NOTE 5 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company follows accounting guidance which requires disclosure of segment data based on how management makes decisions about allocating resources to segments and measuring their performance.

The Company conducts its business in two operating segments: Wholesale and Retail. The Company’s Wholesale segment includes the designing, manufacturing and distribution of watches of quality owned brands and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Retail segment includes the Company’s retail outlet locations.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 26.4%, 10.2%, 9.3% and 6.1%, respectively, of the Company’s total net sales for the three months ended July 31, 2017. For the three months ended July 31, 2016, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 22.3%, 8.3%, 10.0% and 7.2%, respectively, of the Company’s total net sales.

The Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 27.8%, 10.4%, 8.9% and 6.1%, respectively, of the Company’s total net sales for the six months ended July 31, 2017. For the six months ended July 31, 2016, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 22.8%, 9.2%, 9.3% and 6.3%, respectively, of the Company’s total net sales. Substantially all of the Company’s tangible International assets are located in Switzerland and Hong Kong.

Operating Segment Data for the Three Months Ended July 31, 2017 and 2016 (in thousands):

	Net Sales
	2017		2016
Wholesale:
Owned brands category	$	46,339	$	46,643
Licensed brands category		62,529		61,571
After-sales service and all other		2,150		2,997
Total Wholesale		111,018		111,211
Retail		17,763		16,875
Consolidated total	$	128,781	$	128,086

	Operating Income (3) (4)
	2017		2016
Wholesale	$	4,797	$	6,633
Retail		3,520		3,458
Consolidated total	$	8,317	$	10,091

Operating Segment Data for the Six Months Ended July 31, 2017 and 2016 (in thousands):

	Net Sales
	2017		2016
Wholesale:
Owned brands category	$	79,481	$	88,679
Licensed brands category		113,899		118,411
After-sales service and all other		4,798		6,079
Total Wholesale		198,178		213,169
Retail		29,868		28,980
Consolidated total	$	228,046	$	242,149

	Operating Income (3) (4)
	2017		2016
Wholesale	$	309	$	11,201
Retail		4,360		4,268
Consolidated total	$	4,669	$	15,469

	Total Assets
	July 31, 2017		January 31, 2017		July 31, 2016
Wholesale	$	609,893	$	584,518	$	575,903
Retail		24,180		23,284		22,833
Consolidated total	$	634,073	$	607,802	$	598,736

Geographic Location Data for the Three Months Ended July 31, 2017 and 2016 (in thousands):

	Net Sales				Operating Income / (Loss) (3) (4)
	2017		2016		2017		2016
United States (1)	$	61,845	$	66,823	$	1,401	$	(392	)
International (2)		66,936		61,263		6,916		10,483
Consolidated total	$	128,781	$	128,086	$	8,317	$	10,091

United States and International net sales are net of intercompany sales of $62.3 million and $72.4 million for the three months ended July 31, 2017 and 2016, respectively.

Geographic Location Data for the Six Months Ended July 31, 2017 and 2016 (in thousands):

	Net Sales				Operating (Loss) / Income (3) (4)
	2017		2016		2017			2016
United States (1)	$	106,640	$	126,880	$	(8,380	)	$	(1,785	)
International (2)		121,406		115,269		13,049			17,254
Consolidated total	$	228,046	$	242,149	$	4,669		$	15,469

United States and International net sales are net of intercompany sales of $124.6 million and $155.9 million for the six months ended July 31, 2017 and 2016, respectively.

(1)

The United States operating income / (loss) included $7.2 million and $10.0 million of unallocated corporate expenses for the three months ended July 31, 2017 and 2016, respectively. The United States operating loss included $13.4 million and $18.7 million of unallocated corporate expenses for the six months ended July 31, 2017 and 2016, respectively.

(2)

The International operating income included $7.9 million and $9.4 million of certain intercompany profits related to the Company’s supply chain operations for the three months ended July 31, 2017 and 2016, respectively. The International operating income included $15.5 million and $16.5 million of certain intercompany profits related to the Company’s supply chain operations for the six months ended July 31, 2017 and 2016, respectively.

(3)

In the International location of the Wholesale segment, for the three months ended July 31, 2017, operating income included a pre-tax charge of $0.1 million, as a result of the Company’s cost savings initiatives. In the United States and International locations of the Wholesale segment, for the six months ended July 31, 2017, operating (loss) / income included a pre-tax charge of $3.8 million and $2.6 million, respectively, as a result of the Company’s cost savings initiatives.

(4)

In the United States and International locations of the Wholesale segment, for both the three and the six months ended July 31, 2017, operating income / (loss) included $0.2 million and $4.3 million, respectively, of expenses primarily related to transaction costs and adjustments in acquisition accounting, as a result of the Company’s acquisition of the Olivia Burton brand.

	Total Assets
	July 31, 2017		January 31, 2017		July 31, 2016
United States	$	216,929	$	207,246	$	221,081
International		417,144		400,556		377,655
Consolidated total	$	634,073	$	607,802	$	598,736

	Property, Plant and Equipment, Net
	July 31, 2017		January 31, 2017		July 31, 2016
United States	$	17,521	$	19,197	$	21,686
International		13,891		14,976		14,040
Consolidated total	$	31,412	$	34,173	$	35,726