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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-22378
MOVADO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
NEW YORK 13-2595932
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
650 FROM ROAD, PARAMUS, NEW JERSEY 07652
(Address of Principal Executive Offices) (Zip Code)
</Table>
(201) 267-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for that past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Issuer's classes
of Common Stock, as of the latest practicable date.
As of December 7, 2001 the Registrant had 3,483,276 shares of Class A
Common Stock, par value $0.01 per share, outstanding and 9,759,235 shares of
Common Stock, par value $0.01 per share, outstanding.
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MOVADO GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
OCTOBER 31, 2001
Page
----
Part I Financial Information
Item 1. Consolidated Balance Sheets at October 31, 2001,
January 31, 2001 and October 31, 2000 3
Consolidated Statements of Income for the nine
months and three months ended October 31, 2001 and
2000 4
Consolidated Statements of Cash Flows for the nine
months ended October 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
OCTOBER 31, JANUARY 31, OCTOBER 31,
2001 2001 2000
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 20,259 $ 23,059 $ 11,161
Trade receivables, net 127,671 98,797 131,143
Inventories 106,603 95,863 86,170
Other current assets 23,599 23,501 20,162
--------- --------- ---------
Total current assets 278,132 241,220 248,636
Plant, property and equipment, net 36,492 32,906 29,683
Other assets 17,653 16,279 15,564
--------- --------- ---------
$ 332,277 $ 290,405 $ 293,883
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 46,500 $ 8,800 $ 37,840
Current portion of long-term debt 5,000 5,000 5,000
Accounts payable 26,133 28,819 19,902
Accrued liabilities 27,671 28,157 20,798
Deferred and current taxes payable 9,103 15,807 9,522
--------- --------- ---------
Total current liabilities 114,407 86,583 93,062
Long-term debt 40,000 40,000 45,000
Deferred and non-current foreign income taxes 3,515 3,517 4,771
Other liabilities 1,295 835 1,279
--------- --------- ---------
Total liabilities 159,217 130,935 144,112
--------- --------- ---------
Shareholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized; no
shares issued -- -- --
Common stock, $0.01 par value,
20,000,000 shares authorized;
9,756,611, 9,600,435 and 9,513,172
shares issued, respectively 98 96 95
Class A common stock, $0.01 par value,
10,000,000 shares authorized; 3,509,733,
3,509,733 and 3,509,733 shares issued
and outstanding, respectively 35 35 35
Capital in excess of par value 68,504 67,242 66,266
Retained earnings 149,540 138,176 134,858
Accumulated other comprehensive income (17,425) (18,169) (23,573)
Treasury stock, 1,544,487, 1,556,670 and
1,556,670 shares, at cost, respectively (27,692) (27,910) (27,910)
--------- --------- ---------
173,060 159,470 149,771
--------- --------- ---------
$ 332,277 $ 290,405 $ 293,883
========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------- -----------
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 224,967 $234,634 $90,103 $105,122
Costs and expenses:
Cost of sales 86,154 91,613 34,224 39,927
Selling, general and
administrative 119,475 115,394 46,369 46,723
--------- -------- ------- --------
Operating income 19,338 27,627 9,510 18,472
Net interest expense 4,092 4,808 1,204 1,729
--------- -------- ------- --------
Income before income taxes and
cumulative effect of a change in
accounting principle 15,246 22,819 8,306 16,743
Provision for income taxes 2,725 5,705 782 4,186
--------- -------- ------- --------
Income before cumulative effect
of a change in accounting
principle 12,521 17,114 7,524 12,557
Cumulative effect of a change in
accounting principle, net of a
tax benefit of $42 (109) -- -- --
--------- -------- ------- --------
Net income $ 12,412 $ 17,114 $ 7,524 $ 12,557
========= ======== ======= ========
Basic income (loss) per share
Income before cumulative
effect of a change
in accounting principle $ 1.07 $ 1.46 $ 0.64 $ 1.09
Cumulative effect of a
accounting change (0.01) -- -- --
--------- -------- ------- --------
Net income per share $ 1.06 $ 1.46 $ 0.64 $ 1.09
========= ======== ======= ========
Weighted basic average shares
outstanding 11,668 11,702 11,704 11,497
========= ======== ======= ========
Diluted income (loss) per share
Income before cumulative
effect of a change
in accounting principle $ 1.05 $ 1.44 $ 0.63 $ 1.07
Cumulative effect of a
accounting change (0.01) -- -- --
--------- -------- ------- --------
Net income per share $ 1.04 $ 1.44 $ 0.63 $ 1.07
========= ======== ======= ========
Weighted diluted average shares
outstanding 11,964 11,908 12,023 11,783
========= ======== ======= ========
Dividends declared per share $ 0.09 $ 0.075 $ 0.03 $ 0.025
========= ======== ======= ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
NINE MONTHS ENDED OCTOBER 31,
-----------------------------
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 12,412 $ 17,114
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 5,861 4,328
Deferred and non-current foreign income taxes -- 28
Provision for losses on accounts receivable 840 716
Provision for losses on inventory 422 378
Changes in current assets and liabilities:
Trade receivables (30,324) (37,408)
Inventories (11,206) (12,255)
Other current assets (3,168) (7,169)
Accounts payable (2,821) 3,107
Accrued liabilities 3,392 2,245
Deferred & current taxes payable (6,290) 4,108
Other non-current assets (341) 1,602
Other non-current liabilities 460 108
-------- --------
Net cash used in operating activities (30,763) (23,098)
-------- --------
Cash flows from investing activities:
Capital expenditures (9,069) (7,004)
Goodwill, trademarks and other intangibles (620) (741)
-------- --------
Net cash used in investing activities (9,689) (7,745)
-------- --------
Cash flows from financing activities:
Net proceeds from bank borrowings 37,700 24,340
Stock options exercised 1,262 79
Dividends paid (1,048) (863)
Issuance of treasury stock 218 --
Purchase of treasury stock -- (7,328)
-------- --------
Net cash provided by financing activities 38,132 16,228
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (480) (839)
-------- --------
Net decrease in cash and cash equivalents (2,800) (15,454)
Cash and cash equivalents at beginning of period 23,059 26,615
-------- --------
Cash and cash equivalents at end of period $ 20,259 $ 11,161
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Movado Group, Inc. (the "Company") in accordance with generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the accompanying financial statements reflect all adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for the periods
presented. These consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.
Since the Company's business is seasonal, with a higher proportion of sales and
earnings generated in the last six months of the fiscal year, operating results
for the interim periods presented are not necessarily indicative of the results
that may be expected for the fiscal year.
NOTE 1 - RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
OCTOBER 31, JANUARY 31, OCTOBER 31,
2001 2001 2000
---- ---- ----
Finished goods $ 67,462 $60,909 $48,387
Component parts 33,062 30,942 33,530
Work-in-process 6,079 4,012 4,253
-------- ------- -------
$106,603 $95,863 $86,170
======== ======= =======
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the consolidated
statements of cash flows (in thousands):
NINE MONTHS
ENDED OCTOBER 31,
-----------------
2001 2000
---- ----
Cash paid during the period for:
Interest $3,843 $4,861
Income taxes $9,322 $3,165
6
NOTE 4 - COMPREHENSIVE INCOME
The components of comprehensive income for the nine months and three months
ended October 31, 2001 and 2000 are as follows (in thousands):
NINE MONTHS ENDED THREE MONTHS ENDED
----------------- ------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2001 2000 2001 2000
---- ---- ---- ----
Net income $ 12,412 $ 17,114 $ 7,524 $ 12,557
Other comprehensive income (expense):
Foreign currency translation
adjustment (214) (7,111) 6,485 (9,467)
Net unrealized gain on foreign
currency forward exchange
contracts and other 904 -- 452 --
Net unrealized gain on
investments 54 -- 54 --
-------- -------- ------- --------
Total other comprehensive income (loss) 744 (7,111) 6,991 (9,467)
-------- -------- ------- --------
Total comprehensive income $ 13,156 $ 10,003 $14,515 $ 3,090
======== ======== ======= ========
NOTE 5 - SEGMENT INFORMATION
The Company conducts its business primarily in two operating segments:
"Wholesale" and "Other". The Company's wholesale segment includes the designing,
manufacturing and distribution of quality watches. Other includes the Company's
retail and service center operations. Operating segment data for the nine months
and three months ended October 31, 2001 and 2000 are as follows (in thousands):
FOR THE NINE MONTHS ENDED OCTOBER 31,
-------------------------------------
NET SALES OPERATING INCOME
--------- ----------------
2001 2000 2001 2000
---- ---- ---- ----
Wholesale $189,597 $205,068 $ 21,024 $ 31,608
Other 35,370 29,566 (1,686) (3,981)
-------- -------- -------- --------
Consolidated total $224,967 $234,634 $ 19,338 $ 27,627
======== ======== ======== ========
FOR THE THREE MONTHS ENDED OCTOBER 31,
--------------------------------------
NET SALES OPERATING INCOME
--------- ----------------
2001 2000 2001 2000
---- ---- ---- ----
Wholesale $77,313 $ 94,604 $ 9,964 $ 20,399
Other 12,790 10,518 (454) (1,927)
------- -------- ------- --------
Consolidated total $90,103 $105,122 $ 9,510 $ 18,472
======= ======== ======= ========
7
NOTE 6 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") SFAS No. 141, "Business
Combinations" effective for all business combinations completed after June 30,
2001 and SFAS No. 142, "Goodwill and Other Intangible Assets" effective for
fiscal years beginning after December 15, 2001. On August 16, 2001, the FASB
issued SFAS No. 143, "Accounting for Asset Retirement Obligation", which is
effective for financial statements issued for fiscal years beginning after June
15, 2002. On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for financial
statements issued for fiscal years beginning after December 15, 2001. Upon
adoption of these standards, the Company does not expect a significant impact
on its financial position, earnings or cash flows.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD LOOKING STATEMENTS
Statements included under Management's Discussion and Analysis of Financial
Condition and Results of Operations, in this report, as well as statements in
future filings by the Company with the Securities and Exchange Commission
("SEC"), in the Company's press releases and oral statements made by or with the
approval of an authorized executive officer of the Company, which are not
historical in nature, are intended to be, and are hereby identified as, "forward
looking statements" for purposes of the safe harbor provided by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers that
forward looking statements include, without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, plans for future operations, effective tax rates, margins,
interest costs, and income, as well as assumptions relating to the foregoing.
Forward looking statements are subject to certain risks and uncertainties, some
of which cannot be predicted or quantified. Actual results and future events
could differ materially from those indicated in the forward looking statements
due to several important factors herein identified, among others, and other
risks and factors identified from time to time in the Company's reports filed
with the SEC including, without limitation, the following: general economic and
business conditions which may impact disposable income of consumers, changes in
consumer preferences and popularity of particular designs, new product
development and introduction, competitive products and pricing, seasonality,
availability of alternative sources of supply in the case of loss of any
significant supplier, the loss of significant customers, the Company's
dependence on key officers, the continuation of licensing arrangements with
third parties, ability to secure and protect trademarks, patents and other
intellectual property rights, ability to lease new stores on suitable terms in
desired markets and to complete construction on a timely basis, continued
availability to the Company of financing and credit on favorable terms, business
disruptions, general risks associated with doing business outside the United
States including, without limitations, import duties, tariffs, quotas, political
and economic stability and success of hedging strategies in respect of currency
exchange rate fluctuations.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 31, 2001 AS COMPARED TO
THE NINE MONTHS ENDED OCTOBER 31, 2000.
Net sales: Comparative net sales by product class were as follows (in
thousands):
NINE MONTHS ENDED OCTOBER 31,
2001 2000
---- ----
Wholesale Watch Business
Domestic $152,212 $173,135
International 37,385 31,933
Other 35,370 29,566
-------- --------
Net sales $224,967 $234,634
======== ========
Net sales decreased by $9.7 million or 4.1% for the nine months ended October
31, 2001 as compared to the nine months ended October 31, 2000. Domestic sales
of our wholesale watch business decreased by $20.9 million or 12.0% as compared
to the prior year. Domestic sales decreases for the nine months is the
reflection of a significant decrease in the third quarter as a result of a
difficult economic environment, further impacted by the tragic events of
September 11th. The Company experienced sales declines in all of its brands
offset by sales of our
9
new Tommy Hilfiger watch brand, which was launched during the first quarter of
fiscal 2002. Despite the weak U.S. economic environment our international
wholesale watch sales increased by $5.5 million or 17.1%. International sales
were led by double-digit sales growth in our Movado and Concord brands and
single digit sales growth in our Coach brand.
Other net sales, which include sales from the Company's outlet stores, the
Movado Boutiques and after sales service business, increased by $5.8 million or
19.6%. Growth in the other sales category was primarily attributable to new
store openings, comparable store sales increases in the Movado Boutiques and an
increase in after sales service revenue. The increases in retail sales were
offset by a decrease in comparable store sales in the outlet stores.
Gross Margin. Gross profit for the nine months ended October 31, 2001 was $138.8
million (61.7% of net sales) as compared to $143.0 million (61.0% of net sales)
for the nine months ended October 31, 2000, a $4.2 million decrease. The gross
margin percent increase of 70 basis points primarily relates to efficiencies in
the supply chain process and increased margins at the retail operations as a
result of improved product offerings. The gross margin decrease of $4.2 million
is a result of the Company's sales decrease in the third quarter of fiscal 2002.
Selling, General and Administrative. Selling, General and Administrative
expenses for the nine months ended October 31, 2001 were $119.5 million or 53.1%
of net sales, a 3.5% increase over the $115.4 million or 49.2% of net sales for
the nine months ended October 31, 2000. The 3.5% increase was primarily
attributable to a $2.7 million one-time severance and early retirement charge
recorded in the third quarter. Excluding the one-time charge expenses would have
increased by $1.4 million or 1.2%. This increase is associated with growth
initiatives which include the launch of the Tommy Hilfiger watch line, five new
Movado Boutique and three new outlet stores.
Interest Expense. Net interest expense for the nine months ended October 31,
2001 decreased by $0.7 million or 14.9% as compared to interest expense for the
nine months ended October 31, 2000. The decrease in interest expense is
principally due to a decline in interest rates.
Income Taxes. The Company recorded a tax expense of $2.7 million for the nine
months ended October 31, 2001 as compared to an expense of $5.7 million for the
nine months ended October 31, 2000. Taxes were recorded at a 18% rate for fiscal
2002 as compared to a 25% rate for fiscal 2001. The Company's effective annual
tax rate of 18% reflects the Company's current expectation that due to a weak
U.S. economic environment U.S. sourced earnings will decrease as a percentage of
the overall earnings mix. This result is dependent on a number of factors,
including the mix of foreign to domestic earnings, local statutory tax rates and
the Company's ability to utilize net operating loss carryforwards in certain
jurisdictions.
10
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2001 AS COMPARED TO
THE THREE MONTHS ENDED OCTOBER 31, 2000.
Net sales: Comparative net sales by product class were as follows (in
thousands):
THREE MONTHS ENDED OCTOBER 31,
2001 2000
---- ----
Wholesale Watch Business
Domestic $63,523 $83,121
International 13,790 11,483
Other 12,790 10,518
------ ------
Net Sales $90,103 $105,122
======= ========
Net sales decreased by $15.0 million or 14.3% for the three months ended October
31, 2001 as compared to the three months ended October 31, 2000. Domestic sales
of our wholesale watch business decreased by $19.6 million or 23.6% as compared
to the prior year. This decrease is a result of retailers aggressively managing
their inventory due to a weak U.S. economic environment compounded by the tragic
events of September 11th. These events led to sales decreases in all of the
Company's brands offset by the continued roll out of our Tommy Hilfiger watch
brand. International wholesale watch sales increased by $2.3 million or 20.1%
led by double digit increases in our Movado, Concord and Coach brands.
Other net sales, which include sales from the Company's outlet stores, the
Movado Boutiques and after sales service business, increased by $2.3 million or
21.6%. Growth in the other sales category was primarily attributable to new
store openings, comparable store sales increases in the Movado Boutiques and an
increase in after sales service revenue. Comparable store sales increased 6.6%
in the Movado Boutiques and flat in our outlet stores as compared to the prior
year quarter.
Gross Margin. Gross profit for the three months ended October 31, 2001 was $55.9
million (62.0% of net sales) as compared to $65.2 million (62.0% of net sales)
for the three months ended October 31, 2000. The gross margin percent reflects
the Company's ability to continue to maintain the cost reductions initiated in
the supply chain process and increased margins at the Company's outlet stores as
a result of improved product offerings.
Selling, General and Administrative. Selling, General and Administrative
expenses for the quarter were $46.4 million or 51.5% of net sales as compared to
$46.7 million or 44.4% of net sales in the third quarter of last year. Excluding
the one-time charge for severance and early retirement of $2.7 million, selling,
general and administrative expenses would have decreased by 6.5% as compared to
the prior year third quarter. This decrease is the result of the Company's
productivity improvement initiatives to reduce the Company's operating expenses
which were realized even with the expenses incurred for the Company's growth
initiatives. These growth initiatives include the continued launch of the Tommy
Hilfiger watch line and the expansion of our retail operations.
Interest Expense. Net interest expense for the three months ended October 31,
2001 decreased by $0.5 million or 30.4% as compared to interest expense for the
three months ended October 31, 2000. The decrease in interest expense reflects a
decline in interest rates.
11
Income Taxes. The Company recorded a tax expense of $0.8 million for the three
months ended October 31, 2001 as compared to an expense of $4.2 million for the
three months ended October 31, 2000. Taxes were recorded at an annual rate of
18% for fiscal 2002 as compared to a 25% rate for fiscal 2001. During the
quarter, the Company's estimated annual tax rate changed from 28% to 18%.
This change reflects the Company's current expectations that U.S. source
earnings will decrease as a percentage of the overall earnings mix. This result
is dependent on a number of factors, including the mix of foreign to domestic
earnings, local statutory tax rates and the Company's ability to utilize net
operating loss carryforwards in certain jurisdictions. The tax expense for the
third quarter includes an adjustment of taxes for the difference between the 18%
annual tax rate versus the 28% tax rate used to record tax expenses for the six
months ended July 31, 2001.
LIQUIDITY AND FINANCIAL POSITION
Cash flows used in operating activities for the nine months ended October 31,
2001 were $30.5 million as compared to $23.1 million for the nine months ended
October 31, 2000. The increase in cash used in operating activities is
principally due to tax payments made this year of $9.3 million as compared to
$3.2 million in the prior year and a decrease in net income of $4.7 million.
The Company used $9.7 million of cash for investing activities for the nine
months ended October 31, 2001 as compared to $7.7 million for the nine months
ended October 31, 2000. The increase in cash used in investing activities was
due to an increase of capital expenditures made during the nine months ended
October 31, 2001 of $9.1 million as compared to $7.0 million made in the same
period of the prior year. Capital expenditures for fiscal 2002 were primarily
for construction of the new Paramus, NJ leased office, information systems
enhancements and three new Movado Boutiques. Capital expenditures for fiscal
2001 were primarily for the implementation of the new enterprise wide
information system in Switzerland.
Cash provided by financing activities amounted to $37.9 million for the nine
months ended October 31, 2001 as compared to $16.2 million for the nine months
ended October 31, 2000. The increase in cash provided by financing activities
represents an increase in bank borrowings of $13.4 million and stock options
exercised offset by the Company making no stock repurchases this year as
compared to $7.3 million of repurchases made in the prior year.
At October 31, 2001, the Company had two series of Senior Notes outstanding.
Senior Notes due January 31, 2005 were originally issued in a private placement
completed in fiscal 1994. These notes have required annual principal payments of
$5.0 million since January 1998. Accordingly, such amounts have been classified
as a current liability in fiscal 2002 and 2001. The Company repaid $5.0 million
of principal related to these notes in the fourth quarter of fiscal 2001 and is
scheduled to repay an additional $5.0 million in the fourth quarter of fiscal
2002. At October 31, 2001, $20.0 million in principal related to these notes
remained outstanding.
During fiscal 1999, the Company issued $25.0 million of Series A Senior Notes
under a Note Purchase and Private Shelf Agreement dated November 30, 1998. These
notes bear interest at 6.90%, mature on October 30, 2010 and are subject to
annual repayments of $5.0 million commencing October 31, 2006.
On March 21, 2001, the Company entered into a new Note Purchase and Private
Shelf Agreement which allows for the issuance for up to three years after the
date thereof, 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.
12
During the second quarter of fiscal 2001, the Company completed the renewal of
its revolving credit and working capital lines with its bank group. The new
agreement provides for a three year $100.0 million unsecured revolving line of
credit and $15.0 million of uncommitted working capital lines. At October 31,
2001, the Company had $46.5 million of outstanding borrowings under its bank
lines as compared to $37.8 million at October 31, 2000. The increase in
borrowings at the end of the third quarter as compared to the prior year period
was primarily to fund seasonal working capital requirements and the Company's
growth initiatives.
Under a series of share repurchase authorizations approved by the Board of
Directors, the Company has maintained a discretionary share buy-back program.
There were no current year purchases under the repurchase program as compared to
$7.3 million for the comparable prior year period.
The Company paid dividends of $1.1 million as compared to $0.9 million for the
nine months ended October 31, 2001 and 2000, respectively. The increase is
attributable to the raising of the quarterly dividend to $0.03 per share in
fiscal 2002 from $0.025 per share in fiscal 2001.
Cash and cash equivalents at October 31, 2001 amounted to $20.3 million as
compared to $11.2 million at October 31, 2000. Debt to total capitalization at
October 31, 2001 was 34.6% as compared to 37.0% at October 31, 2000.
The Company expects that capital expenditures in the future will approximate the
average of fiscal 2001 and 2000 levels.
13
PART II-OTHER INFORMATION
Item 1. Legal proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
On June 19, 2001 the Company held its annual meeting of shareholders at
the offices of Simpson Thacher & Bartlett located at 425 Lexington
Avenue, New York, New York.
The following matters were voted upon at the meeting:
(i) The election of the following directors, constituting the entire
board of directors:
Margaret Hayes
Adame Richard Cote
Efraim Grinberg
Gedalio Grinberg
Alan H. Howard
Donald Oresman
Leonard L. Silverstein
(ii) A proposal to ratify the selection of PricewaterhouseCoopers
LLP as the Company's independent public accountants for the
fiscal year ending January 31, 2001;
(iii) A proposal to amend the Company's 1996 Stock Incentive Plan.
(iv) A proposal to adopt the Company's Executive Performance Plan.
With respect to the above referenced proposals that were voted
on at the annual shareholders meeting, the following votes were
tabulated. There were no broker non-votes.
Proposal (i) on election of directors:
<Table>
Withheld/ Exception/
Nominee For Against Abstain
- --------------------------------------------- ------------- ------------- ------------
Margaret Hayes Adame......................... 38,697,759 1,126,981 372,941
Richard Cote................................. 38,334,866 1,489,874 372,941
Efraim Grinberg.............................. 38,329,442 1,495,298 372,941
Gedalio Grinberg............................. 38,329,442 1,495,298 372,941
Alan H. Howard............................... 38,702,283 1,122,457 372,941
Donald Oresman............................... 38,697,759 1,126,981 372,941
Leonard L. Silverstein....................... 38,696,259 1,128,481 372,941
Proposal (ii) on ratification of appointment
of accountants............................... 39,747,064 74,549 3,127
Proposal (iii) on amendment of 1996 Stock
Incentive Plan............................... 34,563,289 3,177,060 42,106
Proposal (iv) on adoption of the Executive
Performance Plan............................. 38,517,662 1,265,151 41,927
</Table>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<Table>
10.1 Sublease Agreement entered into as of October 1, 2001 by and
between Movado Group, Inc., as sub-landlord, and National
Financial Services LLC, as sub-tenant.
10.2 Second Amendment of Lease dated July 26, 2001 between Mack-Cali
Realty, L.P., as landlord, and Movado Group, Inc., as tenant,
further amending lease dated as of December 21, 2000.
10.3 First Amendment of Sublease Agreement dated October 10, 2001 by
and between Movado Group, Inc., as sub-landlord, and National
Financial Services LLC, as sub-tenant, further amending
sublease dated October 1, 2001.
10.4 Third Amendment of Lease dated November 6, 2001 between Mack-Cali
Realty, L.P., as lessor, and Movado Group, Inc., as lessee,
further amending lease dated as of December 21, 2000.
</Table>
(b) Reports on Form 8-K
None
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOVADO GROUP, INC.
(Registrant)
Dated: September 14, 2001 By: /s/ Eugene J. Karpovich
---------------------------
Eugene J. Karpovich
Senior Vice President and
Chief Financial Officer
(Chief Financial Officer
and Principal Accounting
Officer)
16
EXHIBIT INDEX
Exhibit
Number Description
- ------- --------------------------------------------------------------------
10.1 Sublease Agreement entered into as of October 1, 2001 by and between
Movado Group, Inc., as sub-landlord, and National Financial Services
LLC, as sub-tenant.
10.2 Second Amendment of Lease dated July 26, 2001 between Mack-Cali
Realty, L.P., as landlord, and Movado Group, Inc., as tenant,
further amending lease dated as of December 21, 2000.
10.3 First Amendment of Sublease Agreement dated October 10, 2001 by and
between Movado Group, Inc., as sub-landlord, and National Financial
Services LLC, as sub-tenant, further amending sublease dated October
1, 2001.
10.4 Third Amendment of lease dated November 6, 2001 between Mack-Cali
Realty, L.P., as lessor, and Movado Group, Inc., as lessee, for
additional space at Mack-Cali II, One Mack Drive, Paramus, NJ.
17