||||
Stock repurchase | (10,488 | ) | - | |||||||||
Purchase of incremental ownership in Joint Venture | - | (4,689 | ) | |||||||||
Other financing | 610 | 2,998 | ||||||||||
Net cash (used in) financing activities | (16,515 | ) | (38,375 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (336 | ) | 1,545 | |||||||||
Net change in cash and cash equivalents | (10,230 | ) | (14,312 | ) | ||||||||
Cash and cash equivalents at beginning of year | 167,889 | 182,201 | ||||||||||
Cash and cash equivalents at end of year | $ | 157,659 | $ | 167,889 |
Source:
ICR, Inc.
Rachel Schacter/Allison Malkin, 203-682-8200