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UNITED STATES
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 July 31, 2004
[ ] 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)
New York 13-2595932
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
650 From Road, Paramus, New Jersey 07652
(Address of Principal Executive Offices) (Zip Code)
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [
]
The number of shares outstanding of the registrant's common stock and class
A common stock as of August 31, 2004 were 17,927,063 and 6,801,812,
respectively.
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MOVADO GROUP, INC.
Index to Quarterly Report on Form 10-Q
July 31, 2004
Page
----
Part I Financial Information (Unaudited)
Item 1. Consolidated Balance Sheets at July 31, 2004, January 31,
2004 and July 31, 2003 3
Consolidated Statements of Income for the six months and
three months ended July 31, 2004 and 2003 4
Consolidated Statements of Cash Flows for the six months
ended July 31, 2004 and 2003 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosure about Market Risks 21
Item 4. Controls and Procedures 22
Part II Other Information
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits 24
Signature 25
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
JULY 31, JANUARY 31, JULY 31,
2004 2004 2003
---------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 27,438 $ 82,083 $ 47,737
Trade receivables, net 95,841 88,800 99,192
Inventories, net 181,784 121,678 125,325
Other 30,818 26,693 22,767
---------- ---------- ----------
Total current assets 335,881 319,254 295,021
Property, plant and equipment, net 48,193 42,112 39,127
Other 38,902 29,601 27,631
---------- ---------- ----------
Total assets $ 422,976 $ 390,967 $ 361,779
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 25,000 $ - $ 14,000
Current portion of long-term debt 5,000 10,000 5,000
Accounts payable 30,965 23,631 21,836
Accrued liabilities 29,264 25,781 23,812
Current taxes payable 11,136 12,150 9,881
Deferred taxes payable 5,853 5,961 5,081
---------- ---------- ----------
Total current liabilities 107,218 77,523 79,610
Long-term debt 25,000 25,000 30,000
Deferred and non-current income taxes 800 2,282 2,835
Other liabilities 13,322 11,449 9,568
---------- ---------- ----------
Total liabilities 146,340 116,254 122,013
---------- ---------- ----------
Shareholders' equity:
Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares issued - - -
Common Stock, $0.01 par value,
100,000,000 shares authorized; 21,987,361, 21,723,262 and 20,755,000
shares issued, respectively 220 217 208
Class A Common Stock, $0.01 par value,
30,000,000 shares authorized; 6,801,812, 6,801,812 and 6,801,812
shares issued and outstanding, respectively 68 68 68
Capital in excess of par value 90,638 89,349 76,878
Retained earnings 198,426 192,601 177,816
Accumulated other comprehensive income 29,648 34,473 16,966
Treasury Stock, 4,089,898, 4,081,182 and 3,453,262
shares, respectively, at cost (42,364) (41,995) (32,170)
---------- ---------- ----------
Total shareholders' equity 276,636 274,713 239,766
---------- ---------- ----------
Total liabilities and shareholders' equity $ 422,976 $ 390,967 $ 361,779
========== ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Six Months Ended July 31, Three Months Ended July 31,
------------------------- ---------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales $ 171,975 $ 136,715 $ 97,788 $ 76,545
Cost of sales 70,612 53,036 39,810 29,306
---------- ---------- ---------- ----------
Gross profit 101,363 83,679 57,978 47,239
Operating expenses:
Selling, general and administrative 90,908 72,894 49,230 38,426
---------- ---------- ---------- ----------
Operating income 10,455 10,785 8,748 8,813
Income from litigation settlement, net 1,444 - 1,444 -
Net interest expense 1,508 1,608 783 825
---------- ---------- ---------- ----------
Income before income taxes 10,391 9,177 9,409 7,988
Provision for income taxes 2,598 2,570 2,352 2,237
---------- ---------- ---------- ----------
Net income $ 7,793 $ 6,607 $ 7,057 $ 5,751
========== ========== ========== ==========
Earnings per share:
Basic $ 0.32 $ 0.28 $ 0.29 $ 0.24
========== ========== ========== ==========
Diluted $ 0.31 $ 0.27 $ 0.28 $ 0.23
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 24,590 23,948 24,643 24,002
========== ========== ========== ==========
Diluted 25,416 24,906 25,484 25,140
========== ========== ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended July 31,
-------------------------
2004 2003
---------- ----------
Cash flows from operating activities:
Net income $ 7,793 $ 6,607
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 5,710 4,554
Deferred income taxes - 176
Provision for losses on accounts receivable 75 602
Provision for losses on inventory 181 350
Changes in assets and liabilities:
Trade receivables 3,329 (4,988)
Inventories (26,101) (13,958)
Other current assets (5,861) 8,300
Accounts payable 4,863 (778)
Accrued liabilities (7,858) 1,212
Current taxes payable (991) (1,548)
Other non-current assets (584) (2,319)
Other non-current liabilities 502 1,620
---------- ----------
Net cash used in operating activities (18,942) (170)
---------- ----------
Cash flows from investing activities:
Capital expenditures (6,878) (3,530)
Acquisition of Ebel, net of cash acquired (43,525) -
Trademarks (178) (270)
---------- ----------
Net cash used in investing activities (50,581) (3,800)
---------- ----------
Cash flows from financing activities:
Net proceeds from bank borrowings 14,813 14,000
Stock options exercised and other changes 923 445
Dividends paid (1,968) (1,078)
---------- ----------
Net cash provided by financing activities 13,768 13,367
---------- ----------
Effect of exchange rate changes on cash and cash equivalents 1,110 (25)
---------- ----------
Net (decrease) increase in cash and cash equivalents (54,645) 9,372
Cash and cash equivalents at beginning of period 82,083 38,365
---------- ----------
Cash and cash equivalents at end of period $ 27,438 $ 47,737
========== ==========
Supplemental Disclosure:
Fair value of assets acquired $ 71,629
Less: liabilities assumed (26,603)
----------
Cash paid for the transaction 45,026
Less: cash acquired (1,340)
Less: accrued deal costs (161)
----------
Net cash paid for transaction $ 43,525
==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Movado Group, Inc. (the "Company") in a manner consistent with that used in
the preparation of the consolidated financial statements included in the
Company's fiscal 2004 Annual Report filed on Form 10-K. In the opinion of
management, the accompanying consolidated 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 aforementioned annual report. Operating results for the
interim periods presented are not necessarily indicative of the results that may
be expected for the full year.
NOTE 1 - RECLASSIFICATION
Certain reclassifications were made to prior years' financial statement amounts
and related note disclosures to conform to the fiscal 2005 presentation.
NOTE 2 - ACQUISITION
On December 22, 2003, the Company entered into an agreement to acquire Ebel S.A.
and the worldwide business related to the Ebel brand (collectively "Ebel") from
LVMH Moet Hennessy Louis Vuitton ("LVMH"). On March 1, 2004, the Company
completed the acquisition of Ebel with the exception of the payment for the
acquired Ebel business in Germany, which was completed July 30, 2004. The Ebel
brand, one of the world's premier luxury watch brands, was established in La
Chaux-de-Fonds, Switzerland in 1911. The Company acquired Ebel to revitalize and
re-build the brand and to expand its global market share.
Under the terms of the agreement, the Company acquired all of the outstanding
common stock of Ebel S.A. and the related worldwide businesses in exchange for:
- 51.6 million Swiss francs in cash; and
- the assumption of a short-term mortgage payable of 6.6 million Swiss
francs.
Under the purchase method of accounting, the Company recorded an aggregate
purchase price of approximately $45.0 million, which consisted of approximately
$40.6 million in cash and $4.4 million in deal costs and other incurred
liabilities, which primarily consisted of legal, accounting, investment banking
and financial advisory services fees.
In accordance with Statement of Financial Accounting Standards No. 141,
"Business Combinations," ("SFAS 141"), the Company allocated the purchase price
to the tangible assets, intangible assets, and liabilities acquired based on
their estimated fair values. The fair value assigned to tangible and intangible
assets acquired was based on an independent appraisal. The fair value of assets
acquired and liabilities assumed exceeds the purchase price. That excess has
been allocated as a pro rata reduction of the amounts that otherwise would have
been assigned to all of the acquired assets except for certain specific types of
assets as set forth in SFAS 141. The pro forma adjustments were based upon an
independent assessment of appraised values. The assessment is now complete. In
accordance with Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), goodwill and purchased intangibles
with indefinite lives are not amortized but will be
6
reviewed annually for impairment. Purchased intangibles with finite lives are
amortized on a straight-line basis over their respective estimated useful lives.
In accordance with Emerging Issues Task Force No. 95-3 ("EITF 95-3"),
"Recognition of Liabilities in Connection with a Purchase Business Combination",
the Company recognized costs associated with exiting an activity of an acquired
company and involuntary termination of employees of an acquired company as
liabilities assumed in a purchase business combination and included the
liabilities in the allocation of the acquisition cost. The liability recognized
in connection with the acquisition of Ebel is comprised of approximately $2.4
million for employee severance, $0.2 million for lease terminations, $1.7
million for exit costs related to certain promotional and purchase contracts and
$0.4 million of other liabilities. During the quarter ended July 31, 2004,
payments against employee severance, exit costs and other liabilities amounted
to $1.1 million, $0.4 million and $0.3 million, respectively. The employee
severance, and the payments against employee severance, are entirely related to
the Ebel business in Europe. There are no further adjustments related to the
aforementioned accruals.
As part of the acquisition, the Company recorded deferred tax assets resulting
from Ebel's net operating loss carry forwards amounting to approximately 165.0
million Swiss francs. The Company established a full valuation allowance on the
deferred tax assets. However, if the deferred tax assets are subsequently
recognized, the recognition of the tax benefit will be applied to reduce the
carrying value of acquired intangible assets to zero, prior to being recognized
as a reduction of income tax expense. The total purchase price has been
allocated as follows (in thousands):
Cash $ 1,340
Accounts receivable 16,369
Property, plant and equipment 4,556
Inventories 35,834
Intangible assets 9,129
Other current assets 4,401
---------
Total assets acquired 71,629
Current liabilities 16,149
Short-term commitments and contingencies 5,269
Mortgage payable 5,185
---------
Total purchase price $ 45,026
=========
In allocating the purchase price, the Company considered, among other factors,
its intention for future use of the acquired assets, analyses of historical
financial performance and estimates of future performance of Ebel's products.
Included in the other current assets are certain assets held for sale of
approximately $1.4 million, which are expected to be disposed of within the next
12 months.
7
The fair value of intangible assets was primarily based on the income approach
and cost approach. The discount rates used were 16% for customer lists and 21%
for trade names and trademarks. These discount rates were determined after
consideration of the industry's cost of capital which is equal to the weighted
average, after-tax cost of equity and debt. The identifiable intangible assets
purchased in the Ebel acquisition consisted of the following (in thousands):
Gross
Identifiable Intangible Assets Value Useful Life
--------- -----------
Trade names and trademarks $ 8,343 Indefinite
Customer list 786 5 years
---------
Total $ 9,129
=========
Amortization expense for the next four years and thereafter for intangibles with
finite lives is as follows (in thousands):
Estimated
Amortization
Expense
------------
FOR THE YEAR ENDED
January 31, 2005 $ 144
January 31, 2006 157
January 31, 2007 157
January 31, 2008 and thereafter 328
------------
$ 786
============
Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined
results of operations of the Company and Ebel, on a pro forma basis, as though
the acquisition had been completed as of the beginning of each period presented.
This pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the results of operations that would
have been achieved had the acquisition taken place at the beginning of each six
month and three month period presented. The unaudited pro forma condensed
combined statements of income for the six months and three months ended July 31,
2004 combines the historical results for the Company for the six months and
three months ended July 31, 2004 and the historical results for Ebel for the
period preceding the acquisition of February 1 through February 29, 2004. The
unaudited pro forma condensed combined statements of income for the six months
and three months ended July 31, 2003 combines the historical results for the
Company for the six months and three months ended July 31, 2003, and the
historical results for Ebel for the six months and three months ended July 31,
2003. The following amounts are in thousands, except per share amounts:
Six Months Ended Three Months Ended
July 31, July 31,
--------------------------- ---------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ 173,344 $ 166,957 $ 97,788 $ 94,606
Net income $ 5,902 $ 36 $ 7,057 $ 2,165
Basic income per share $ 0.24 $ 0.00 $ 0.29 $ 0.09
Diluted income per share $ 0.23 $ 0.00 $ 0.28 $ 0.09
8
NOTE 3 - STOCK OPTION PLAN
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plan. No compensation cost
has been recognized for any stock options granted under the Company's stock
option plan because the quoted market price of the Common Stock at the grant
date was not in excess of the amount an employee must pay to acquire the Common
Stock. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," issued by the Financial Accounting Standards
Board ("FASB") in 1995, prescribes a method to record compensation cost for
stock-based employee compensation plans at fair value. The Company utilizes the
Black-Scholes option-pricing model for determining the fair value of the
stock-based compensation. Pro forma disclosures as if the Company had adopted
the recognition requirements under SFAS No. 123 for the six months and three
months ended July 31, 2004 and 2003, respectively, are presented below.
For The Six Months Ended For The Three Months Ended
July 31, July 31,
------------------------ --------------------------
(In thousands, except per share data) 2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income as reported $ 7,793 $ 6,607 $ 7,057 $ 5,751
Fair value based compensation
expense, net of taxes 2,805 1,539 1,408 852
---------- ---------- ---------- ----------
Pro forma net income $ 4,988 $ 5,068 $ 5,649 $ 4,899
========== ========== ========== ==========
Basic earnings per share:
As reported $ 0.32 $ 0.28 $ 0.29 $ 0.24
Pro forma under SFAS No. 123 $ 0.20 $ 0.21 $ 0.23 $ 0.20
Diluted earnings per share:
As reported $ 0.31 $ 0.27 $ 0.28 $ 0.23
Pro forma under SFAS No. 123 $ 0.20 $ 0.20 $ 0.22 $ 0.19
NOTE 4 - COMPREHENSIVE INCOME
The components of comprehensive income for the six months and three months ended
July 31, 2004 and 2003 are as follows (in thousands):
Six Months Ended Three Months Ended
July 31, July 31,
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income $ 7,793 $ 6,607 $ 7,057 $ 5,751
Net unrealized gain (loss) on
investments, net of tax 20 146 (8) 104
Effective portion of unrealized income (loss) on hedging
contracts, net of tax 2,297 (2,133) 360 (1,473)
Foreign currency translation adjustment (7,142) (433) 3,599 (2,012)
---------- ---------- ---------- ----------
Total comprehensive income $ 2,968 $ 4,187 $ 11,008 $ 2,370
========== ========== ========== ==========
9
NOTE 5 - SEGMENT INFORMATION
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. The Retail segment includes
the Movado Boutiques and outlet stores.
The Company divides its business into two major geographic segments: Domestic,
which includes the results of the Company's North American, Caribbean and Tommy
Hilfiger South American operations, and International, which includes the
results of the Company's operations in all other parts of the world. The
Company's International operations are principally conducted in Europe, the
Middle East and Asia. The Company's International assets are substantially
located in Europe.
Operating Segment Data For The Six Months Ended July 31, 2004 And 2003:
Net Sales Operating Income (Loss)
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Wholesale $ 141,600 $ 112,149 $ 12,714 $ 12,227
Retail 30,375 24,566 (2,259) (1,442)
---------- ---------- ---------- ----------
Consolidated total $ 171,975 $ 136,715 $ 10,455 $ 10,785
========== ========== ========== ==========
Operating Segment Data For The Three Months Ended July 31, 2004 And 2003:
Net Sales Operating Income (Loss)
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Wholesale $ 80,592 $ 62,799 $ 9,299 $ 8,524
Retail 17,196 13,746 (551) 289
---------- ---------- ---------- ----------
Consolidated total $ 97,788 $ 76,545 $ 8,748 $ 8,813
========== ========== ========== ==========
Geographic Segment Data For The Six Months Ended July 31, 2004 And 2003:
Net Sales Operating Income
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Domestic $ 136,226 $ 118,327 $ 5,115 $ 1,447
International 35,749 18,388 5,340 9,338
---------- ---------- ---------- ----------
Consolidated total $ 171,975 $ 136,715 $ 10,455 $ 10,785
========== ========== ========== ==========
10
Geographic Segment Data For the Three Months Ended July 31, 2004 and 2003:
Net Sales Operating Income
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Domestic $ 77,143 $ 67,059 $ 4,978 $ 3,462
International 20,645 9,486 3,770 5,351
---------- ---------- ---------- ----------
Consolidated total $ 97,788 $ 76,545 $ 8,748 $ 8,813
========== ========== ========== ==========
Domestic and International net sales are net of intercompany sales of $115.9
million and $94.8 million for the six months ended July 31, 2004 and 2003,
respectively.
Domestic and International net sales are net of intercompany sales of $56.3
million and $53.7 million for the three months ended July 31, 2004 and 2003,
respectively.
Total Assets
-------------------------------------------------
July 31, 2004 January 31, 2004 July 31, 2003
------------- ---------------- -------------
Domestic $ 145,873 $ 128,112 $ 127,721
International 277,103 262,855 234,058
------------- ------------- -------------
Consolidated total $ 422,976 $ 390,967 $ 361,779
============= ============= =============
NOTE 6 - EXECUTIVE RETIREMENT PLAN
The Company has a number of employee benefit plans covering substantially all
employees. Certain eligible executives of the Company have elected to defer a
portion of their compensation on a pre-tax basis under a defined contribution,
supplemental executive retirement plan (SERP) sponsored by the Company. The SERP
was adopted effective June 1, 1995, and provides eligible executives with
supplemental pension benefits in addition to amounts received under the
Company's other retirement plans. The Company makes a matching contribution
which vests equally over five years. For the six months ended July 31, 2004 and
2003, the Company recorded an expense related to the SERP of $0.3 million for
each period. For the three months ended July 31, 2004 and 2003, the Company
recorded an expense related to the SERP of $0.1 million for each period.
11
NOTE 7 - INVENTORIES
Inventories consist of the following (in thousands):
July 31, January 31, July 31,
2004 2004 2003
------------- ------------- -------------
Finished goods $ 153,605 $ 78,490 $ 82,937
Component parts 74,075 43,335 43,161
Work-in-process 5,349 2,261 2,869
------------- ------------- -------------
233,029 124,086 128,967
Less: inventories reserve (51,245) (2,408) (3,642)
------------- ------------- -------------
$ 181,784 $ 121,678 $ 125,325
============= ============= =============
The increase in all inventory categories, including the inventory reserve,
includes the acquired net assets of Ebel. As of July 31, 2004, the Ebel
inventory was $91.4 million with reserves of $48.2 million.
NOTE 8 - 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 24,590,000 and 23,948,000 for the six months ended July 31, 2004 and 2003,
respectively. For diluted earnings per share, these amounts were increased by
826,000 and 958,000 for the six months ended July 31, 2004 and 2003,
respectively, due to potentially dilutive common stock equivalents issuable
under the Company's stock option plans and restricted stock grants.
The weighted average number of shares outstanding for basic earnings per share
were 24,643,000 and 24,002,000 for the three months ended July 31, 2004 and
2003, respectively. For diluted earnings per share, these amounts were increased
by 841,000 and 1,138,000 for the three months ended July 31, 2004 and 2003,
respectively, due to potentially dilutive common stock equivalents issuable
under the Company's stock option plans and restricted stock grants.
NOTE 9 - STOCK DIVIDEND
On June 17, 2004, the Company's shareholders approved an amendment to its
articles of incorporation providing for an increase in the authorized shares of
common stock and Class A common stock to 100 million shares and 30 million
shares, respectively. Subsequently, on June 25, 2004, the Company distributed a
stock dividend of one newly issued share of common stock and one newly issued
share of Class A common stock for each then outstanding share of common stock
and of Class A common stock, respectively, to shareholders of record as of June
11, 2004. The balance sheet has been updated accordingly.
12
NOTE 10 - LITIGATION SETTLEMENT
On July 28, 2004, a settlement was reached in a lawsuit the Company filed
against Swiss Army Brands, Inc. and two individuals in November 2001. In the
lawsuit, the Company alleged that Swiss Army Brands and the other defendants
tortiously interfered with its business by soliciting a number of the Company's
sales employees. As a result of the settlement, the Company recorded a pre-tax
gain of $1.4 million in the quarter ended July 31, 2004. This consisted of a
gross settlement of $1.9 million partially offset by direct costs related to the
litigation of $0.5 million.
13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
Statements in this quarterly report on Form 10-Q, including, without limitation,
statements under this Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere 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. These statements are based on
current expectations, estimates, forecasts and projections about the Company,
its future performance, the industry in which the Company operates and
management's assumptions. Words such as "expects," "anticipates," "targets,"
"goals," "projects," "intends," "plans," "believes," "seeks," "estimates,"
"may," "will," "should" and variations of such words and similar expressions are
also intended to identify such forward-looking statements. The Company cautions
readers that forward-looking statements include, without limitation, those
relating to the Company's future business prospects, projected operating or
financial results, revenues, working capital, liquidity, capital needs, plans
for future operations, expectations regarding capital expenditures and operating
expenses, 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 in the United States and the other
significant markets where the Company's products are sold, general uncertainty
related to possible terrorist attacks and the impact on consumer spending,
changes in consumer preferences and popularity of particular designs, new
product development and introduction, competitive products and pricing,
seasonality, availability of alternative sources of supply in the case of the
loss of any significant supplier, the loss of significant customers, the
Company's dependence on key employees and officers, the ability to successfully
integrate the operations of acquired businesses without disruption to other
business activities, the continuation of licensing arrangements with third
parties, 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, disease, general risks associated with doing business outside the
United States including, without limitation, import duties, tariffs, quotas,
political and economic stability, and success of hedging strategies with respect
to currency exchange rate fluctuations.
Critical Accounting Policies And Estimates
In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), goodwill and purchased
intangibles with indefinite lives are not amortized but will be reviewed
annually for impairment. Purchased intangibles with finite lives are amortized
on a straight-line basis over their respective estimated useful lives.
Aside from the above, there has been no other material change in the Company's
Critical Accounting Policies and Estimates, as disclosed in its Annual Report on
Form 10-K for the fiscal year ended January 31, 2004.
14
Results Of Operations For The Six Months Ended July 31, 2004 As Compared To The
Six Months Ended July 31, 2003.
Net Sales: Comparative net sales by business segment were as follows (in
thousands):
Six Months Ended
July 31,
-----------------------
2004 2003
---------- ----------
Wholesale:
Domestic $ 105,851 $ 93,761
International 35,749 18,388
Retail 30,375 24,566
---------- ----------
Net Sales $ 171,975 $ 136,715
========== ==========
Net sales increased by $35.3 million or 25.8% for the six months ended July 31,
2004 as compared to the six months ended July 31, 2003. Sales in the wholesale
segment increased by 26.3% to $141.6 million versus $112.1 million in the prior
year. Sales of all brands experienced double digit percentage increases over the
prior year except Movado, which experienced growth in the mid-single digits
above last year and ESQ which experienced growth in the high single digits above
last year. Sales include $12.8 million for the Ebel brand.
Sales in the domestic wholesale business were $105.9 million or 12.9%, above the
prior year sales of $93.8 million. Tommy Hilfiger posted sales increases of
64.5% over the prior year due to increased sell through at retail locations in
addition to added new store distribution. Concord and Coach sales experienced
double digit percentage increases over the prior year, ESQ sales experienced
high single digit percentage increases over the prior year, and Movado sales
experienced mid single digit percentage increases over the prior year.
Sales in the international wholesale business were $35.7 million or 94.4% above
prior year. All brands recorded double digit percentage increases with Tommy
Hilfiger sales more than doubling year over year reflecting the strength of the
Tommy Hilfiger brand name, the addition of new Tommy Hilfiger doors, and the
appeal of the watch designs and price points in the international marketplace.
Sales of all brands were particularly strong in Asia, where they were up over
100% from the prior year second quarter (which was significantly impacted by the
outbreak of SARS).
Sales in the retail segment rose 23.6% to $30.4 million. The increase was driven
by overall 66.8% growth in Movado Boutique sales. This increase was the result
of an 18.4% increase in comparable store sales along with the addition of eight
new stores year over year. The outlet business experienced a mid single digit
percentage increase in sales.
Gross Profit. Gross profit for the six months ended July 31, 2004 was $101.4
million, or 58.9%, of net sales as compared to $83.7 million, or 61.2%, of net
sales for the six months ended July 31, 2003. The increase in gross profit of
$17.7 million was the result of the higher sales volume. The decrease in the
gross profit as a percentage of sales was the result of differences in brand and
product mix, particularly the effect of the acquisition of the Ebel business,
which generated lower margins, and the proportionately higher sales growth of
Tommy Hilfiger, which has lower margins, as well. In addition, the mix of
product within the Boutiques also contributed to the
15
margin percent decrease due to higher jewelry sales relative to watch sales in
the current year. Gross margin excluding Ebel was 59.8%.
Selling, General and Administrative. Selling, general and administrative
expenses for the six months ended July 31, 2004 were $90.9 million or 52.9% of
net sales as compared to $72.9 million or 53.3% of net sales for the six months
ended July 31, 2003. The increase is primarily attributable to spending in
support of the Company's growth initiatives. The major elements of the increased
spending were to operate the Ebel business for the five months in the current
year with no comparable spending in the prior year, the additional costs
associated with the eight new Movado Boutiques and one new outlet, the continued
global expansion of Tommy Hilfiger and increased people-related infrastructure
costs to support other growth initiatives, including the development of the
Movado brand in China.
Interest Expense. Net interest expense for the six months ended July 31, 2004
declined by 6.2% to $1.5 million as compared to $1.6 million for the six months
ended July 31, 2003. The decrease is due to the reduction of the average
borrowing rate to 4.7% as compared to 5.4% in the prior year. This reduced rate
is the result of the mix of the borrowings with a greater portion classified as
short-term bank loans due to the continued pay down of the Company's long-term
debt. The average debt for the quarter increased by 6.2% to $53.3 million.
Litigation Settlement. The Company recognized income for the six months ended
July 31, 2004 from a litigation settlement with Swiss Army Brands, Inc. in the
net amount of $1.4 million. This consisted of a gross settlement of $1.9 million
partially offset by direct costs related to the litigation of $0.5 million.
After accounting for fees and taxes associated with the settlement, second
quarter net income increased by $0.8 million, or $0.03 per diluted share.
Income Taxes. The Company recorded a tax expense of $2.6 million for the six
months ended July 31, 2004 and July 31, 2003. Taxes were recorded at a 25% and a
28% rate for the periods ended July 31, 2004 and July 31, 2003 respectively. The
decrease in the effective tax rate is the result of the Company's projected
profits and earnings mix for the year.
Net Income. For the six months ended July 31, 2004, the Company recorded net
income of $7.8 million as compared to $6.6 million for the six months ended July
31, 2003. The results for the six months ended July 31, 2004 reflect a loss from
the Ebel business of $3.1 million.
16
Results Of Operations For The Three Months Ended July 31, 2004 As Compared To
The Three Months Ended July 31, 2003.
Net Sales: Comparative net sales by business segment were as follows (in
thousands):
Three Months Ended
July 31,
-------------------------
2004 2003
---------- ----------
Wholesale:
Domestic $ 59,947 $ 53,313
International 20,645 9,486
Retail 17,196 13,746
---------- ----------
Net Sales $ 97,788 $ 76,545
========== ==========
Net sales increased by $21.2 million, or 27.8%, for the three months ended July
31, 2004 as compared to the three months ended July 31, 2003. Sales in the
wholesale segment increased by 28.3%, to $80.6 million, versus $62.8 million in
the prior year. Sales of all brands experienced double digit percentage
increases over the prior year, except Movado, which experienced growth in the
low single digits above last year. Sales include $9.4 million for the Ebel
brand.
Sales in the domestic wholesale business were $59.9 million, or 12.4%, above the
prior year sales of $53.3 million. Tommy Hilfiger posted sales increases of
62.2% over prior year due to increased sell through at retail locations in
addition to added new store distribution. ESQ and Coach experienced double digit
percentage increases, Concord experienced low single digit increases, and Movado
was flat year over year.
Sales in the international wholesale business were $20.6 million, or 117.6%,
above prior year. All brands recorded double digit percentage increases, with
Tommy Hilfiger sales more than doubling year over year reflecting the strength
of the brand name, the addition of new doors, and the appeal of the watch
designs and price points in the international marketplace. Sales of all brands
were particularly strong in Asia, which were up over 100% from the prior year
second quarter (which was significantly impacted by the outbreak of SARS).
Sales in the retail segment rose 25.1% to $17.2 million. The increase was driven
by overall 65.0% growth in Movado Boutique sales. This increase was the result
of an 11.8% increase in comparable store sales along with the addition of eight
new stores year over year. The outlet business sales experienced a high single
digit percentage increase.
Gross Profit. Gross profit for the three months ended July 31, 2004 was $58.0
million, or 59.3%, of net sales as compared to $47.2 million, or 61.7%, of net
sales for the three months ended July 31, 2003. The increase in gross profit of
$10.7 million was the result of the higher sales volume. The decrease in the
gross profit as a percentage of sales was the result of differences in brand and
product mix, particularly the effect of the Ebel business, which generated lower
margins, and the proportionately higher sales growth of Tommy Hilfiger, which
has lower margins, as well. In addition, the mix of product within the Boutiques
also contributed to the
17
margin percentage decrease due to higher jewelry sales relative to watch sales
in the current year. Gross margin excluding Ebel was 60.0%.
Selling, General and Administrative. Selling, general and administrative
expenses for the three months ended July 31, 2004 were $49.2 million or 50.3% of
net sales as compared to $38.4 million or 50.2% of net sales for the three
months ended July 31, 2003. The increase is primarily attributable to spending
in support of the Company's growth initiatives. The major elements of the
increased spending were to operate the Ebel business for the three months in the
current year with no comparable spending in the prior year, the additional costs
associated with the eight new Movado Boutiques and one new outlet, the continued
global expansion of Tommy Hilfiger and increased people-related infrastructure
costs to support other growth initiatives, including the development of the
Movado brand in China.
Interest Expense. Net interest expense for the three months ended July 31, 2004
declined by 5.1% to $783,000 as compared to $825,000 for the three months ended
July 31, 2003. The decrease is due to a reduction of the average borrowing rate
to 4.4% as compared to 5.0% in the prior year. This reduced rate is the result
of the mix of the borrowings with a greater portion classified as short-term
bank loans due to the continued pay down of the Company's long-term debt. The
average debt for the quarter increased by 9.0% to $60.8 million.
Litigation Settlement. The Company recognized income for the three months ended
July 31, 2004 from a litigation settlement with Swiss Army Brands, Inc. in the
net amount of $1.4 million. This consisted of a gross settlement of $1.9 million
partially offset by direct costs related to the litigation of $0.5 million.
After accounting for fees and taxes associated with the settlement, second
quarter net income increased by $0.8 million, or $0.03 per diluted share.
Income Taxes. The Company recorded a tax expense of $2.4 million for the three
months ended July 31, 2004 as compared to a tax expense of $2.2 million for the
three months ended July 31, 2003. Taxes were recorded at a 25% and a 28% rate
for the periods ended July 31, 2004 and July 31, 2003 respectively. The decrease
in the effective tax rate is the result of the Company's projected profits and
earnings mix for the year.
Net Income. For the three months ended July 31, 2004, the Company recorded net
income of $7.1 million as compared to $5.8 million for the three months ended
July 31, 2003. The results for the three months ended July 31, 2004 reflect a
loss from the Ebel business of $1.3 million.
LIQUIDITY AND FINANCIAL POSITION
Cash used in operating activities amounted to $18.9 million and $0.2 million for
the six months ended July 31, 2004 and 2003, respectively. The increase in the
cash used in operating activities for the six months ended July 31, 2004
compared to July 31, 2003, was the result of several factors. Increase in
inventories resulted in an additional use of cash of $12.1 million. The addition
of product to stock the opening of eight new retail stores and the build-up of
inventory to support higher anticipated sales for the upcoming holiday selling
season were the primary reasons for the change. The impact of the Company's
hedging program accounted for a $10.4 million use of cash. An $8.0 million
increase in the use of cash resulted from activities associated with the
integration of Ebel, including the payment of severance and the consummation of
customer-related transactions provided for in the opening balance sheet. These
increases were partially offset by cash provided by changes in accounts
receivable of $8.3 million primarily due to an improvement in the accounts
receivable days outstanding due to the mix of sales growth in the Movado
Boutiques and Tommy Hilfiger, where shorter payment terms are the norm and
improved cash collections. Additionally, $5.6 million of cash was provided by
accounts payable principally due to the payments associated with the increased
inventory purchases.
18
Cash used in investing activities amounted to $50.6 million and $3.8 million for
the six months ended July 31, 2004 and 2003, respectively. The cash used during
the period ended July 31, 2004 was primarily for the acquisition of Ebel. In
addition, cash was used during the six months ended July 31, 2004 for capital
expenditures, primarily for the build out of the eight new Movado Boutiques and
for furniture and fixtures for the expanded space in the headquarters facility
in Paramus. The cash used during the six months ended July 31, 2003 was
primarily for capital expenditures for the build out of the new Movado Boutiques
and normal ongoing systems hardware and software investments.
Cash provided by financing activities amounted to $13.8 million and $13.4
million for the six months ended July 31, 2004 and 2003, respectively. For the
period ended July 31, 2004, cash was provided by normal seasonal short term
borrowings of $20.0 million and was partially offset by payment of the mortgage
assumed in the Ebel acquisition of $5.2 million. For the period ended July 31,
2003, cash was provided primarily from normal seasonal short term borrowings of
$14.0 million.
At July 31, 2004, the Company had two series of Senior Notes outstanding. Senior
Notes due January 31, 2005, with a remaining principal amount due of $5.0
million, 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 and bear interest of 6.56% per annum.
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 of 6.90% per annum, mature on October 30, 2010 and are
subject to annual repayments of $5.0 million commencing October 31, 2006.
As of March 21, 2004, the Company amended its Note Purchase and Private Shelf
Agreement, originally dated March 21, 2001, to expire on March 21, 2007. This
agreement 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. As
of July 31, 2004 and 2003, there were no amounts outstanding under the
agreement.
On June 17, 2003, the Company completed the renewal of its revolving credit line
with its bank group. The agreement provides for a three year $75.0 million
unsecured revolving line of credit and $15.0 million of uncommitted working
capital lines. The line of credit expires on June 17, 2006. At July 31, 2004,
the Company had $25.0 million of outstanding borrowings under its bank lines as
compared to $14.0 million at July 31, 2003. In addition, one bank in the
domestic bank group issued five irrevocable standby letters of credit for retail
and operating facility leases to various landlords and Canadian payroll to the
Royal Bank of Canada totaling $0.6 million with expiration dates through June
30, 2005.
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 approximately $6.2
million and $6.4 million at July 31, 2004 and 2003, respectively, of which a
maximum of $5.0 million may be drawn under the terms of the Company's revolving
credit line with its bank group. As of July 31, 2004, the Swiss bank has
guaranteed the Company's Swiss subsidiary's obligations to certain Swiss third
parties in the amount of approximately 0.9 million Swiss francs. As of July 31,
2004, there are no borrowings against these lines.
As part of the Ebel acquisition, the Company assumed an existing mortgage of 6.6
million Swiss francs. The Company settled this liability during the three months
ended July 31, 2004.
19
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 purchases under the repurchase program for the six months ended
July 31, 2004 and 2003.
During the six months ended July 31, 2004, treasury shares increased by 6,888 as
the result of cashless exercises of stock options for 43,685 shares of stock.
The Company paid dividends of $0.04 per share for the first and second quarter,
or approximately $2.0 million for the six months ended July 31, 2004, and $0.015
per share for the first quarter and $0.03 per share for the second quarter, or
approximately $1.1 million for the six months ended July 31, 2003.
Cash and cash equivalents at July 31, 2004 amounted to $27.4 million compared to
$47.7 million at July 31, 2003.
20
Item 3. Quantitative and Qualitative Disclosure about Market Risks
FOREIGN CURRENCY AND COMMODITY PRICE RISKS
The majority of the Company's purchases are denominated in Swiss francs. The
Company reduces its exposure to the Swiss franc exchange rate risk through a
hedging program. Under the hedging program, the Company purchases various
derivatives, predominantly forward and option contracts. Changes in derivative
fair values will either be recognized in earnings as offsets to the changes in
fair value of related hedged assets, liabilities and firm commitments or, for
forecasted transactions, deferred and recorded as a component of other
shareholders' equity until the hedged transactions occur and are recognized in
earnings. The ineffective portion of a hedging derivative's change in fair value
will be immediately recognized in earnings. If the Company did not engage in a
hedging program, any change in the Swiss franc currency rate would have an equal
effect on the entities' cost of sales. The Company purchases gold for the
production of certain watches. The Company purchases gold derivatives under its
hedging program and treats the changes in fair value on these derivatives in the
same manner as the changes in fair value in its Swiss franc derivatives.
The Company also hedges its Swiss franc denominated investment in its
wholly-owned Swiss subsidiaries using purchase options under certain
limitations. These hedges are treated as net investment hedges under SFAS No.
133. Under SFAS No. 133, the change in fair value of these instruments is
recognized in accumulated other comprehensive income to offset the change in the
value of the net investment being hedged.
The following presents fair value and maturities of the Company's foreign
currency derivatives outstanding as of July 31, 2004 (in millions):
JULY 31, 2004
FAIR VALUE MATURITIES
------------- ----------
Forward exchange contracts ($ 1.4) 2004-2005
Purchased foreign currency options 5.4 2004-2006
-------
$ 4.0
=======
The Company's international trade business accounts for 20.8% of the Company's
sales in various currencies. The international operations are denominated in
local currency and fluctuations in these currency rates may have an impact on
the Company's sales, cost of sales, operating expenses and net income.
INTEREST RATE RISK
As of July 31, 2004, the Company had $25.0 million in short-term bank debt
obligations with variable interest rates based on LIBOR plus an applicable loan
spread. The Company does not hedge these interest rate risks. The Company also
has $30.0 million Senior Note debt bearing fixed interest rates per annum. The
difference between the market based interest rates at July 31, 2004 and the
fixed rates were unfavorable.
21
Item 4. Controls and Procedures
The Company, under the supervision and with the participation of its management,
including the Chief Executive Officer and the Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Company's "disclosure
controls and procedures" (as defined in Rule 13a-15(e) under the Securities
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
making known to them, in a timely manner, material information relating to the
Company and the Company's consolidated subsidiaries required to be disclosed in
the Company's reports filed or submitted under the Exchange Act.
There has been no change in the Company's internal control over financial
reporting during the quarter ended July 31, 2004, that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
It should be noted that while the Company's Chief Executive Officer and Chief
Financial Officer believe that the Company's disclosure controls and procedures
provide a reasonable level of assurance that they are effective, they do not
expect that the Company's disclosure controls and procedures or internal control
over financial reporting will prevent all errors and fraud. A control system, no
matter how well conceived or operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.
22
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
On June 17, 2004, the Company held its annual meeting of
shareholders at its corporate office in Paramus, New Jersey.
The following matters were voted upon at the meeting:
(i) Margaret Hayes Adame, Richard Cote, Efraim Grinberg, Gedalio
Grinberg, Alan H. Howard, Nathan Leventhal, Donald Oresman and
Leonard L. Silverstein were elected directors of the Company.
The results of the vote were as follows:
Withheld/
Nominee For Against
------- --- ---------
Margaret Hayes Adame 39,430,211 1,227,054
Richard Cote 37,145,125 3,512,140
Efraim Grinberg 37,236,912 3,420,353
Gedalio Grinberg 37,233,380 3,423,885
Alan H. Howard 39,315,452 1,341,813
Nathan Leventhal 39,332,152 1,325,113
Donald Oresman 39,277,101 1,380,164
Leonard L. Silverstein 36,791,838 3,865,427
(ii) A proposal to ratify the selection of PricewaterhouseCoopers
LLP as the Company's independent public accountants for the
fiscal year ending January 31, 2005 was approved. The results
of the vote were as follows:
For Withheld/Against Exception/Abstain
--- ---------------- -----------------
40,452,481 198,735 6,049
(iii) A proposal to extend the term of the Company's Amended and
Restated Deferred Compensation Plan for Executives to June 17,
2014 was approved. The results of the vote were as follows:
For Withheld/Against Exception/Abstain
--- ---------------- -----------------
37,913,013 1,325,402 7,332
23
(iv) A proposal to amend and restate the Company's 1996 Stock
Incentive Plan was approved. The results of the vote were as
follows:
For Withheld/Against Exception/Abstain
--- ---------------- -----------------
33,202,588 5,891,737 151,422
(v) A proposal to amend the Company's restated certificate of
incorporation to increase the number of authorized shares of
common stock and Class A common stock was approved. The
results of the vote were as follows:
For Withheld/Against Exception/Abstain
--- ---------------- -----------------
35,111,205 5,541,646 4,414
Item 6. Exhibits
(a) Exhibits
10.1 Amendment dated August 5, 2004 to Line of Credit
Agreement dated August 20, 2001, as previously amended,
between the Registrant and The Bank of New York.
10.2 Master Credit Agreement dated August 17, 2004 and August
20, 2004 between MGI Luxury Group S.A. and UBS AG.
10.3 Line of Credit letter agreement dated as of June 20,
2004 between the Registrant and Fleet National Bank and
Second Amended and Restated Promissory Note as of June
20, 2004.
10.4 Fourth Amendment to License Agreement dated June 3, 1999
between Tommy Hilfiger Licensing, Inc. and the
Registrant entered into as of June 25, 2004.*
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
* Confidential portions of Exhibit 10.4 have been omitted and filed
separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.
24
SIGNATURE
Pursuant to the requirements of the Securities and 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 9, 2004 By: /s/ Eugene J. Karpovich
---------------------------------
Eugene J. Karpovich
Senior Vice President and
Chief Financial Officer
(Chief Financial Officer and
Principal Accounting Officer)
25