NOTE 17 – ACQUISITIONS

On July 3, 2017, the Company, through a wholly-owned U.K. subsidiary, acquired JLB Brands Ltd., the owner of the Olivia Burton brand, one of the United Kingdom’s fastest growing fashion watch and jewelry brands, for $78.2 million, or £60.0 million in cash, subject to working capital and other closing adjustments. After giving effect to the closing adjustments, the purchase price was $79.0 million, or £60.7 million, net of cash acquired of approximately $5.9 million, or £4.5 million. The acquisition was funded with cash on hand of the Company’s non-U.S. subsidiaries, and no debt was assumed in the acquisition. The acquisition adds a new brand with significant global growth potential to the Company’s portfolio.

The results of the Olivia Burton brand’s operations have been included in the consolidated financial statements since the date of acquisition within the International location of the Wholesale segment. In the United States and International locations of the Wholesale segment, for the three 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.

The acquisition was accounted for in accordance with FASB Topic ASC 805 (“Business Combinations”), which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the July 3, 2017 acquisition date (in thousands):

Assets Acquired and Liabilities Assumed	Fair Value
Cash and cash equivalents	$	5,909
Trade receivables, net		3,106
Inventories		4,164
Prepaid expenses and other current assets		913
Property, plant and equipment, net		131
Goodwill		55,322
Trade name and other intangibles		21,415
Total assets acquired		90,960
Accounts payable		608
Accrued liabilities		844
Income taxes payable		643
Deferred and non-current income taxes payable		3,965
Total liabilities assumed		6,060
Total purchase price	$	84,900

Inventories include a step-up adjustment of approximately $0.8 million, which is being amortized over three months. The components of Trade name and other intangibles include a trade name of approximately $12.8 million (amortized over 10 years), and customer relationships of $8.6 million (amortized over 6 years).

The Company recorded goodwill of $55.3 million based on the amount by which the purchase price exceeded the fair value of the net assets acquired. Goodwill is not deductible for income tax purposes.

The operating results of the Olivia Burton brand have been included in the Company’s Consolidated Financial Statements beginning July 3, 2017. Net sales of the acquired Olivia Burton brand since the date of acquisition through July 31, 2017 were $0.9 million. The Olivia Burton brand’s net income since the date of acquisition was $0.1 million.

The following table provides the Company’s unaudited pro forma net sales, net income and net income per basic and diluted common share as if the results of operations of the Olivia Burton brand had been included in the Company’s operations commencing on February 1, 2016, based on available information relating to operations of the Olivia Burton brand. This pro forma information is not necessarily indicative either of the combined results of operations that actually would have been realized by the Company had the Olivia Burton brand acquisition been consummated at the beginning of the period for which the pro forma information is presented, or of future results.

		Six Months Ended July 31,
	2017		2016
(In thousands, except per share data)		(Unaudited)
Net sales	$	239,309	$	248,136
Net income	$	6,214	$	9,770

Basic income per share:
Net income per share attributed to Movado Group, Inc.	$	0.27	$	0.42

Diluted income per share:
Net income per share attributed to Movado Group, Inc.	$	0.27	$	0.42

The change in the carrying amount of the Company’s goodwill, which is included in the International location of the Wholesale segment, is as follows (in thousands):

	Total
Balance at January 31, 2017	$	—
Acquisition of the Olivia Burton brand		55,322
Foreign exchange impact		794
Balance at July 31, 2017	$	56,116

Trade name and other intangible assets consist of the following (in thousands):

	Three months ended
	July 31, 2017
	Gross carrying amount		Accumulated amortization		Foreign exchange		Net
Intangible assets subject to amortization:
Trade name	$	12,766	$	(108)	$	184	$	12,842
Customer relationships		8,598		(121)		123		8,600
Total intangible assets	$	21,364	$	(229)	$	307	$	21,442