Business Context and Reporting Period
This Form 6-K filing by Birks & Mayors Inc. (a Canadian foreign private issuer) dated August 15, 2011, serves as a Management Proxy Circular for the Annual Meeting of Shareholders scheduled for September 15, 2011. The filing covers the fiscal year ended March 26, 2011 (Fiscal 2011). The Company operates in the luxury jewelry retail sector with operations in Canada and the United States.
Key Financial Metrics and Corporate Data
The filing focuses on governance and compensation rather than detailed operational financial results, which are referenced as being available in the Annual Report on Form 20-F. Key data points include:
- Share Capital: As of August 5, 2011, there were 3,673,615 Class A voting shares and 7,717,970 Class B multiple voting shares outstanding. Class B shares carry 10 votes per share.
- Executive Compensation: Aggregate annual salary paid to eight executive officers in Fiscal 2011 was approximately $3,057,000. No performance bonuses were paid to executive officers in Fiscal 2011 as the Company did not meet the minimum required threshold.
- Director Compensation: Non-employee directors received an annual fee of $22,500 plus $1,350 per meeting. Fees were increased in August 2011 following the phase-out of a 10% salary reduction program.
- Auditor Fees: KPMG LLP audit fees for Fiscal 2011 were approximately $420,000.
- Related Party Transactions: The Company purchased approximately $2.5 million of diamonds and finished goods from Prime Investments SA (a related party owning 41.8% of Class A shares) during Fiscal 2011. The Company paid $238,000 to Regaluxe Srl for expense reimbursements.
Material Changes and Governance Updates
- Salary Reduction Program: The Company decided in February 2011 to phase out its 10% salary reduction program. Effective August 2011, general salary levels and director fees returned to pre-reduction levels.
- Executive Changes: Joseph A. Keifer, III retired as Executive Vice President and Chief Operating Officer on May 6, 2011. Deborah Nicodemus was appointed Executive Vice President & Chief Merchandising and Marketing Officer effective May 2, 2011.
- Related Party Agreements: On June 8, 2011, the Company amended agreements with Montrovest B.V. (affiliated with the Chairman). Changes included reducing the interest rate on cash advances from 16% to 11% and eliminating a potential "Success Fee" on equity issuances, replacing it with an annual retainer fee of €140,000 for consulting services.
- Stock Option Amendments: In 2010, the Company amended outstanding stock options to reduce the exercise price to $1.00 or $1.05 and reduce the number of shares issuable, resulting in a reduction of 73,709 shares issuable upon exercise.
Guidance, Outlook, and Risks
The filing does not contain specific financial guidance, revenue forecasts, or management commentary on future market outlooks. The document is strictly a proxy circular soliciting votes for the election of directors and the appointment of auditors.
Risks and Contingencies:
- Related Party Dependence: Significant transactions exist with entities controlled by the Chairman (Montrovest, Prime Investments SA, Gestofi S.A.), including diamond supply and management consulting.
- Executive Retention: The Company granted a $250,000 retention bonus to the CFO, Michael Rabinovitch, contingent on continuous employment through March 31, 2013.
- Control Structure: The dual-class share structure concentrates voting power. The Goldfish Trust (beneficiary: Chairman Dr. Lorenzo Rossi di Montelera) controls approximately 67.8% of the voting power through Class B shares.
Important Facts for Investor Verification
- Verify the Company's actual revenue, profit, and cash flow figures in the Annual Report on Form 20-F (filed July 8, 2011), as this proxy circular does not contain a summary of financial performance.
- Confirm the terms of the amended cash advance agreements with Montrovest, specifically the 11% interest rate and the €140,000 annual retainer fee.
- Review the details of the $250,000 retention bonus granted to the CFO and the conditions for its payout.
- Assess the impact of the related party diamond supply agreement, where Prime Investments SA supplied approximately $2.5 million of goods in Fiscal 2011.
- Note that no executive bonuses were paid in Fiscal 2011 due to failure to meet performance thresholds.