UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 08/28/2014
SIGNET JEWELERS LIMITED
(Exact name of registrant as specified in its charter)
Commission File Number: 1-32349
Bermuda
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(State or other jurisdiction of
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(IRS Employer
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incorporation)
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Identification No.)
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Clarendon House
2 Church Street
Hamilton
HM11
Bermuda
(Address of principal executive offices, including zip code)
441 296 5872
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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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))
Item 2.02. Results of Operations and Financial Condition
On August 28, 2014, Signet Jewelers Limited ("Signet") issued a press release announcing its results for the second quarter ending on August 2, 2014 ("Q2 Fiscal 2015"). A copy of the press release is being furnished as Exhibit 99.1 and is incorporated herein by reference.The information set forth in Exhibit 99.1 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
Press release of Signet Jewelers Limited, dated August 28, 2014
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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SIGNET JEWELERS LIMITED
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Date: August 28, 2014
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By:
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/s/ Michele Santana
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Michele Santana
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Chief Financial Officer
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EXHIBIT INDEX
Exhibit No.
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Description
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EX-99.1
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Press release of Signet Jewelers Limited, dated August 28, 2014
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SIGNET JEWELERS REPORTS SECOND QUARTER FINANCIAL RESULTS
Same Store Sales Increase 4.8%, Organic Same Store Sales Increase 6.3% Diluted Earnings Per Share $0.72, Organic Diluted Earnings Per Share $1.00 Significant Progress on Zale
Acquisition Integration Leads to Increase in Synergy Expectations
HAMILTON, Bermuda, August 28, 2014 Signet Jewelers Limited (Signet) (NYSE and LSE: SIG), the largest specialty retail jeweler in the US, UK and Canada, today announced its results for the 13 weeks
(second quarter Fiscal 2015) and 26 weeks ended August 2, 2014. The results include 65 days of performance of the Zale division beginning May 30, 2014. Zale division operations excluding accounting adjustments contributed $256.8
million in sales, $1.7 million in operating income, and $0.01 in diluted earnings per share (EPS) in the second quarter Fiscal 2015.
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Second Quarter Fiscal 2015
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Second Quarter Fiscal 2015
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Reported Results
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Organic Results 1
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Total sales
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up 39.3%
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up 11.2%
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Same store sales
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up 4.8%
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up 6.3%
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Operating income
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$83.5 million, down 20.9%
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$124.1 million, up 17.6%
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EPS
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$0.72, down 14.3%
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$1.00, up 19.0%
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1. Organic results exclude transaction, severance, and capital structure and financing items incurred as well as the results of Zale operations and related purchase accounting adjustments. Please see the schedule
accompanying this release for a reconciliation of GAAP measures to organic measures, which are non-GAAP measures.
Mike Barnes, Chief Executive Officer, commented: We delivered a very strong second quarter with increases of 6.3% in organic same store sales and 19.0% in organic EPS. Positive momentum at our UK division
continued with our best quarterly same store sales increase in seven years, at 4.4%, and our best operating margin in five years. Same store sales at our Sterling Jewelers division, which includes Kay and Jared, increased 6.7% and delivered strong
operating results. I would like to thank all Signet associates globally for their contributions to these results.
We are now even more excited about the acquisition of Zale, having begun the integration process. Our integration teams are successfully sharing best practices with implementation already benefitting both organizations
and importantly, moving us forward in a positive way. We believe three-year synergy opportunities will be $150 million to $175 million, up from our previous expectation of $100 million. I would like to thank all Signet associates
throughout North America for their contributions to this acquisition integration.
Second Quarter Fiscal 2015 EPS
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Second quarter EPS was $0.72. Second quarter organic EPS was $1.00, an increase of 19.0% compared to prior year EPS of $0.84. Organic EPS to EPS can be reconciled as follows:
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Transaction
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Severance
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Accounting
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Capital structure and
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Zale
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Organic EPS
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costs
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costs
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adjustments
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financing
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operations
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EPS
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$1.00
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$(0.14)
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$(0.11)
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$(0.10)
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$0.06
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$0.01
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$0.72
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Second Quarter Fiscal 2015 Sales Highlights:
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Total sales were $1,225.9 million, up $345.7 million or 39.3%, compared to $880.2 million in the 13 weeks ended August 3, 2013 (second quarter Fiscal 2014 or prior year second
quarter). The increase was primarily driven by the addition of the Zale division which added $247.5 million of sales to second quarter Fiscal 2015. Organic same store sales increased 6.3% compared to an increase of 3.6% in the second
quarter Fiscal 2014. eCommerce sales were $50.5 million compared to $31.2 million in the second quarter Fiscal 2014, up $19.3 million or 61.9%. Organic eCommerce sales were $39.0 million, a 25.0% increase over prior year.
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Sterling Jewelers division sales increases were driven by particular strength in bridal brands, fashion diamonds and watches. The number of transactions and the average transaction price in Sterling increased 5.8% and
4.6%, respectively. eCommerce sales in the Sterling division were $29.5 million, up 16.6%. |
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Zale division sales were driven by branded sales in bridal and fashion in the Zale Jewelry operating segment offset, somewhat, by non-branded merchandise. eCommerce sales in the Zale division were $11.5 million.
Sales were in-line with management expectations which incorporated a level of expected business disruption and a $9.3 million unfavorable sales impact due to purchase accounting adjustments associated with deferred revenue. |
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UK division sales increases were driven by strategic initiatives to grow diamond sales and the continuing success of the watch business. The number of merchandise transactions increased by 4.8% primarily due to higher
sales of fashion watches and jewelry and more effective store events. The average merchandise transaction value declined by (0.9)% primarily driven by sales mix. eCommerce sales in the UK were $9.5 million, up 61.0%. |
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Sales change from previous year
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Total sales at
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Same
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Non-same
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constant
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Exchange
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Total
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Second Quarter
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store
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store
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exchange
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translation
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sales as
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Total sales
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Fiscal 2015
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sales¹
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sales, net²
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rate³
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impact³
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reported
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(in millions)
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Kay
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8.1%
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2.9%
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11.0%
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11.0%
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$496.5
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Jared 4
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4.9%
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6.2%
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11.1%
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11.1%
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$264.7
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Regional brands
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1.9%
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(13.6)%
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(11.7)%
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(11.7)%
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$49.2
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Sterling Jewelers division
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6.7%
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2.7%
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9.4%
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9.4%
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$810.4
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Zales Jewelers
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(1.0)%
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$158.3
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Gordons Jewelers
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(5.7)%
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$12.7
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Zale US Jewelry
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(1.3)%
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$171.0
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Peoples Jewellers
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3.9%
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$37.0
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Mappins
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(4.3)%
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$7.0
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Zale Canada Jewelry
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2.5%
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$44.0
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Zale Jewelry
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(0.6)%
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$215.0
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Piercing Pagoda
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(2.8)%
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$32.5
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Zale division
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(0.9)%
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$247.5
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H.Samuel
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2.6%
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(1.0)%
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1.6%
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11.1%
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12.7%
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$81.8
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Ernest Jones
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6.4%
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3.6%
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10.0%
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12.0%
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22.0%
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$81.1
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UK division
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4.4%
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1.2%
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5.6%
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11.5%
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17.1%
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$162.9
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Other segment
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NM
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NM
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NM
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$5.1
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Signet
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4.8%
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32.1%
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36.9%
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2.4%
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39.3%
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$1,225.9
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Organic Signet 3
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6.3%
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3.0%
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9.3%
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1.9%
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11.2%
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$978.4
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1. |
Based only on stores opened for at least 12 months. |
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Includes all sales from stores not open for 12 months. |
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Non-GAAP measure. |
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Includes 31 stores that were converted from regional brands. |
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Includes sales from Signets diamond sourcing initiative. NM - not meaningful. |
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Second Quarter Fiscal 2015 Financial Highlights:
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Gross margin was $409.0 million or 33.4% of sales compared to $309.7 million or 35.2% of sales in the second quarter Fiscal 2014 due primarily to the addition of Zale. Organic gross margin was $340.0
million or 34.8% of sales. The difference between second quarter Fiscal 2015 gross margin and organic gross margin was attributable primarily to lower gross margins associated with the Zale division and purchase accounting adjustments.
Zale
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operates with a lower gross margin structure than Sterling Jewelers and represents an area of focus on applying best practices for improvement.
Signets organic gross margin rate was down 40 basis points due principally to two factors in the UK division. Strategic initiatives directed at diamond and gold merchandise which, although reduced Signets
organic gross margin rate, successfully drove incremental gross margin dollars; and a shift in merchandise mix as a result of strong watch sales.
Selling, general and administrative expenses (SGA) were $379.2 million or 31.0% of sales compared to $250.5 million or 28.5% of sales in the second quarter Fiscal 2014. The $128.7 million SGA
increase was primarily made up of: $81.8 million from the Zale division, $17.1 million from transaction costs, $13.7 million from severance costs, and partially offset by a $3.0 million SGA reduction from purchase accounting
adjustments. Organic SGA was $269.6 million or 27.6% of sales. The 90 basis point decrease in the organic SGA rate compared to second quarter Fiscal 2014 was driven primarily by leverage in store staff costs and centralized costs due to higher
sales.
Other operating income was $53.7 million (second quarter Fiscal 2014: $46.3 million), up $7.4 million or 16.0%. This increase was primarily due to higher interest income earned from higher outstanding
receivable balances. Operating income was $83.5 million, or 6.8% of sales (second quarter Fiscal 2014: $105.5 million or 12.0% of sales). Organic operating income was $124.1 million, or 12.7% of sales, up 70 basis points versus prior
year. Net interest expense was $13.7 million compared to $1.0 million in the prior year second quarter. The increase in interest expense was driven by the addition of $1.4 billion of financing at a weighted average interest cost of 2.6%
related to the Zale acquisition. Included in interest expense was a write-off of fees of $0.7 million associated with the previous credit facility. In comparison, the Company had no debt at the end of the second quarter Fiscal 2014. Income tax
expense was $11.8 million (second quarter Fiscal 2014: $37.1 million), an effective tax rate (ETR) of 16.9% (second quarter Fiscal 2014: 35.5%). Organic income tax expense was $43.5 million with an ETR of 35.2%. The
forecasted ETR for Fiscal 2015 is 29.3% which is lower than the ETR of 35.1% applied as of first quarter Fiscal 2015. This reduction of 5.8% in Signets ETR primarily reflects the benefit of Signets amended capital structure and the
global financing arrangements utilized to fund the acquisition of Zale.
Net income was $58.0 million (second quarter Fiscal 2014: $67.4 million), or $0.72 per share. Organic net income was $79.9 million or $1.00 per share.
The weighted average diluted number of common shares outstanding was 80.2 million compared to 80.7 million in second quarter Fiscal 2014.
Balance Sheet and Other Highlights at August 2, 2014:
Cash and cash equivalents were $215.0 million compared to $212.9 million as of August 3, 2013. The virtually unchanged cash position was due to a variety of nearly offsetting factors including higher cash
flows generated from operating activities, lower share repurchases, higher capital spending, higher dividends, and the financing and closing of the Zale acquisition.
Net accounts receivable were $1,316.0 million, up 14.2% compared to $1,152.1 million as of August 3, 2013. In the Sterling Jewelers division the credit participation rate was 60.0% in the 26 weeks ended August
2, 2014 (year to date Fiscal 2015) compared to 57.1% in the 26 weeks ended August 3, 2013 (year to date Fiscal 2014). The net bad debt as a percentage of the divisions total sales increased to 3.7% in year to date
Fiscal 2015 compared to 3.6% in year to date Fiscal 2014, driven primarily by growth in the outstanding receivable balance from increased credit penetration. The portfolio continues to perform strongly as evidenced by the allowance for doubtful
accounts as a percentage of ending accounts receivable decreasing 20 basis points from 7.2% as of August 3, 2013 to 7.0% as of August 2, 2014.
Net inventories were $2,345.3 million, up 65.4% compared to $1,417.7 million as of August 3, 2013. The increase was primarily due to:
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The acquisition of the Zale division which has inventories of $841.3 million. |
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An increase in Sterling Jewelers inventory of $61.2 million due primarily to bridal and fashion brand extensions and new store growth. |
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An increase in UK inventory of $17.0 million due to the impact of foreign currency translation. (UK inventory decreased in local currency.) |
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An increase in Signets diamond sourcing initiative of $8.1 million. |
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Long term debt is $1.4 billion compared to $0.0 as of August 3, 2013 due to the acquisition of Zale.
On August 2, 2014, Signet had 3,589 stores, consisting of the following:
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Feb 1,
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Acquired
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Logo
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Aug 2,
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Store count
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2014
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stores
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Openings
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conversions
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Closures
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2014
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Kay
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1,055
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-
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31
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(10)
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1,076
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Jared 1
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203
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-
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4
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33
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-
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240
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Regional brands
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213
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-
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0
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(33)
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(9)
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171
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Sterling Jewelers
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1,471
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-
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35
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(19)
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1,487
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Zales Jewelers
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-
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722
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3
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(2)
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723
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Gordons Jewelers
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-
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91
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-
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-
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(7)
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84
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Peoples Jewellers
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-
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145
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-
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-
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(1)
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144
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Mappins
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-
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48
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-
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-
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(1)
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47
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Zale Jewelry segment
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-
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1,006
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3
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(11)
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998
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Piercing Pagoda
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-
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613
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-
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(2)
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611
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Zale division
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-
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1,619
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3
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(13)
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1,609
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H.Samuel
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304
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-
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-
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-
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304
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Ernest Jones
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189
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-
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-
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-
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-
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189
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UK division
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493
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-
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-
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-
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-
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493
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Signet
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1,964
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1,619
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38
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-
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(32)
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3,589
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1. Includes 31 Jared Vault stores that were converted from regional brands.
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Financial Guidance:
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Third Quarter Fiscal 2015
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Same Store sale
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2.0% to 4.0%
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EPS
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($0.11)
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to
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($0.01)
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Purchase accounting adjustments
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($0.14)
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to
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($0.12)
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Transaction costs
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($0.09)
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to
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($0.07)
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Adjusted EPS (Organic EPS plus EPS attributable to Zale operations)
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$0.12 to $0.18
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Adjusted EPS are expected to be unfavorably impacted by Zale operations in the third quarter Fiscal 2015 by $(0.21) to $(0.19).
Signet is providing annual EPS guidance for Fiscal 2015 on a one-time basis due to the complexity of the acquisition.
Fiscal 2015
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EPS
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$4.47 to $4.71
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Purchase accounting adjustments
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($0.41) to ($0.37)
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Transaction costs
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($0.50) to ($0.46)
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Adjusted EPS (Organic EPS plus EPS attributable to Zale operations)
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$5.38 to $5.54
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Effective tax rate
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29.3%
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Capital expenditures
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$240M to $260M
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Net selling square footage growth
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45.0% to 47.5%
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Zale operations are expected to be accretive to Fiscal 2015 adjusted EPS by $0.18 to $0.24.
4
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The weighted average common shares outstanding are expected to be 80.3 million. |
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Capital expenditures are expected to be $240 million to $260 million. This will be driven primarily by new Kay and Jared stores, store remodels, and approximately $55 million directed to the Zale division
for information technology infrastructure and stores. |
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Signet net selling square footage is expected to increase 45.0% to 47.5% year-over-year. Store count changes: |
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Sterling Jewelers division up 75-85 gross, 35-45 net |
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UK division approximately unchanged |
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Zale division 1,550-1,560 |
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3-Year Acquisition Synergies
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Signet anticipates realizing $150 million to $175 million in synergies from January 2015 to January 2018. |
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The sources of the expected incremental synergies are anticipated to broadly build upon the original expectations of supply chain/purchasing, expense reduction, and service capabilities and brand
cross-selling. |
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Long Term Effective Tax Rate
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· |
Beyond FY 2015, the ETR is anticipated to be 28% to 29% due to the full year impact of Signets amended capital structure and financing arrangements partially offset by higher anticipated profits. |
|
A conference call is scheduled today at 8:30 a.m. ET (1:30 p.m. BST and 5:30 a.m. PT) and a simultaneous audio webcast and slide presentation are available at www.signetjewelers.com. The slides are available to be
downloaded from the website ahead of the conference call. The call details are:
A replay and transcript of the call will be posted on Signet's website as soon as they are available and will be accessible for one year.
About Signet and Safe Harbor Statement
|
Signet Jewelers Limited is the largest specialty jewelry retailer in the US, UK and Canada. Signet's Sterling Jewelers division operates over 1,400 stores in all 50 states primarily under the name brands of Kay
Jewelers and Jared The Galleria Of Jewelry. Signet's UK division operates approximately 500 stores primarily under the name brands of H.Samuel and Ernest Jones. Signet's Zale division operates over 1,600 locations in the US and Canada primarily
under the name brands of Zales, Peoples, and Piercing Pagoda. Further information on Signet is available at
www. |
signetjewelers.com. See also www.kay.com, www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk, |
|
www. |
zales.com, www.peoplesjewellers.com and www.pagoda.com. |
|
This release contains statements which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, based upon management's beliefs and expectations as
well as on assumptions made by and data currently available to management, include statements regarding, among other things, Signet's results of operation, financial condition, liquidity, prospects, growth, strategies and the industry in which
Signet operates. The use of the words "expects," "intends," "anticipates," "estimates," "predicts," "believes," "should," "potential," "may," "forecast," "objective," "plan," or "target," and other similar expressions are intended to identify
forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including but not limited to general economic conditions, risks relating to Signet being a
Bermuda corporation, the merchandising, pricing and inventory policies followed by Signet, the reputation of Signet and its brands, the level of competition in the jewelry sector, the cost and availability of diamonds, gold and other precious
metals, regulations relating to consumer credit, seasonality of Signet's business, financial market risks, deterioration in consumers' financial condition, exchange rate fluctuations, changes in consumer attitudes regarding jewelry, management of
social, ethical and environmental risks, security breaches and other disruptions to Signet's information technology infrastructure and databases, inadequacy in and disruptions to internal controls and systems, changes in assumptions used in making
accounting estimates relating to items such as extended service plans and pensions, the impact of the Zale acquisition on relationships, including with
5
employees, suppliers, guests and competitors and any related impact on integration and anticipated synergies, the impact of stockholder litigation with respect to the Zale acquisition, and our ability to successfully
integrate Zale's operations and to realize synergies from the transaction.
For a discussion of these and other risks and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statement, see the "Risk Factors" section of Signet's Fiscal
2014 Annual Report on Form 10-K filed with the SEC on March 27, 2014 and the "Risk Factors" section of Signet's Quarterly Report on Form 10-Q filed with the SEC on June 3, 2014. Signet undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances, except as required by law.
Contacts:
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|
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|
|
|
|
|
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Investors:
|
|
James Grant, VP Investor Relations, Signet Jewelers
|
|
+1
|
|
(330) 668-5412
|
|
|
Press:
|
|
Alecia Pulman, ICR, Inc.
|
|
+1
|
|
(203)
|
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682-8224
|
6
Non-GAAP Reconciliation for the second quarter ended August 2, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
Signet
|
|
Zale
|
|
Accounting
|
|
Severance
|
|
Transaction
|
|
Structure &
|
|
Signet
|
|
|
Organic
|
|
Operations
|
|
Adjustments
|
|
Costs
|
|
Costs
|
|
Financing
|
|
Consolidated,
|
|
|
Results
|
|
(1)
|
|
(2)
|
|
(3)
|
|
(4)
|
|
(5)
|
|
As Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
978.4
|
|
256.8
|
|
(9.3)
|
|
-
|
|
-
|
|
-
|
|
1,225.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
(638.4)
|
|
(173.3)
|
|
(5.2)
|
|
-
|
|
-
|
|
-
|
|
(816.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
340.0
|
|
83.5
|
|
(14.5)
|
|
-
|
|
-
|
|
-
|
|
409.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SGA
|
|
(269.6)
|
|
(81.8)
|
|
3.0
|
|
(13.7)
|
|
(17.1)
|
|
-
|
|
(379.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
|
53.7
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
53.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
124.1
|
|
1.7
|
|
(11.5)
|
|
(13.7)
|
|
(17.1)
|
|
-
|
|
83.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(0.7)
|
|
(0.2)
|
|
(1.2)
|
|
-
|
|
-
|
|
(11.6)
|
|
(13.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
123.4
|
|
1.5
|
|
(12.7)
|
|
(13.7)
|
|
(17.1)
|
|
(11.6)
|
|
69.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
(43.5)
|
|
(0.6)
|
|
4.8
|
|
5.2
|
|
5.9
|
|
16.4
|
|
(11.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
79.9
|
|
0.9
|
|
(7.9)
|
|
(8.5)
|
|
(11.2)
|
|
4.8
|
|
58.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$ 1.00
|
|
0.01
|
|
(0.10)
|
|
(0.11)
|
|
$ (0.14)
|
|
0.06
|
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signet's 2nd quarter guidance
|
|
$0.95-1.05
|
|
N/A
|
|
N/A
|
|
N/A
|
|
$(0.15)(0.13)
|
|
$(0.10)
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percentage of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signet
|
|
Zale
|
|
|
|
|
|
|
|
|
|
Signet
|
|
|
Organic
|
|
Operations
|
|
|
|
|
|
|
|
|
|
Consolidated,
|
|
|
Results
|
|
(1)
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
100.0%
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
(65.2%)
|
|
(67.5%)
|
|
|
|
|
|
|
|
|
|
(66.6%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
34.8%
|
|
32.5%
|
|
|
|
|
|
|
|
|
|
33.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SGA
|
|
(27.6%)
|
|
(31.8%)
|
|
|
|
|
|
|
|
|
|
(31.0%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
|
5.5%
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
4.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
12.7%
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(0.1%)
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
(1.1%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
12.6%
|
|
0.6%
|
|
|
|
|
|
|
|
|
|
5.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
(4.4%)
|
|
(0.2%)
|
|
|
|
|
|
|
|
|
|
(1.0%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
8.2%
|
|
0.4%
|
|
|
|
|
|
|
|
|
|
4.7%
|
(1) |
Includes the 65-day results of Zales from acquisition date to the end of second quarter. |
|
(2) |
Includes deferred revenue adjustments related to acquisition accounting which resulted in a reset of deferred revenue associated with extended service plans previously sold by Zale. Similar to Signets Sterling
Jewelers division, historically, Zale deferred the revenue generated by the sale of lifetime warranties and recognized revenue in relation to the pattern of costs expected to be incurred, which included a profit margin on activities related to the
initial selling effort. In acquisition accounting, deferred revenue is only recognized when a legal performance obligation is assumed by the acquirer. The fair value of deferred revenue is determined based on the future obligations associated with
the outstanding plans at the time of the Acquisition. The acquisition accounting adjustment results in a reduction to the deferred revenue balance from $183.8 million to $93.0 million as of May 29, 2014 as the fair value was determined
through the estimation of costs remaining to be incurred, plus a reasonable profit margin on the estimated costs. Revenues generated from the sale of extended services plans subsequent to the Acquisition are recognized in revenue in a manner
consistent with Signets methodology. Additionally, accounting adjustments include the recognition of a portion of the inventory fair value step-up of $31.3 million and amortization expense of intangibles. |
|
(3) |
During the second quarter, Signet incurred $13.7 million of severance costs related to Zale and other management changes. These costs are included within Signets Other segment. |
|
(4) |
Transaction costs include transaction-related and integration expenses associated with advisor fees for legal, tax, accounting and consulting expenses. These costs are included within Signets Other
segment. |
|
(5) |
Financing costs include those costs to support the new capital structure. Included within the second quarter expense is a one-time write-off of $(0.7) million associated with Signets capitalized debt issuance
costs associated with its prior credit facility agreement. These financing costs were offset by savings associated with Signets lower annual effective tax rate of 29.3%. The reduction in Signets forecasted annual effective tax rate
primarily reflects the benefit of Signets amended capital structure and financing arrangements utilized to fund the acquisition of Zale. |
|
7
Condensed Consolidated Income Statements
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks ended
|
|
26 weeks ended
|
|
|
Aug 2,
|
|
Aug 3,
|
|
Aug 2,
|
|
Aug 3,
|
(in millions, except per share amounts)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$1,225.9
|
|
$880.2
|
|
$2,282.0
|
|
$1,873.8
|
Cost of sales
|
|
(816.9)
|
|
(570.5)
|
|
(1,465.8)
|
|
(1,181.3)
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
409.0
|
|
309.7
|
|
816.2
|
|
692.5
|
Selling, general & administrative expenses
|
|
(379.2)
|
|
(250.5)
|
|
(689.7)
|
|
(537.5)
|
Other operating income, net
|
|
53.7
|
|
46.3
|
|
107.7
|
|
93.3
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
83.5
|
|
105.5
|
|
234.2
|
|
248.3
|
Interest expense, net
|
|
(13.7)
|
|
(1.0)
|
|
(15.5)
|
|
(1.9)
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
69.8
|
|
104.5
|
|
218.7
|
|
246.4
|
Income taxes
|
|
(11.8)
|
|
(37.1)
|
|
(64.1)
|
|
(87.2)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$58.0
|
|
$67.4
|
|
$154.6
|
|
$159.2
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$0.73
|
|
$0.84
|
|
$1.93
|
|
$1.98
|
diluted
|
|
$0.72
|
|
$0.84
|
|
$1.93
|
|
$1.97
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
79.9
|
|
80.3
|
|
79.9
|
|
80.6
|
diluted
|
|
80.2
|
|
80.7
|
|
80.2
|
|
81.0
|
|
|
|
|
|
|
|
|
|
8
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Aug 2,
|
|
Feb 1,
|
|
Aug 3,
|
(in millions, except par value per share amount)
|
|
2014
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$215.0
|
|
$247.6
|
|
$212.9
|
Accounts receivable, net
|
|
1,316.0
|
|
1,374.0
|
|
1,152.1
|
Other receivables
|
|
54.1
|
|
51.5
|
|
43.0
|
Other current assets
|
|
120.5
|
|
87.0
|
|
79.2
|
Deferred tax assets
|
|
2.3
|
|
3.0
|
|
2.3
|
Income taxes
|
|
15.5
|
|
6.5
|
|
12.8
|
Inventories
|
|
2,345.3
|
|
1,488.0
|
|
1,417.7
|
|
|
|
|
|
|
|
Total current assets
|
|
4,068.7
|
|
3,257.6
|
|
2,920.0
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of $831.7,
|
|
627.8
|
|
487.6
|
|
434.9
|
$788.1 and $750.1, respectively
|
|
|
|
|
|
|
Goodwill
|
|
551.9
|
|
26.8
|
|
23.2
|
Intangible assets, net of accumulated amortization of $2.4
|
|
467.6
|
|
|
|
|
Other assets
|
|
133.0
|
|
87.2
|
|
84.2
|
Deferred tax assets
|
|
84.4
|
|
113.7
|
|
127.3
|
Retirement benefit asset
|
|
61.3
|
|
56.3
|
|
50.7
|
|
|
|
|
|
|
|
|
Total assets
|
|
$5,994.7
|
|
$4,029.2
|
|
$3,640.3
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Loans and overdrafts
|
|
$31.2
|
|
$19.3
|
|
$1.7
|
Accounts payable
|
|
235.0
|
|
162.9
|
|
130.3
|
Accrued expenses and other current liabilities
|
|
422.1
|
|
328.5
|
|
259.7
|
Deferred revenue
|
|
211.1
|
|
173.0
|
|
154.6
|
Deferred tax liabilities
|
|
218.9
|
|
113.1
|
|
140.8
|
Income taxes
|
|
55.4
|
|
103.9
|
|
46.9
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
1,173.7
|
|
900.7
|
|
734.0
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
Long-term debt
|
|
1,379.1
|
|
|
|
|
Other liabilities
|
|
235.4
|
|
121.7
|
|
114.6
|
Deferred revenue
|
|
520.4
|
|
443.7
|
|
418.4
|
Deferred tax liabilities
|
|
2.2
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
3,310.8
|
|
1,466.1
|
|
1,267.7
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
Common shares of $0.18 par value: authorized 500 shares, 80.2 shares
|
|
|
|
|
|
|
outstanding (Feb 1, 2014: 80.2 shares outstanding; August 3, 2013: 80.5
|
|
15.7
|
|
15.7
|
|
15.7
|
shares outstanding)
|
|
|
|
|
|
|
Additional paid-in capital
|
|
262.5
|
|
258.8
|
|
249.3
|
Other reserves
|
|
0.4
|
|
0.4
|
|
0.4
|
Treasury shares at cost: 7.0 shares (Feb 1, 2014: 7.0 shares; August 3,
|
|
(367.0)
|
|
(346.2)
|
|
(321.8)
|
2014: 6.7 shares)
|
|
|
|
|
|
|
Retained earnings
|
|
2,935.3
|
|
2,812.9
|
|
2,628.9
|
Accumulated other comprehensive loss
|
|
(163.0)
|
|
(178.5)
|
|
(199.9)
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
2,683.9
|
|
2,563.1
|
|
2,372.6
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$5,994.7
|
|
$4,029.2
|
|
$3,640.3
|
|
|
|
|
|
|
|
9
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
13 weeks ended
|
|
26 weeks ended
|
|
|
Aug 2,
|
|
Aug 3,
|
|
Aug 2,
|
|
Aug 3,
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$58.0
|
|
$67.4
|
|
$154.6
|
|
$159.2
|
Adjustments to reconcile net income to cash provided by operating
|
|
|
|
|
|
|
|
|
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
36.5
|
|
25.5
|
|
64.5
|
|
51.1
|
Amortization related to purchasing accounting adjustments
|
|
(5.9)
|
|
|
|
(5.9)
|
|
|
Pension
|
|
(1.7)
|
|
(1.1)
|
|
(3.4)
|
|
(3.0)
|
Share-based compensation
|
|
4.0
|
|
3.5
|
|
7.2
|
|
6.5
|
Deferred taxation
|
|
(13.6)
|
|
(4.4)
|
|
(4.2)
|
|
(2.5)
|
Excess tax benefit from exercise of share awards
|
|
|
|
(4.5)
|
|
(7.7)
|
|
(4.5)
|
Debt issuance fee amortization and charges
|
|
4.5
|
|
0.1
|
|
5.5
|
|
0.2
|
Other non-cash movements
|
|
0.7
|
|
(0.7)
|
|
0.1
|
|
(0.9)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
(7.9)
|
|
5.2
|
|
58.3
|
|
52.8
|
(Increase) decrease in other receivables and other assets
|
|
(2.3)
|
|
(4.4)
|
|
(4.0)
|
|
(9.9)
|
(Increase) decrease in other current assets
|
|
(23.2)
|
|
(0.5)
|
|
(22.7)
|
|
4.0
|
Decrease (increase) in inventories
|
|
37.0
|
|
(2.7)
|
|
17.1
|
|
(57.4)
|
Decrease in accounts payable
|
|
(24.7)
|
|
(47.6)
|
|
(28.9)
|
|
(29.3)
|
Increase (decrease) in accrued expenses and other liabilities
|
|
23.9
|
|
(5.8)
|
|
(19.0)
|
|
(57.1)
|
Increase (decrease) in deferred revenue
|
|
6.1
|
|
(0.4)
|
|
21.0
|
|
7.6
|
Increase (decrease) in income taxes payable
|
|
19.5
|
|
(15.8)
|
|
(48.5)
|
|
(58.2)
|
Effect of exchange rate changes on currency swaps
|
|
(0.5)
|
|
(0.4)
|
|
(0.1)
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
110.4
|
|
13.4
|
|
183.9
|
|
58.5
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(61.9)
|
|
(30.4)
|
|
(90.0)
|
|
(53.6)
|
Purchase of available-for-sale securities
|
|
(1.2)
|
|
|
|
(1.2)
|
|
|
Proceeds from sale of available-for-sale securities
|
|
1.0
|
|
|
|
1.0
|
|
|
Acquisition of Ultra Stores, Inc, net of cash acquired
|
|
|
|
1.4
|
|
|
|
1.4
|
Acquisition of Zale Corporation, net of cash acquired
|
|
(1,429.2)
|
|
|
|
(1,429.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(1,491.3)
|
|
(29.0)
|
|
(1,519.4)
|
|
(52.2)
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
(14.4)
|
|
(12.1)
|
|
(26.4)
|
|
(21.9)
|
Proceeds from issuance of common shares
|
|
1.0
|
|
0.2
|
|
2.0
|
|
5.2
|
Excess tax benefit from exercise of share awards
|
|
|
|
4.5
|
|
7.7
|
|
4.5
|
Proceeds of long-term debt
|
|
1,398.4
|
|
|
|
1,398.4
|
|
|
Payment of debt issuance costs
|
|
(15.4)
|
|
|
|
(18.4)
|
|
|
Repurchase of common shares
|
|
(11.0)
|
|
(25.0)
|
|
(22.4)
|
|
(75.1)
|
Net settlement of equity based awards
|
|
0.2
|
|
0.1
|
|
(15.1)
|
|
(9.0)
|
Principal payments under capital lease obligations
|
|
(0.2)
|
|
|
|
(0.2)
|
|
|
(Repayment of) proceeds from short-term borrowings
|
|
(11.7)
|
|
(4.0)
|
|
(22.2)
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
1,346.9
|
|
(36.3)
|
|
1,303.4
|
|
(94.6)
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
249.1
|
|
263.7
|
|
247.6
|
|
301.0
|
(Decrease) increase in cash and cash equivalents
|
|
(34.0)
|
|
(51.9)
|
|
(32.1)
|
|
(88.3)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(0.1)
|
|
1.1
|
|
(0.5)
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$215.0
|
|
$212.9
|
|
$215.0
|
|
$212.9
|
|
|
|
|
|
|
|
|
|
10
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