EXHIBIT 99.1
[WHITEHALL LOGO] NEWS RELEASE
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For: Whitehall Jewellers, Inc.
Contact: John R. Desjardins
Executive Vice President
312-762-9751
WHITEHALL JEWELLERS, INC. REPORTS FIRST QUARTER RESULTS
Chicago, Illinois, May 27, 2004 -- Whitehall Jewellers, Inc. (NYSE:
JWL) today reported financial results for the first quarter ended April 30,
2004.
For the quarter ended April 30, 2004, Whitehall posted a net loss of
$3.7 million or $0.27 per share compared to net loss of $2.8 million or $0.20
per share for the same period a year ago. As previously disclosed in its Form
10-K filed on April 15, 2004, the Company had recorded a litigation accrual of
$8.6 million for the consolidated Capital Factors actions and the United States
Attorney and Securities and Exchange Commission investigations. Since that time,
the Company has engaged in additional settlement negotiations relating to these
matters. In light of developments in these discussions, the Company has recorded
an additional accrual in the quarter ended April 30, 2004 in the amount of
$350,000. In addition, professional fees increased by $1.7 million over the
first quarter last year. This increase was incurred primarily in connection with
the consolidated Capital Factors actions and the related investigations by the
United States Attorney and the Securities and Exchange Commission. The
additional litigation accrual plus the increase in professional fees amounted to
$2.0 million before income taxes. Net sales for the quarter ended April 30, 2004
increased 5.6% to $73.0 million compared to $69.1 million in the first quarter
last year. Comparable store sales increased 3.3% in the first quarter compared
to a decrease of 8.7% last year.
Hugh M. Patinkin, Chairman and Chief Executive Officer, commented, "At
the beginning of the year we began to introduce a number of programs which are
designed to improve merchandise gross margin. We are pleased with the progress
we made in implementing these programs."
Mr. Patinkin continued, "We are in the process of evaluating our future
store expansion plans. We currently anticipate increasing our rate of new store
growth in 2005 and 2006."
Mr. Patinkin continued, "We continue to cooperate with the United
States Attorney and the Securities and Exchange Commission in their
investigations related to the Capital Factors actions. We are also actively
recruiting for the newly created position of Chief Operating Officer as well as
for a new Executive Vice President of Merchandise."
Today at 9:00 AM EDT, the Company will host a conference call to review
results for the quarter ended April 30, 2004. To participate in the call, please
dial 888-789-0150. This call will also be broadcast live on the Internet at:
http://www.whitehalljewellers.com.
Whitehall Jewellers, Inc. is a leading national specialty retailer of
fine jewelry, currently operating 385 stores in 38 states. The Company operates
stores in regional and superregional shopping malls under the names Whitehall
Co. Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers. The Company opened 5
stores during the first quarter. The Company plans to open one additional store
during the balance of fiscal 2004.
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
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, and shareholder and other civil
litigation 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.
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- tables to follow -
Whitehall Jewellers, Inc.
Statements of Operations
For the three months ended April 30, 2004 and 2003
(unaudited)
(in thousands, except per share data)
Three months ended
April 30, April 30,
2004 2003
--------- ----------
Net sales $ 73,028 $ 69,149
Cost of sales (including buying and occupancy
expenses) 48,752 46,038
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Gross profit 24,276 23,111
Selling, general and administrative expenses 27,036 26,135
Professional fees and other charges 2,653 635
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(Loss) from operations (5,413) (3,659)
Interest expense 905 908
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(Loss) before income taxes (6,318) (4,567)
Income tax (benefit) (2,622) (1,780)
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Net (loss) $ (3,696) $ (2,787)
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Basic earnings per share:
Net (loss) $ (0.27) $ (0.20)
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Weighted average common share and common
share equivalents 13,930 14,206
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Diluted earnings per share:
Net (loss)
$ (0.27) $ (0.20)
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Weighted average common share and common
share equivalents 13,930 14,206
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Whitehall Jewellers, Inc.
Balance Sheets
(unaudited, in thousands)
April 30, January 31, April 30
2004 2004 2003
-------- ---------- --------
ASSETS
Current Assets:
Cash $ 1,432 $ 1,901 $ 1,302
Accounts receivable, net 1,078 2,544 719
Merchandise inventories 197,990 206,146 205,020
Current income tax benefit 4,591 2,294 2,251
Prepaid expenses 837 875 2,281
Deferred income taxes, net 5,791 5,712 2,638
Deferred financing costs 278 261 510
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Total current assets 211,997 219,733 214,721
Property and equipment, net 60,032 60,948 63,655
Goodwill 5,662 5,662 5,662
Deferred financing costs 690 654 161
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Total assets $278,381 $286,997 $284,199
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolver loans $104,849 $ 80,340 $ 88,559
Current portion of
long-term debt 640 640 3,000
Accounts payable 32,289 60,538 49,088
Customer deposits 3,587 3,601 3,635
Accrued payroll 4,542 4,457 4,583
Other accrued expenses 23,472 24,479 12,581
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Total current liabilities 169,379 174,055 161,446
Subordinated debt -- -- 640
Deferred income tax 3,352 3,639 3,753
Other long-term liabilities 3,534 3,535 3,216
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Total liabilities 176,265 181,229 169,055
Commitments and contingencies
Stockholders' equity:
Common stock 18 18 18
Class B common stock -- -- --
Additional paid-in capital 106,122 106,091 105,755
Accumulated earnings 35,614 39,311 45,238
Less: Treasury stock, at cost
(4,119,010, 4,134,143 and
3,817,742 shares,
respectively) (39,638) (39,652) (35,867)
-------- -------- --------
Total stockholders' equity 102,116 105,768 115,144
-------- -------- --------
Total liabilities and
stockholders' equity $278,381 $286,997 $284,199
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