Business Context and Reporting Period
Company: Birks & Mayors Inc.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: August 13, 2012
Reporting Period: This filing serves as a Management Proxy Circular for the Annual and Special Meeting of Shareholders scheduled for September 13, 2012. It references the fiscal year ended March 31, 2012 (53 weeks).
Key Financial Metrics
Note: This filing is a proxy circular and does not contain a full income statement or balance sheet. Specific financial figures are limited to compensation, fees, and related party transactions.
- Executive Compensation (Fiscal 2012): Aggregate compensation paid to ten executive officers was approximately $3,475,000 (annual salary).
- Auditor Fees (Fiscal 2012): Total fees billed by KPMG LLP were approximately $489,700, comprising $405,000 in audit fees, $50,000 in audit-related fees, and $34,700 in tax fees.
- Related Party Transactions:
- Diamond purchases from Prime Investments SA: ~$1.8 million.
- Management consulting fees to Montrovest: ~$158,000.
- Reimbursement to Regaluxe Srl (Chairman's office expenses): $238,000.
- Wholesale distribution fees to Regaluxe Srl: ~$11,000.
- Debt and Liquidity: The filing mentions cash advances from Montrovest totaling $5.0 million (received in 2009) with an interest rate reduced to 11% in June 2011. These advances are subordinated to senior credit facilities. Specific liquidity ratios or total debt figures are not provided in this document.
Material Changes and Corporate Actions
- Leadership Transition: Thomas A. Andruskevich resigned as President and CEO effective March 31, 2012. Jean-Christophe Bédos was appointed President and CEO effective April 1, 2012.
- By-Law Amendments: The Board approved modifications to By-Law No. One on April 19, 2012, including adding a Vice Chairman position, revising dividend declarations, and adding a section on banking and borrowing arrangements. Shareholder ratification is sought.
- Executive Compensation Structure: For fiscal 2012, the company paid bonuses to executive officers ranging from 13% to 17% of base salary, marking a return to bonus payments after not meeting thresholds since 2007. The former CEO received a bonus of approximately 124% of his base salary per his employment agreement.
- Equity Incentives: No new options were granted to named executive officers in fiscal 2012, except for 150,000 options to Mr. Bédos and 25,000 to Ms. Nicodemus. The Employee Stock Purchase Plan (ESPP) is fully utilized with no additional shares available for issuance.
Guidance, Outlook, and Risks
Management Commentary: The filing focuses on corporate governance and the solicitation of proxies. Management highlights the strategic experience of the new CEO, Mr. Bédos, who brings over 24 years of experience in the global retail luxury sector (formerly with Boucheron and Cartier).
Risks and Contingencies:
- Related Party Transactions: Significant reliance on related parties for diamond supply (Prime Investments SA) and management consulting (Montrovest). The Chairman of the Board is a beneficiary of the trust controlling the majority of voting shares (Goldfish Trust/Montrovest).
- Controlled Company Status: The company qualifies as a "controlled company" under NYSE MKT rules due to majority ownership by the Goldfish Trust/Montrovest group, allowing exemptions from certain corporate governance requirements (e.g., majority independent directors), though the company voluntarily maintains independent committees.
- Employment Agreements: Significant severance obligations exist for executive officers in the event of termination without cause or change of control, including lump-sum payments and salary continuation.
Investor Verification Checklist
- Verify the full consolidated financial statements for the fiscal year ended March 31, 2012, filed on Form 20-F (referenced in this circular but not included).
- Review the specific terms of the $5.0 million cash advances from Montrovest and their impact on liquidity and interest expense.
- Confirm the details of the diamond supply agreement with Prime Investments SA to assess pricing competitiveness and supply chain concentration risk.
- Examine the employment agreements of the new CEO and other executives to understand potential future cash outflows for severance or bonuses.
- Check the voting record of the Goldfish Trust/Montrovest group, which controls approximately 67.8% of the voting power via Class B shares.