Exhibit 99.1
[WHITEHALL GRAPHIC] NEWS RELEASE
Whitehall Jewellers, Inc.
================================================================================
For: Whitehall Jewellers, Inc.
Contact: John R. Desjardins
Executive Vice President,
Chief Financial Officer
FOR IMMEDIATE RELEASE TX: 312/762-9751
WHITEHALL JEWELLERS, INC. REPORTS THIRD QUARTER FINANCIAL RESULTS
------------------------
NOVEMBER COMP STORE SALES UP 9.1%; DECEMBER COMP STORE
SALES UP MID-SINGLE DIGITS TO DATE
COMPANY RESTATES RESULTS FOR PREVIOUS PERIODS PRIMARILY TO REFLECT INVENTORY
VALUATION ADJUSTMENTS RELATED TO VENDOR ALLOWANCES AND SUBSTANDARD INVENTORY
-----------------------
Chicago, Illinois, December 22, 2003 -- Whitehall Jewellers, Inc. (NYSE:JWL)
today reported financial results for the third quarter ended October 31, 2003.
Third Quarter Results
The Company reported total third quarter sales of $66.2 million, compared to
$61.8 million for the third quarter 2002. Net loss for the third fiscal quarter
of 2003 was $7.4 million, or $0.53 per share, compared to net loss of $5.1
million, or $0.35 per share, for the same period one-year ago. Comparable store
sales increased 3.9% in the third quarter.
For the nine-month period ended October 31, 2003, the Company reported sales of
$208.1 million, compared to $212.7 million last year. Net loss was $13.0
million, or $0.92 per share, versus net loss of $4.8 million, or $0.33 per
share, for the same period a year ago. Comparable store sales decreased 4.5% in
the nine-month period.
Third quarter results were adversely impacted by a number of items, including
approximately $0.04 per share for increased professional fees primarily in
connection with the Capital Factors lawsuit and related SEC and US Attorney
investigations; approximately $0.07 per share for a change in the estimated
annual effective income tax rate; approximately $0.03 per share for a sales tax
accrual adjustment; approximately $0.04 per share for higher than estimated
insurance costs; and approximately $0.03 per share related to increased
advertising expenses which, in accordance with new accounting guidelines (EITF
02-16), may no longer be offset by certain vendor allowances. Complete financial
statements for the third quarter, ended October 31, 2003, are included in the
Company's Form 10-Q, filed today with the SEC.
Hugh M. Patinkin, Chairman and Chief Executive Officer, commented, "Although the
third quarter was a challenging period for the Company, we are pleased that
total and comparable store sales experienced solid increases in the quarter,
driven largely by the new sales initiatives announced earlier this year. Further
evidence that our sales programs have firmly taken hold is an increase in
November comparable store sales of 9.1 percent, primarily due to the success of
a new two-day
event. Sales growth has continued in December, as strong holiday season demand
has generated comparable store sales that are up in the mid-single digits as a
percentage through December 21st. In 2004, we plan to continue to focus on our
new sales programs. We do, however, expect to continue to incur substantial
professional fees associated with the ongoing Capital Factors lawsuit and
related matters."
Mr. Patinkin continued, "We continue to cooperate fully with the SEC and US
Attorney in connection with their respective investigations and are taking
significant steps to enhance our internal controls. We are committed to
achieving the highest standards of corporate governance and have adopted more
stringent guidelines and policies for our business. This will be a continuing
focus and further actions will be implemented in 2004, including strengthening
our management team. We will soon commence searches for a Chief Operating
Officer, a new EVP of Merchandising and a General Counsel, and we have already
begun a search for an internal audit director who will report directly to the
audit committee of the board."
The Company opened two stores and closed one in the third quarter.
Prior Period Restatements
The Company also announced that it has restated its financial statements for
fiscal 2000, 2001 and 2002, including the 2002 quarters then ended, and the
first two quarters ended July 31, 2003. The restatements primarily reflect the
Company's revision of the accounting treatment for vendor allowances associated
with the Company's return of certain substandard inventory to vendors, as well
as certain previously unrecorded adjustments in earlier periods in fiscal 2003.
The impact of these restatements will decrease Whitehall's earnings per diluted
share by $0.01 for fiscal 2000, $0.03 for fiscal 2001, $0.02 for fiscal 2002 and
decrease the loss by $0.01 for the six-month period ended July 31, 2003.
The impact of the restatements are provided in the Company's Form 10-Q for the
period ended October 31, 2003, filed today with the SEC. The Company expects to
file amended Form 10-K and Form 10-Q reports with respect to the restatements
discussed above as soon as practicable.
Management will discuss third quarter results during a conference call this
morning at 9:00 a.m. EST. Call Susan Weber to reserve a space on the call or
dial in to the conference call at 1-877-888-7019. This call will also be
broadcast live on the Internet at www.whitehalljewellers.com.
ABOUT WHITEHALL JEWELLERS
Whitehall Jewellers, Inc. is a leading national specialty retailer of fine
jewelry, operating 384 stores in 38 states as of October 31, 2003. The Company
operates stores in regional and superregional shopping malls under the names
Whitehall Co. Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers.
SAFE HARBOR STATEMENT
This release contains certain forward-looking statements (as such term is
defined in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934) and information relating to the Company that
are based on the current beliefs of management of the Company as well as
assumptions made by and information currently available to management including
statements related to the markets for our products, general trends and trends in
our operations or financial results, plans, expectations, estimates and beliefs.
In addition, when used in this release, the words "anticipate," "believe,"
"estimate," "expect," "intend," "plan," "predict" and similar expressions and
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their variants, as they relate to the Company or our management, may identify
forward-looking statements. Such statements reflect our judgment as of the date
of this release with respect to future events, the outcome of which is subject
to certain risks, including the factors described below, which may have a
significant impact on our business, operating results or financial condition.
Investors are cautioned that these forward-looking statements are inherently
uncertain. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results or outcomes may
vary materially from those described herein. Whitehall Jewellers undertakes no
obligation to update forward-looking statements. The following factors, among
others, may impact forward-looking statements contained in this release: (1) a
change in economic conditions or the financial markets which negatively impacts
the retail sales environment and reduces discretionary spending on goods such as
jewelry; (2) reduced levels of mall traffic caused by economic or other factors;
(3) our ability to execute our business strategy and the related effects on
comparable store sales and other results; (4) the extent and results of our
store expansion strategy and associated occupancy costs, and access to funds for
new store openings; (5) the high degree of fourth quarter seasonality of our
business; (6) the extent and success of our marketing and promotional programs;
(7) personnel costs and the extent to which we are able to retain and attract
key personnel; (8) the effects of competition; (9) the availability and cost of
consumer credit; (10) relationships with suppliers; (11) our ability to maintain
adequate information systems capacity and infrastructure; (12) our leverage and
cost of funds and changes in interest rates that may increase such costs; (13)
our ability to maintain adequate loss prevention measures; (14) fluctuations in
raw material prices, including diamond, gem and gold prices; (15) developments
relating to the consolidated Capital Factors actions and the related SEC and
U.S. Attorney's office investigations, including the impact of such developments
on our results of operations and financial condition and relationship with our
lenders or with our vendors; (16) regulation affecting the industry generally,
including regulation of marketing practices; (17) the successful integration of
acquired locations and assets into our existing operations; and (18) the risk
factors identified from time to time in our filings with the SEC.
- tables to follow -
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Whitehall Jewellers, Inc.
Statements of Operations
for the three months and nine months ended October 31, 2003 and 2002
(unaudited, in thousands, except for per share data)
Three months ended Nine months ended
October 31, October
October 2002 October 31, 2002
31, 2003 (Restated) 31, 2003 (Restated)
-------- ----------- --------- ----------
Net sales $ 66,179 $61,831 $208,060 $212,662
Cost of sales (including buying
and occupancy expenses) 45,299 43,069 139,877 140,361
-------- ------- -------- --------
Gross profit 20,880 18,762 68,183 72,301
Selling, general and
administrative expenses 30,541 25,553 84,534 76,431
-------- ------- -------- --------
Loss from operations (9,661) (6,791) (16,351) (4,130)
Interest expense 869 1,168 3,341 3,291
-------- ------- -------- --------
Loss before income taxes (10,530) (7,959) (19,692) (7,421)
Income tax benefit (3,122) (2,849) (6,694) (2,658)
-------- ------- -------- --------
Net loss $ (7,408) $(5,110) $(12,998) $(4,763)
======== ======= ======== =======
Basic loss per share:
Net loss $ (0.53) $ (0.35) $ (0.92) $ (0.33)
======== ======= ======== =======
Weighted average common share
and common share equivalents 14,051 14,475 14,156 14,637
======== ======= ======== =======
Diluted loss per share:
Net loss $ (0.53) $ (0.35) $ (0.92) $ (0.33)
======== ======= ======== =======
Weighted average common share
and common share equivalents
14,051 14,475 14,156 14,637
======== ======= ======== =======
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Whitehall Jewellers, Inc.
Balance Sheets
(unaudited, in thousands except for share data)
January 31, October
October 31, 2003 31, 2002
2003 (Restated) (Restated)
----------- ----------- ----------
ASSETS
Current Assets:
Cash $ 1,251 $ 2,048 $ 1,917
Accounts receivable, net 497 1,621 1,596
Merchandise inventories 229,393 196,694 219,186
Other current assets 1,558 1,470 1,552
Current income tax benefit 7,122 --- 3,649
Deferred financing costs 261 510 510
Deferred income taxes, net 2,577 2,627 2,674
--------- ---------- ---------
Total current assets 242,659 204,970 231,084
Property and equipment, net 62,002 61,634 62,686
Goodwill 5,662 5,662 5,662
Deferred financing costs 683 213 341
--------- ---------- ---------
Total assets $311,006 $ 272,479 $299,773
========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolver loan $107,104 $ 94,490 $ 98,404
Current portion of long-term debt 640 4,500 6,000
Accounts payable 71,169 26,784 63,624
Customer deposits 4,771 3,454 3,789
Accrued payroll 4,778 3,282 4,099
Income taxes payable --- 3,303 ---
Other accrued expenses 14,236 11,380 12,370
--------- ---------- ---------
Total current liabilities 202,698 147,193 188,286
Long-term debt --- 640 640
Deferred income taxes, net 3,442 3,607 2,191
Other long-term liabilities 3,446 3,138 3,018
--------- ---------- ---------
Total liabilities 209,586 154,578 194,135
--------- ---------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock 18 18 18
Class B common stock --- --- ---
Additional paid-in capital 106,041 105,795 105,635
Accumulated earnings 35,027 48,025 33,568
--------- ---------- ---------
141,086 153,838 139,221
--------- ---------- ---------
Less:
Treasury stock, at cost (4,135,626,
3,822,637 and 3,629,148 shares,
respectively) (39,666) (35,937) (33,583)
--------- ---------- ---------
Total stockholders' equity, net 101,420 117,901 105,638
--------- ---------- ---------
Total liabilities and
stockholders' equity $311,006 $ 272,479 $299,773
========= ========== =========
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The following table sets forth the effects of the restatement adjustments
discussed above on the Statements of Operations for each of the two quarters
ended July 31, 2003
(unaudited, in thousands, except per share data):
Three months Three months Six months
ended ended ended
April 30, 2003 July 31, 2003 July 31, 2003
-------------- ------------- -------------
Net loss
As previously reported $ (2,748) $ (2,871) $ (5,619)
Reduced/(additional) expense:
Merchandise inventory
valuation adjustments (4) 6 2
Software development costs
and amortization 27 78 105
Vendor advertising and
promotion credits (87) 27 (60)
Tax effects of items above 25 (43) (18)
-------- -------- --------
As restated $ (2,787) $ (2,803) $ (5,590)
======== ======== ========
Basic loss per share
As previously reported $ (0.19) $ (0.20) $ (0.40)
As restated $ (0.20) $ (0.20) $ (0.39)
Weighted average common
Shares 14,206 14,215 14,210
Diluted loss per share
As previously reported $ (0.19) $ (0.20) $ (0.40)
As restated $ (0.20) $ (0.20) $ (0.39)
Weighted average common
shares and common share
equivalents 14,206 14,215 14,210
See accompanying notes regarding the restatements.
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The following table sets forth the effects of the restatement adjustments
discussed above on the Statements of Operations for each of the three months
ended April 30, 2002, July 31, 2002, and October 31, 2002, and the six months
and nine months ended July 21, 2002 and October 31, 2002, respectively
(unaudited, in thousands, except per share data):
2002
--------------------------------------------------------
For the three months Six Three Nine
ended months months months
--------------------------------------------------------
April 30, July 31, July 31, October 31, October 31,
2002 2002 2002 2002 2002
----------------------------------------------------------
Net income (loss)
As previously reported $ 369 $ 114 $ 483 $(5,039) $(4,556)
Reduced/(additional)
expense:
Merchandise inventory
valuation adjustments
(118) (95) (213) (110) (323)
Tax effects of items
Above 42 35 77 39 116
-------------------------------------------------------
As restated $ 293 $ 54 $ 347 $(5,110) $(4,763)
=======================================================
Basic earnings (loss) per
share:
As previously reported $ 0.03 $ 0.01 $ 0.03 $ (0.35) $ (0.31)
As restated $ 0.02 $ 0.00 $ 0.02 $ (0.35) $ (0.33)
Weighted average common
Shares 14,667 14,807 14,719 14,475 14,637
Diluted earnings (loss) per share:
As previously reported $ 0.02 $ 0.01 $ 0.03 $ (0.35) $ (0.31)
As restated $ 0.02 $ 0.00 $ 0.02 $ (0.35) $ (0.33)
Weighted average common
shares and common share
equivalents 15,382 15,594 15,476 14,475 14,637
See accompanying notes regarding the restatements.
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The following table sets forth the effects of the restatement adjustments
discussed above on the Statements of Operations for each of the three years
ended January 31, 2003
(unaudited, in thousands, except per share data):
Statement of Operations for the
Years ended January 31
-------------------------------
2003 2002 2001
-------------------------------
Net income
As previously reported $ 9,907 $10,080 $ 7,306
Reduced/(additional) expense:
Merchandise
inventory valuation adjustments
(332) (653) (180)
Tax adjustments for effects of items
above 119 227 67
------------------------------
As restated $ 9,694 $ 9,654 $ 7,193
===============================
Basic earnings per share:
As previously reported $ 0.68 $ 0.69 $ 0.47
As restated $ 0.67 $ 0.66 $ 0.46
Weighted average common shares
14,545 14,584 15,617
Diluted earnings per share:
As previously reported $ 0.66 $ 0.69 $ 0.46
As restated $ 0.64 $ 0.66 $ 0.45
Weighted average common shares and
common share equivalents
15,038 14,685 15,964
See accompanying notes regarding the restatements.
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PRIOR PERIOD RESTATEMENTS
In December 2003, the Company restated previously issued financial statements to
record adjustments resulting from various accounting matters described below.
The Company restated financial statements for the three-month periods ended
April 30, 2003 and 2002, the three and six month periods ended July 31, 2003 and
2002 and the three-month and nine-month periods ended October 31, 2002.
Adjustments to restate the financial statements are summarized into the
following four categories:
A. Merchandise inventory valuation adjustments
In prior periods, the Company entered into certain contemporaneous
agreements to both purchase merchandise inventory and return substandard
merchandise inventory to vendors, outside of the normal contractual return
privileges. Additionally in fiscal 2001, the Company entered into a barter
arrangement for approximately $250,000 of merchandise inventory that
involved the exchange of inventory for barter credits. These arrangements
involved receiving vendor allowances at an amount greater than the
merchandise inventory fair market value in exchange for purchases of
merchandise inventory at a date in the future. The Company has restated
the financial statements to write down the substandard merchandise
inventory to fair market value and record the consideration received in
excess of the fair market value of the substandard inventory as a vendor
allowance, which benefits cost of sales in the inventory period.
In periods prior to February 1, 2000, the Company had written down
substandard merchandise inventory to fair market value and did not
exchange such inventory with vendors.
B. Software development costs and amortization
The financial statements have been restated to capitalize certain costs
associated with software development that were expensed in the six-months
ended July 31, 2003, in accordance with Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". In addition, the Company amortized certain capitalized
software development costs prior to the project being placed in service
and has reversed such amortization in the restated financial statements.
C. Vendor advertising/promotion credits
Certain vendor consideration, primarily related to co-op advertising and
program sponsorships, was received in the six-months ended July 31, 2003,
which should have reduced the carrying value of merchandise inventory, in
accordance with Emerging Issues Task Force (EITF) 02-16. The adjustments
reflected in the Statement of Operations relate to reversing the
reimbursements received and recording the benefit as an adjustment of the
inventory carrying value, which benefits cost of sales in the inventory
turnover period.
D. Tax effect of the adjustments
As a result of the restatement adjustments, income tax provisions were
revised in the Statement of Operations.
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For Investor Relations info: investorrelations@whji.com
Internet Website: www.whitehalljewellers.com
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