MOVADO GROUP, INC.
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(Exact name of registrant as specified in its charter)
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New York
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(State or other jurisdiction of incorporation)
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1-16497
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13-2595932
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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650 From Road, Suite 375
Paramus, New Jersey
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07652-3556
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(Address of principal executive offices)
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(Zip Code)
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(201) 267-8000
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(Registrant’s Telephone Number, Including Area Code)
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02.
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Results of Operations and Financial Condition.
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Item 9.01.
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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MOVADO GROUP, INC.
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By:
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/s/ Timothy F. Michno
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Name: Timothy F. Michno
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Title: General Counsel
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CONTACT:
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ICR, Inc.
Rachel Schacter/Allison Malkin
203-682-8200
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·
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Net sales increased 3.8% to $143.6 million compared to $138.3 million in the second quarter of fiscal 2014 driven by growth in the Movado brand and the licensed brand and retail categories.
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Gross profit was $77.6 million, or 54.0% of sales, compared to $74.8 million, or 54.1% of sales, in the second quarter last year. Gross margin percentage remained relatively flat as a result of the unfavorable impact of changes in foreign currency exchange rates, offset by the leverage gained on certain fixed costs due to increased sales.
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·
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Operating expenses increased $2.7 million, or 4.6%, to $60.4 million. This increase was primarily the result of increased payroll and related costs, expenses associated with the Baselworld Watch and Jewelry Show as well as the unfavorable effects of foreign currency exchange rates, partially offset by lower marketing expenses.
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·
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Operating income increased to $17.2 million, or 12.0% of net sales, compared to operating income of $17.0 million, or 12.3% of net sales, in the second quarter of fiscal 2014.
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The Company recorded a tax provision of $4.9 million, which equates to an effective tax rate of 28.7%, compared to an effective tax rate of 25.3% in the second quarter of fiscal 2014. As mentioned above, in the second quarter of fiscal 2014, the Company recorded a $1.0 million tax benefit, or $0.04 per diluted share, related to certain items, which if excluded equates to an adjusted effective tax rate of 31.2%. (See attached table for GAAP and Non-GAAP measures.)
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Net income was $12.2 million, or $0.47 per diluted share, compared to $12.5 million, or $0.48 per diluted share, in the second quarter of fiscal 2014. Second quarter fiscal 2014 adjusted net income was $11.5 million, or $0.44 per diluted share, excluding the $1.0 million, or $0.04 per diluted share tax benefit. (See attached table for GAAP and Non-GAAP measures.)
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Net sales increased 6.5% to $264.5 million compared to $248.3 million in the first six months of fiscal 2014 driven by growth in the Movado brand and the licensed brand and retail categories.
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Gross profit was $142.8 million, or 54.0% of sales, compared to $134.7 million, or 54.3% of sales in the same period last year. The decrease in gross margin percentage was primarily the result of the unfavorable impact of changes in foreign currency exchange rates, partially offset by leverage gained on certain fixed costs due to increased sales.
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Operating expenses increased $7.0 million, or 6.5%, to $114.7 million. This increase was primarily the result of increased payroll and related costs, expenses associated with the Baselworld Watch and Jewelry Show as well as the unfavorable effects of foreign currency exchange rates.
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Operating income increased to $28.1 million, or 10.6% of net sales compared to operating income of $27.0 million, or 10.9% of net sales in the first six months of fiscal 2014.
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The Company recorded a tax provision in the first six months of fiscal 2015 of $8.3 million, which equates to an effective tax rate of 29.9% compared to an effective tax rate of 26.7% for the first six months of fiscal 2014. As mentioned above, the Company recorded a $1.0 million tax benefit, or $0.04 per diluted share, related to certain items, and a $1.5 million pre-tax gain, or $0.04 per diluted share, related to the sale of a Company-owned building in Switzerland, which resulted in an adjusted effective tax rate of 30.4% for the first six months of fiscal 2014. (See attached table for GAAP and Non-GAAP measures.)
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·
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Net income was $19.5 million, or $0.76 per diluted share, compared to $20.7 million, or $0.80 per diluted share, in the first six months of fiscal 2014. Adjusted net income for the first six months of fiscal 2014 was $18.6 million, or $0.72 per diluted share, excluding the $1.0 million, or $0.04 per diluted share tax benefit taken in the second quarter of fiscal 2014 and the $1.5 million, or $0.04 per diluted share pre-tax gain, related to the sale of a building in Switzerland in the first quarter of fiscal 2014. (See attached table for GAAP and Non-GAAP measures.)
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MOVADO GROUP, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands, except per share data)
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(Unaudited)
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Three Months Ended
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Six Months Ended
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July 31,
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July 31,
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2014
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2013
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2014
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2013
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Net sales
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$ | 143,591 | $ | 138,301 | $ | 264,512 | $ | 248,311 | ||||||||
Cost of sales
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65,985 | 63,483 | 121,755 | 113,574 | ||||||||||||
Gross profit
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77,606 | 74,818 | 142,757 | 134,737 | ||||||||||||
Operating expenses
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60,438 | 57,778 | 114,668 | 107,692 | ||||||||||||
Operating income
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17,168 | 17,040 | 28,089 | 27,045 | ||||||||||||
Other income
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- | - | - | 1,526 | ||||||||||||
Interest expense
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(100 | ) | (115 | ) | (194 | ) | (180 | ) | ||||||||
Interest income
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11 | 16 | 46 | 39 | ||||||||||||
Income before income taxes
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17,079 | 16,941 | 27,941 | 28,430 | ||||||||||||
Provision for income taxes
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4,909 | 4,287 | 8,342 | 7,597 | ||||||||||||
Net income
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12,170 | 12,654 | 19,599 | 20,833 | ||||||||||||
Less: Net income attributed to noncontrolling interests
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19 | 200 | 83 | 169 | ||||||||||||
Net income attributed to Movado Group, Inc.
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$ | 12,151 | $ | 12,454 | $ | 19,516 | $ | 20,664 | ||||||||
Per Share Information:
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Net income attributed to Movado Group, Inc.
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$ | 0.47 | $ | 0.48 | $ | 0.76 | $ | 0.80 | ||||||||
Weighted diluted average shares outstanding
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25,674 | 25,846 | 25,685 | 25,859 |
MOVADO GROUP, INC.
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GAAP AND NON-GAAP MEASURES
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(In thousands, except for percentage data)
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(Unaudited)
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As Reported
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% Change
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Three Months Ended
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% Change
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Constant
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July 31,
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As Reported
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Dollar
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2014
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2013
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Total Net sales
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143,591 | 138,301 | 3.8% | 2.7% | ||||||||||||
As Reported
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% Change
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Six Months Ended
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% Change
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Constant
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July 31,
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As Reported
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Dollar
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2014 | 2013 | |||||||||||||||
Total Net sales
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264,512 | 248,311 | 6.5% | 5.2% |
MOVADO GROUP, INC.
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GAAP AND NON-GAAP MEASURES
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(In thousands, except per share data)
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(Unaudited)
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Net Sales
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Gross Profit
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Operating Income
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Pre-tax Income
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Net Income
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EPS
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Three Months Ended July 31, 2014
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As Reported (GAAP)
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$ | 143,591 | $ | 77,606 | $ | 17,168 | $ | 17,079 | $ | 12,151 | $ | 0.47 | ||||||||||||
Three Months Ended July 31, 2013
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As Reported (GAAP)
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$ | 138,301 | $ | 74,818 | $ | 17,040 | $ | 16,941 | $ | 12,454 | $ | 0.48 | ||||||||||||
Tax Adjustment (1)
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(1,000 | ) | (0.04 | ) | ||||||||||||||||||||
Adjusted Results (Non-GAAP)
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$ | 138,301 | $ | 74,818 | $ | 17,040 | $ | 16,941 | $ | 11,454 | $ | 0.44 | ||||||||||||
Six Months Ended July 31, 2014
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As Reported (GAAP)
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$ | 264,512 | $ | 142,757 | $ | 28,089 | $ | 27,941 | $ | 19,516 | $ | 0.76 | ||||||||||||
Six Months Ended July 31, 2013
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As Reported (GAAP)
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$ | 248,311 | $ | 134,737 | $ | 27,045 | $ | 28,430 | $ | 20,664 | $ | 0.80 | ||||||||||||
Tax Adjustment (1)
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(1,000 | ) | (0.04 | ) | ||||||||||||||||||||
Building Sale (2)
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(1,526 | ) | (1,099 | ) | (0.04 | ) | ||||||||||||||||||
Adjusted Results (Non-GAAP)
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$ | 248,311 | $ | 134,737 | $ | 27,045 | $ | 26,904 | $ | 18,565 | $ | 0.72 | ||||||||||||
MOVADO GROUP, INC.
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CONSOLIDATED BALANCE SHEETS
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(In thousands)
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(Unaudited)
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July 31,
2014 |
January 31,
2014 |
July 31,
2013 |
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ASSETS | ||||||||||||
Cash and cash equivalents
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$ | 169,649 | $ | 157,659 | $ | 151,516 | ||||||
Short-term investments
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- | 33,099 | - | |||||||||
Trade receivables
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91,214 | 68,683 | 74,567 | |||||||||
Inventories
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195,331 | 181,305 | 182,718 | |||||||||
Other current assets
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41,018 | 44,564 | 38,426 | |||||||||
Total current assets
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497,212 | 485,310 | 447,227 | |||||||||
Property, plant and equipment, net
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46,141 | 47,796 | 47,296 | |||||||||
Deferred income taxes
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14,604 | 14,891 | 21,667 | |||||||||
Other non-current assets
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33,486 | 30,613 | 27,451 | |||||||||
Total assets
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$ | 591,443 | $ | 578,610 | $ | 543,641 | ||||||
LIABILITIES AND EQUITY
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Accounts payable
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$ | 37,604 | $ | 33,598 | $ | 31,169 | ||||||
Accrued liabilities
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40,334 | 43,573 | 40,902 | |||||||||
Deferred and current income taxes payable
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4,819 | 6,422 | 5,150 | |||||||||
Total current liabilities
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82,757 | 83,593 | 77,221 | |||||||||
Deferred and non-current income taxes payable
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3,360 | 3,518 | 3,880 | |||||||||
Other non-current liabilities
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28,063 | 25,509 | 24,542 | |||||||||
Noncontrolling interests
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2,751 | 2,686 | 2,149 | |||||||||
Shareholders' equity | 474,512 | 463,304 | 435,849 | |||||||||
Total liabilities and eqiuty | $ | 591,443 | $ | 578,610 | $ | 543,641 |
MOVADO GROUP, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In thousands)
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(Unaudited)
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Six Months Ended | |||||||||
July 31, | |||||||||
2014
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2013
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Cash flows from operating activities:
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Net income
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$ | 19,599 | $ | 20,833 | |||||
Depreciation and amortization
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6,097 | 5,769 | |||||||
Other non-cash adjustments
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3,363 | (362 | ) | ||||||
Changes in working capital
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(34,317 | ) | (25,889 | ) | |||||
Changes in non-current assets and liabilities
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(421 | ) | (546 | ) | |||||
Net cash (used in) operating activities
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(5,679 | ) | (195 | ) | |||||
Cash flows from investing activities:
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Capital expenditures
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(4,294 | ) | (10,206 | ) | |||||
Proceeds from short-term investments
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33,736 | - | |||||||
Proceeds from sale of an asset held for sale
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- | 2,196 | |||||||
Other investing
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275 | (164 | ) | ||||||
Net cash provided by / (used in) investing activities
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29,717 | (8,174 | ) | ||||||
Cash flows from financing activities:
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Dividends paid
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(5,059 | ) | (2,549 | ) | |||||
Stock repurchase
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(7,684 | ) | (3,310 | ) | |||||
Other financing
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1,312 | (143 | ) | ||||||
Net cash (used in) financing activities
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(11,431 | ) | (6,002 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
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(617 | ) | (2,002 | ) | |||||
Net change in cash and cash equivalents
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11,990 | (16,373 | ) | ||||||
Cash and cash equivalents at beginning of year
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157,659 | 167,889 | |||||||
Cash and cash equivalents at end of period
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$ | 169,649 | $ | 151,516 |