EPS $1.87, up 26.4%; Adjusted EPS $1.95, up
20.4%; Fiscal 2017 Earnings Guidance Reaffirmed
Signet Jewelers Limited (“Signet”) (NYSE: SIG), the world's
largest retailer of diamond jewelry, today announced its results
for the 13 weeks ended April 30, 2016 (“first quarter Fiscal
2017”).
Highlights:
- Diluted earnings per share ("EPS") grew
26.4%. Adjusted EPS grew 20.4%.
- Same store sales up 2.4%. Total sales
$1.6 billion up 3.2%. Total sales at constant exchange rate up
3.9%.
- Annual earnings guidance
reaffirmed.
- Zale acquisition integration
progressing well; synergies remain on-target.
- Repurchased over 1.1 million shares in
first quarter for $125.0 million.
- Conducting strategic evaluation of
credit portfolio; first quarter credit metrics improved
sequentially and in-line with expectations.
Mark Light, Chief Executive Officer of Signet Jewelers said,
“Signet delivered another period of solid performance resulting in
record first quarter EPS and strong operating margin expansion. We
gained profitable market share despite a challenging retail
environment through strong sales of Ever Us and other fashion
jewelry collections as well as select branded bridal. Our 26% EPS
growth was driven by higher same store sales and total sales along
with solid expense management and synergies, leading to 190 basis
points of operating margin expansion. In addition to delivering
earnings results at the top end of our guided range, we achieved
sales growth across real estate formats and in each of our
divisions and our credit metrics showed strong sequential
improvement.
Mr. Light added, "This Sunday marks the two-year anniversary of
the close of our acquisition of Zale. The integration continues to
go extremely well across all aspects of our business. The synergies
we expect to deliver this year will be mostly driven by operating
expense savings as a result of the sound investments and strategic
management of the integration over the past couple of years.
Learnings from our customer segmentation study and business results
since the acquisition have validated our growth assumptions, and we
have an enviable position with the three leading U.S. brands in a
heavily fragmented and growing middle market jewelry industry. We
are pursuing the opportunity to grow square footage both near-term,
driven principally by Kay, and medium-term driven more by
Zales.
“I want to thank all Signet team members for their contributions
to our results. Their superior experience and dedication is the key
to our ability to deliver consistently solid performance in an
ever-changing environment.”
EPS Analysis:
First quarter EPS was $1.87. First quarter Adjusted EPS was
$1.95. Adjusted EPS can be reconciled to EPS as follows:
Adjustments EPS Purchase accounting
Integration Adjusted EPS1 $1.87 $(0.04)
$(0.04) $1.95 1. Throughout this release, Signet uses
adjusted metrics which adjust for purchase accounting and
integration costs in relation to the Zale acquisition and its
integration into Signet. See non-GAAP reconciliation tables.
Adjusted EPS is a non-GAAP measure and is defined as EPS adjusted
for the impact of purchase accounting and integration costs.
Purchase accounting 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 Corporation. Integration costs are severance and consulting
costs associated with organizational changes and information
technology ("I/T") implementations to drive synergies.
Financial Guidance:
13 weeks ended July 30, 2016 (2nd Quarter) Same store sales
1.0% to 2.0% EPS $1.39 to $1.46 Adjustments (purchase
accounting and integration costs) ($0.10) to ($0.08) Adjusted EPS
$1.49 to $1.54 Fiscal 2017 (Annual) Same store sales
2.0% to 3.5% EPS $7.88 to $8.23 Adjustments (purchase
accounting and integration costs) ($0.37) to ($0.32) Adjusted EPS
$8.25 to $8.55 Effective tax rate 27% to 28% Capital
expenditures $315 million to $365 million Net selling square
footage growth 3.0% to 3.5%
Capital expenditures will be driven primarily by new Kay and
Jared stores, store remodels, and I/T to support global
implementations. Most of Signet’s new square footage growth is
slated for real estate channels other than enclosed malls.
Cumulative Net Synergies Fiscal 2017 (Fiscal 2016 plus Fiscal 2017)
$158 million to $175 million Fiscal 2018 (Fiscal 2016
plus Fiscal 2017 plus Fiscal 2018) $225 million to $250 million
Fiscal 2017 Store and Kiosk Changes Net
selling Gross locations Net locations square feet Kay
Jewelers +60 to +70 +55 to +65 +7% to 8% Jared +8 to +10 +5 to +7
+2% to 3% Zales +30 to +35 +15 to +20 +2% to 3% Peoples 0 to +3 ~0
~0 Regional stores in total 0 -45 to -50 -10% to -11% Piercing
Pagoda +35 to +40 +20 to +30 +1% to +2% H.Samuel +12 to +15 +10 to
+12 +1% to +2% Ernest Jones 0 to +3 ~0 ~0
Signet
Total +145 to +176 +55 to +89
+3.0% to +3.5% Strategic Evaluation of Credit
Portfolio
Signet also announced that its Board of Directors has authorized
management to conduct a strategic evaluation of the Company’s
credit portfolio. Goldman Sachs has been engaged as the Company’s
financial advisor in this process. Signet will consider a full
range of options with respect to its credit operations and update
investors as appropriate.
Mr. Light said, “We are always looking for the best ways to
optimize our operating model, and to that end, the Board has
determined to undertake a formal and comprehensive strategic
evaluation of the Company’s credit portfolio. This is a top
priority and as we move through this review, we will remain focused
on executing our operational plans and driving profitable growth in
our business. The primary objective of this process will be to
ensure Signet has an optimized business structure that enhances our
ability to execute against our strategic objectives which in turn
delivers value for shareholders.”
First quarter Fiscal 2017 Sales Highlights:
Signet's total sales were $1,578.9 million, up $48.3 million or
3.2%, compared to $1,530.6 million in the 13 weeks ended May 2,
2015 ("first quarter Fiscal 2016"). Same store sales increased 2.4%
compared to an increase of 3.6% in the first quarter Fiscal 2016,
driven primarily by strong sales in select branded bridal and
diamond fashion jewelry. Ecommerce sales in the first quarter
Fiscal 2017 were $80.1 million, or 5.1% of sales, up $3.2 million,
or 4.2%, compared to $76.9 million in the first quarter Fiscal
2016.
Overall, average transaction value ("ATV") was higher and number
of transactions were lower due to merchandise mix.
- Sterling Jewelers' same store sales
increased 2.3%. ATV increased 5.7% and the number of transactions
decreased 5.6%. This was driven principally by strong sales of
select branded bridal jewelry as well as fashion jewelry and lower
sales of Charmed Memories and low-priced promotional items which
tend to drive more transactions.
- Zale Jewelry's same store sales
increased 2.0%. ATV increased 5.8%, while the number of
transactions decreased 3.7%. This was driven primarily by strong
sales of diamond fashion jewelry as well as branded bridal and
lower sales of low-priced promotional items which tend to drive
more transactions.
- Piercing Pagoda's same store sales
increased 5.6%. ATV increased 13.7%, while the number of
transactions decreased 6.9%. The higher sales were driven
principally by strong sales of gold chains and diamond jewelry.
Transactions declined primarily due to fewer piercings.
- UK Jewelry's same store sales increased
3.4%. ATV increased 4.3% and the number of transactions decreased
1.0%. This was driven principally by strong sales of diamond
jewelry and prestige watches. Transactions declined due primarily
to beads and fashion watches.
Sales change from previous year First quarter
Fiscal 2017
Samestoresales¹
Non-samestoresales, net²
Total sales
at constantexchangerate³
Exchangetranslationimpact
Total
sales
Total sales
(in millions)
Kay 4.7
%
1.7
%
6.4
%
—
%
6.4
%
$ 634.5 Jared (1.7 )% 3.3
%
1.6
%
—
%
1.6
%
$ 300.2 Regional brands (3.6 )% (8.7 )% (12.3
)% —
%
(12.3 )% $ 45.7
Sterling Jewelers division
2.3
%
1.5
%
3.8
%
—
%
3.8
%
$ 980.4 Zales Jewelers 3.1
%
2.2
%
5.3
%
—
%
5.3
%
$ 313.1 Gordon’s Jewelers (9.3
)%
(9.5 )% (18.8 )% —
%
(18.8 )% $ 16.9 Zale US Jewelry 2.4
%
1.3
%
3.7
%
—
%
3.7
%
$ 330.0 Peoples Jewellers (0.5 )% 1.6
%
1.1
%
(6.4 )% (5.3 )% $ 44.7 Mappins (1.6 )% (4.0 )% (5.6 )% (6.2 )%
(11.8 )% $ 6.7 Zale Canada Jewelry (0.6 )% 0.8
%
0.2
%
(6.4 )% (6.2 )% $ 51.4 Zale Jewelry 2.0
%
1.2
%
3.2
%
(0.9 )% 2.3
%
$ 381.4 Piercing Pagoda 5.6
%
1.9
%
7.5
%
—
%
7.5
%
$ 69.0
Zale division 2.5
%
1.4
%
3.9
%
(0.9 )% 3.0
%
$ 450.4 H.Samuel 2.7
%
(0.4 )% 2.3
%
(5.8 )% (3.5 )% $ 72.2 Ernest Jones 4.0
%
1.9
%
5.9
%
(5.8 )% 0.1
%
$ 71.8
UK Jewelry division 3.4
%
0.6
%
4.0
%
(5.7 )% (1.7 )%
$ 144.0 Other segment —
%
46.4
%
46.4 % —
%
46.4
%
$ 4.1 Signet 2.4
%
1.5
%
3.9
%
(0.7 )% 3.2
%
$ 1,578.9 Adjusted Signet3
$
1,583.1 Notes: 1=For stores open for at least 12 months. 2=For
stores not open in the last 12 months. 3=Non-GAAP measure.
First quarter Fiscal 2017 Financial Highlights:
Gross margin was $600.4 million or 38.0% of sales, up 100 basis
points versus first quarter Fiscal 2016. Adjusted gross margin rate
was 38.2%, up 40 basis points from first quarter Fiscal 2016. The
higher adjusted gross margin rate was mostly related to the Zale
division and favorably driven by gross margin synergies such as
sourcing, favorable commodity costs, and leverage on store
occupancy.
- Sterling Jewelers gross margin
increased $16.4 million compared to first quarter Fiscal 2016. The
gross margin rate increased 20 basis points due to commodity
costs.
- Zale gross margin increased $18.7
million, or 320 basis points, compared to first quarter Fiscal
2016. Included in gross margin were purchase accounting adjustments
totaling $4.0 million compared to $15.5 million in prior year.
Adjusted gross margin in the Zale division increased $7.2 million,
or 90 basis points, compared to first quarter Fiscal 2016 as
synergies favorably affected many areas including merchandise
margins, distribution costs, and store operating costs.
- UK Jewelry gross margin decreased $1.2
million compared to prior year first quarter, and the gross margin
rate decreased 30 basis points. The gross margin rate decline was
driven principally by lower sales and merchandise margin deleverage
as a result of currency exchange rates.
Selling, general, and administrative expense ("SGA") was $462.7
million or 29.3% of sales compared to $453.2 million or 29.6% of
sales in first quarter Fiscal 2016. Included in first quarter
Fiscal 2017 SGA are adjustments of $6.6 million.
- First quarter Fiscal 2017 adjusted SGA
was $456.1 million or 28.8% of adjusted sales compared to $450.9
million or 29.3% in the prior year. The favorable 50 basis points
of leverage was due primarily to lower store and corporate payroll
expenses related to organizational realignment as well as lower
advertising expenses offset in part by I/T expenses related to
Signet’s I/T modernization and standardization initiatives.
Other operating income was $74.3 million compared to $63.5
million in the prior year first quarter, up $10.8 million or 17.0%.
The increase was due to the Sterling division’s higher interest
income earned from higher outstanding receivable balances.
In first quarter Fiscal 2017 Signet's operating income was
$212.0 million, or 13.4% of sales, compared to $176.2 million, or
11.5% of sales, in first quarter Fiscal 2016. Included in first
quarter Fiscal 2017 operating income are adjustments of $10.6
million. Adjusted operating income was $222.6 million, or 14.1% of
adjusted sales, compared to $194.0 million, or 12.6% of adjusted
sales in the prior year reflecting 150 basis points of operating
leverage this year.
Operating income, net ($ in millions) First Quarter Fiscal
2017 First Quarter Fiscal 2016 $ % of sales $
% of sales Sterling Jewelers division 198.3 20.2 % 178.2 18.9 %
Zale division1 26.1 5.8 % 15.5 3.5 % UK Jewelry division 1.3 0.9 %
0.5 0.3 % Other2 (13.7 ) nm (18.0 ) nm 1. In the first
quarter Fiscal 2017, Zale division includes net operating loss
impact of $5.3 million for purchase accounting adjustments.
Excluding the impact from accounting adjustments, Zale division's
operating income was $31.4 million or 6.9% of sales. The Zale
division operating income included $18.3 million from Zale Jewelry
or 4.8% of sales and $7.8 million from Piercing Pagoda or 11.3% of
sales. In the first quarter Fiscal 2016, Zale division includes net
operating loss impact of $11.4 million for purchase accounting
adjustments. Excluding the impact from accounting adjustments, Zale
division's operating income was $26.9 million or 6.0% of sales. The
Zale division operating income included $10.4 million from Zale
Jewelry or 2.8% of sales and $5.1 million from Piercing Pagoda or
7.9% of sales. 2. Other includes $5.3 million and $6.4 million of
transaction and integration expenses in the first quarter of Fiscal
2017 and 2016, respectively. Amounts represent advisor fees for
legal, tax, information technology implementations and consulting
services, as well as severance costs. nm not meaningful
Income taxes were $53.4 million, compared to $46.4 million in
first quarter Fiscal 2016, resulting in a first quarter Fiscal 2017
effective tax rate of 26.7%, versus 28.1% in first quarter Fiscal
2016, driven by the anticipated annual mix of pre-tax income by
jurisdiction.
Balance Sheet and Other Highlights
Cash and cash equivalents were $113.0 million as of April 30,
2016 compared to $122.6 million as of May 2, 2015. The lower
cash position was primarily due to share repurchases partially
offset by favorable cash provided by operating activities. During
the first quarter Fiscal 2017, Signet repurchased $125.0 million
worth of its stock, or 1,121,543 shares at an average cost of
$111.45 per share. As of April 30, 2016, there was $760.6
million remaining under Signet's share repurchase authorization
programs.
Sterling division in-house net accounts receivable were $1,654.3
million, up 11.1% compared to $1,489.4 million as of May 2, 2015
driven primarily by a higher in-house credit penetration rate
combined with higher average purchases. The Sterling Jewelers
in-house credit participation rate was 61.7% in first quarter
Fiscal 2017 compared to 60.7% in first quarter Fiscal 2016 which
contributed to an increase in credit sales of 5.6%.
- For the first quarter Fiscal 2017,
finance charge income was $72.8 million and net bad debt was $33.6
million -- a favorable difference of $39.2 million. This was
favorable to the prior year by $2.9 million.
- Non-performing loans and the total
valuation allowance as a percentage of gross receivables were 3.6%
and 6.6%, respectively, at the end of first quarter Fiscal 2017.
Both ratios were down 40 basis points from the prior quarter and up
10 basis points from the prior year first quarter. Sequentially,
fiscal year-end to the first quarter of the following year, the
aging metrics both improved 10 basis points compared to prior year.
Credit team execution and credit marketing initiatives drove
improvement in the credit receivable mix.
Net inventories were $2,512.6 million, up 1.0% compared to
$2,487.8 million at the prior year period. The increase was lower
than sales growth due to strong inventory management.
Long-term debt was $1,311.5 million compared to $1,347.2 million
in the prior year period. Long-term debt is entirely representative
of the financing of the Zale acquisition. Signet's credit programs
are self-funded and therefore not vulnerable to rising interest
rates, as the primary value of the program is in the facilitation
of jewelry sales not the spread on rates.
Signet has a diversified real estate portfolio. Based upon
sales, slightly more than half of Signet's selling square footage
is in enclosed malls and nearly half is in a variety of other real
estate types. On April 30, 2016, Signet had 3,611 stores totaling
5.0 million square feet of selling space. Compared to prior
year-end, store count decreased by 14 stores.
Store count Jan 30, 2016
Openings Closures Apr 30, 2016
Kay 1,129 3 — 1,132 Jared 270 1 — 271
Regional brands 141 — (10 ) 131
Sterling Jewelers division 1,540
4 (10 ) 1,534 Zales 730 5
(5 ) 730 Gordons 59 — (4 ) 55 Peoples 145 — — 145 Mappins 43 — (5 )
38 Total Zale Jewelry 977 5 (14 ) 968 Piercing Pagoda 605
7 (6 ) 606
Zale division
1,582 12 (20 )
1,574 H.Samuel 301 — — 301 Ernest Jones 202 —
— 202
UK Jewelry division
503 — — 503
Signet 3,625 16
(30 ) 3,611
Quarterly Dividend:
Reflecting the Board's confidence in the strength of the
business, Signet's ability to invest in growth initiatives, and the
Board's commitment to building long-term shareholder value, a
quarterly cash dividend of $0.26 per Signet Common Share was
declared for the second quarter of Fiscal 2017 payable
on August 26, 2016 to shareholders of record on July
29, 2016, with an ex-dividend date of July 27, 2016.
Conference Call:
A conference call is scheduled today at 8:30 a.m. ET and a
simultaneous audio webcast and slide presentation are available at
www.signetjewelers.com. The slides are available to be downloaded
from the website. The call details are:
Dial-in: 1-647-788-4901
Conference ID: 1710201
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 world's largest retailer of
diamond jewelry. Signet operates approximately 3,600 stores
primarily under the name brands of Kay Jewelers, Zales, Jared The
Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing
Pagoda. Further information on Signet is available at
www.signetjewelers.com. See also www.kay.com, www.zales.com,
www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk,
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 customer credit, seasonality of Signet's
business, financial market risks, deterioration in customers’
financial condition, exchange rate fluctuations, changes in
Signet's credit rating, 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
acquisition of Zale Corporation on relationships, including with
employees, suppliers, customers and competitors, 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 2016 Annual Report on Form 10-K filed
with the SEC on March 24, 2016. Signet undertakes no obligation to
update or revise any forward-looking statements to reflect
subsequent events or circumstances, except as required by law.
The below tables reflect the impact of costs associated with the
acquisition of Zale Corporation. Management finds the information
useful to analyze the results of the business excluding these items
in order to appropriately evaluate the performance of the business
without the impact of significant and unusual items. Management
views acquisition-related impacts as events that are not
necessarily reflective of operational performance during a period.
In particular, management believes the consideration of measures
that exclude such expenses can assist in the comparison of
operational performance in different periods which may or may not
include such expenses.
Non-GAAP Reconciliation for the first quarter ended April 30,
2016 (in mil. of $ except per share data) Signet
PurchaseAccounting1
IntegrationCosts2
Adjusted Signet Sales 1,578.9 100.0
%
(4.2 ) — 1,583.1 100.0
%
Cost of sales (978.5 ) (62.0 )% 0.2 —
(978.7 ) (61.8 )% Gross margin 600.4 38.0
%
(4.0 ) — 604.4 38.2
%
Selling, general and administrative expenses (462.7 ) (29.3 )% (1.3
) (5.3 ) (456.1 ) (28.8 )% Other operating income, net 74.3
4.7
%
— — 74.3 4.7
%
Operating income 212.0 13.4
%
(5.3 ) (5.3 ) 222.6 14.1
%
Interest expense, net (11.8 ) (0.7 )% —
— (11.8 ) (0.8 )% Income before income taxes
200.2 12.7
%
(5.3 ) (5.3 ) 210.8 13.3
%
Income taxes (53.4 ) (3.4 )% 2.0 2.0
(57.4 ) (3.6 )% Net income 146.8
9.3
%
(3.3 ) (3.3 ) 153.4 9.7
%
Earnings per share – diluted 1.87 (0.04
) (0.04 ) 1.95 1.
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 Corporation.
Similar to the Sterling Jewelers division, historically, Zale
Corporation 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
$93.3 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
Signet’s methodology. Additionally, accounting adjustments include
the amortization of acquired intangibles. 2. Integration costs are
severance and consulting costs associated with organizational
changes and I/T implementations to drive synergies.
Non-GAAP Reconciliation for the first quarter ended May 2, 2015
(in mil. of $ except per share data) Signet
PurchaseAccounting1
TransactionCosts2
Adjusted Signet Sales 1,530.6 100.0
%
(8.6 ) — 1,539.2 100.0
%
Cost of sales (964.7 ) (63.0 )% (6.9 ) —
(957.8 ) (62.2 )% Gross margin 565.9 37.0
%
(15.5 ) — 581.4 37.8
%
Selling, general and administrative expenses (453.2 ) (29.6 )% 4.1
(6.4 ) (450.9 ) (29.3 )% Other operating income, net 63.5
4.1
%
— — 63.5 4.1
%
Operating income 176.2 11.5
%
(11.4 ) (6.4 ) 194.0 12.6
%
Interest expense, net (11.0 ) (0.7 )% —
— (11.0 ) (0.7 )% Income before income taxes
165.2 10.8
%
(11.4 ) (6.4 ) 183.0 11.9
%
Income taxes (46.4 ) (3.0 )% 4.0 2.4
(52.8 ) (3.4 )% Net income 118.8
7.8
%
(7.4 ) (4.0 ) 130.2 8.5
%
Earnings per share – diluted 1.48 (0.09
) (0.05 ) 1.62 1.
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 Corporation.
Similar to the Sterling Jewelers division, historically, Zale
Corporation 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 resulted in a
reduction to the deferred revenue balance from $183.8 million to
$93.3 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
Signet’s methodology. Additionally, accounting adjustments include
the recognition of a portion of the inventory fair value step-up of
$32.2 million and amortization of acquired intangibles. 2.
Transaction costs include transaction-related and integration
expenses associated with advisor fees for legal, tax, accounting
and consulting expenses. These costs are included within Signet’s
Other segment.
Condensed Consolidated Income
Statements(Unaudited)
13 weeks ended (in millions, except per share
amounts)
April 30, 2016 May 2, 2015
Sales 1,578.9 1,530.6 Cost of sales (978.5 )
(964.7 )
Gross margin 600.4 565.9 Selling,
general and administrative expenses (462.7 ) (453.2 ) Other
operating income, net 74.3 63.5
Operating income 212.0 176.2 Interest expense,
net (11.8 ) (11.0 )
Income before income taxes
200.2 165.2 Income taxes (53.4 ) (46.4
)
Net income 146.8 118.8 Earnings per share:
Basic $ 1.87 $ 1.49 Diluted $ 1.87 $ 1.48 Weighted average common
shares outstanding: Basic 78.6 80.0 Diluted 78.7 80.2 Dividends
declared per share $ 0.26 $ 0.22
Condensed Consolidated Balance
Sheets(Unaudited)
(in millions, except par value per share
amount)
April 30, 2016 January 30, 2016
May 2, 2015 Assets Current assets: Cash and cash
equivalents 113.0 137.7 122.6 Accounts receivable, net 1,689.3
1,756.4 1,499.9 Other receivables 63.7 84.0 56.5 Other current
assets 161.2 152.6 130.6 Income taxes 1.4 3.5 5.3 Inventories
2,512.6 2,453.9 2,487.8
Total current assets 4,541.2
4,588.1 4,302.7 Non-current assets: Property, plant
and equipment, net of accumulated depreciation of $993.6, $949.2
and $848.8, respectively 725.7 727.6 668.7 Goodwill 519.7 515.5
520.7 Intangible assets, net 430.4 427.8 445.9 Other assets 157.2
154.6 132.1 Deferred tax assets — — 2.2 Retirement benefit asset
53.5 51.3 38.1
Total assets 6,427.7 6,464.9
6,110.4 Liabilities and Shareholders’ equity Current
liabilities: Loans and overdrafts 110.1 57.7 43.0 Accounts payable
255.7 269.1 256.5 Accrued expenses and other current liabilities
409.5 498.3 420.5 Deferred revenue 261.4 260.3 244.0 Income taxes
19.1 65.7 28.3
Total current liabilities 1,055.8
1,151.1 992.3 Non-current liabilities: Long-term debt
1,311.5 1,321.0 1,347.2 Other liabilities 229.7 230.5 224.4
Deferred revenue 644.4 629.1 597.3 Deferred tax liabilities 88.1
72.5 57.3
Total liabilities 3,329.5 3,404.2
3,218.5 Commitments and contingencies Shareholders’
equity: Common shares of $0.18 par value: authorized 500 shares,
78.4 shares outstanding (January 30, 2016: 79.4 outstanding; May 2,
2015: 80.2 outstanding) 15.7 15.7 15.7 Additional paid-in capital
275.9 279.9 265.2 Other reserves 0.4 0.4 0.4 Treasury shares at
cost: 8.8 shares (January 30, 2016: 7.8 shares; May 2, 2015: 7.0
shares) (620.4 ) (495.8 ) (393.2 ) Retained earnings 3,665.1
3,534.6 3,238.1
Accumulated other comprehensive loss
(238.5 ) (274.1 ) (234.3
) Total shareholders’ equity 3,098.2
3,060.7 2,891.9 Total liabilities and
shareholders’ equity 6,427.7 6,464.9
6,110.4
Condensed Consolidated Statements of
Cash Flows(Unaudited)
13 weeks ended (in millions)
April
30, 2016 May 2, 2015 Cash flows from operating
activities Net income 146.8 118.8 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 45.6 41.8
Amortization of unfavorable leases and
contracts
(4.9 ) (8.8 ) Pension benefit (0.4 ) — Share-based compensation 3.8
3.3 Deferred taxation 15.4 6.9 Excess tax benefit from exercise of
share awards (1.3 ) (5.1 ) Amortization of debt discount and
issuance costs 0.9 0.9 Other non-cash movements (0.3 ) 2.2 Changes
in operating assets and liabilities: Decrease in accounts
receivable 67.4 67.7 Decrease in other receivables and other assets
18.2 5.8 Increase in other current assets (3.5 ) (1.7 ) Increase in
inventories (34.8 ) (43.7 ) Decrease in accounts payable (12.4 )
(19.0 ) Decrease in accrued expenses and other liabilities (90.8 )
(71.1 ) Increase in deferred revenue 13.3 27.7 Decrease in income
taxes payable (48.1 ) (57.9 ) Pension plan contributions
(0.5 ) (0.8 )
Net cash provided by operating
activities 114.4 67.0
Investing activities Purchase of property, plant and equipment
(39.3 ) (42.9 ) Purchase of available-for-sale securities (0.8 )
(1.4 ) Proceeds from sale of available-for-sale securities
1.2 3.5
Net cash used in investing
activities (38.9 ) (40.8
) Financing activities Dividends paid (17.5 ) (14.4 )
Proceeds from issuance of common shares 0.3 0.1 Excess tax benefit
from exercise of share awards 1.3 5.1 Repayments of term loan (7.5
) (5.0 ) Proceeds from securitization facility 696.5 638.2
Repayments of securitization facility (696.5 ) (638.2 ) Proceeds
from revolving credit facility 99.0 — Repayments of revolving
credit facility (55.0 ) — Repurchase of common shares (125.0 )
(19.1 ) Net settlement of equity based awards (4.6 ) (8.7 )
Principal payments under capital lease obligations (0.1 ) (0.3 )
Proceeds from (repayment of) short-term borrowings 6.0
(55.0 )
Net cash used in financing activities
(103.1 ) (97.3 ) Cash and
cash equivalents at beginning of period 137.7 193.6 Decrease in
cash and cash equivalents (27.6 ) (71.1 ) Effect of exchange rate
changes on cash and cash equivalents 2.9 0.1 Cash and cash
equivalents at end of period 113.0 122.6
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160526005269/en/
Signet JewelersInvestors:James Grant, VP Investor Relations,
+1-330-668-5412orMedia:David Bouffard, VP Corporate Affairs,
+1-330-668-5369
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