EXHIBIT 99.1
[WHITEHALL JEWELLERS, INC. LOGO] NEWS RELEASE
For: Whitehall Jewellers, Inc.
Contact: John R. Desjardins
Executive Vice President,
Chief Financial Officer
TX: 312/762-9751
U.S. ATTORNEY'S OFFICE WILL NOT FILE CHARGES AGAINST WHITEHALL JEWELLERS AND
COMPANY REACHES SETTLEMENT OF CAPITAL FACTORS-RELATED CIVIL LITIGATION
Chicago, Illinois, September 28, 2004 - Whitehall Jewellers, Inc.
(NYSE:JWL) has been advised by the U.S. Attorney's Office for the Eastern
District of New York that the U.S. Attorney will not file any charges against
the Company. Whitehall has also reached a settlement of the consolidated Capital
Factors actions currently pending in New York State Supreme Court.
As previously announced, the U.S. Attorney's Office for the Eastern
District of New York has been conducting a criminal investigation regarding
matters that include those alleged in the consolidated Capital Factors actions.
The non-prosecution agreement entered into today brings closure to the U.S.
Attorney's Office investigation of the Company. Under the agreement, the Company
has committed to pay restitution to Capital Factors in the amount of $10.8
million, and to pay $350,000 to the United States. In addition, as it has in the
past, the Company will continue to cooperate with the U.S. Attorney's Office
investigation as requested, and has committed to maintain the corporate
compliance program and other policy changes that the Company has implemented. So
long as the Company fulfills its obligations under the agreement, the U.S.
Attorney's Office has agreed not to prosecute the Company for any matters
relating to Cosmopolitan Gem Corp. and Colorcast Inc.'s scheme to defraud
Capital Factors or any other party.
The Company today also entered into a settlement agreement with Capital
Factors, Inc. and a separate settlement agreement with International Diamonds,
LTD and its affiliate, Astra Diamonds Manufacturers, Inc. The settlement
agreements together provide for, among other things, full releases of the
Company by Capital Factors, International, and Astra, for matters arising out of
the consolidated Capital Factors actions in consideration of payments to Capital
155 NORTH WACKER DRIVE MAIN: 312-782-6800
CHICAGO, ILLINOIS 60606 FAX: 312-469-5592
INVESTORRELATIONS@WHJI.COM
Factors of the $10.8 million ($8.2 million payable immediately, the remaining
portion payable by December 23, 2004) and to International/Astra of $1.93
million (payable immediately). Upon full payment of these amounts, Capital
Factors, International and Astra have each agreed to dismiss all of their
respective claims against the Company in the consolidated Capital Factors
actions. In addition, as part of the settlements, Capital Factors and
International/Astra have each agreed that they will release the Company from any
claims related to certain consignment goods and proceeds, which were originally
supplied to the Company by Ultimo, Inc., once such goods and proceeds have been
paid into court or placed in escrow.
In earlier periods, the Company has recorded litigation accruals totaling
$9.2 million relating to these matters. In connection with the final
settlement of these matters, the Company will record an additional accrual of
$120,000 before income taxes for the third fiscal quarter ending October 31,
2004. Including previously recorded payables and accruals and the Company's
receipt of certain consignment inventory as a part of the Capital Factors
settlement, the litigation accrual covers all payments being made to Capital
Factors, International, Astra and the United States.
Hugh M. Patinkin, Chairman and Chief Executive Officer, commented, "We are
pleased that we have reached agreements in these matters. The Company has worked
diligently to cooperate fully with the governmental inquiries. Today's
agreements will allow us to bring closure to the criminal investigation and
Capital Factors-related civil litigation, and permit the Company and its
management to focus our energies on the business and the Company's future."
In addition, as previously announced, on March 22, 2004, the Company
entered into a letter agreement with its lenders under which the lenders agreed
that none of the Capital Factors-related matters would give rise to a default or
an event of default under the Credit Agreement so long as the resolution of such
matters meets certain conditions. The agreements announced today meet the
required conditions and otherwise are in compliance with the terms of the Credit
Agreement. As of yesterday, the Company's outstanding borrowings under its $125
million revolver facility were $93.5 million.
Also as previously disclosed, in September 2003, the SEC initiated a
formal inquiry of the Company with respect to matters that were the subject of
the consolidated Capital Factors actions. The Company has fully cooperated with
the SEC in connection with this formal investigation.
For Investor Relations info: investorrelations@whji.com
Internet Website: www.whitehalljewellers.com
Throughout the course of the U.S. Attorney's Office and SEC
investigations, Whitehall has implemented a number of measures designed to
address the issues raised by the Capital Factors related matters. Since October
2003, the Company has: (1) terminated the employment of all personnel it
determined had engaged in misconduct; (2) hired an Internal Audit Director and
authorized the hiring of a General Counsel; (3) committed to hiring a President
and COO with significant public company experience; (4) taken measures to
increase the Board's independence; (5) instituted a comprehensive compliance
program; and (6) implemented numerous policies, procedures, and processes
designed to strengthen the Company's systems of internal controls.
Mr. Patinkin commented, "Our search for the newly created position of
Chief Operating Officer will continue. Our search for the new position of
general counsel will commence in the near term. We are also very pleased to have
recently hired Debbie Nicodemus-Volker as our Executive Vice President of
Merchandise. In addition, the Nominating and Corporate Governance Committee will
soon begin a search for two additional independent directors with the assistance
of a search firm."
Management will discuss these matters during a conference call to be held
today at 4:30 PM (ET). Call Lynn Nickless at 312-762-0292 to reserve a space on
the call or dial in to the conference call at 800-446-4472. The playback call
will be available until October 12, 2004 at 866-518-1010 or 416-695-5275. 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, currently operating 386 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.
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 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,
For Investor Relations info: investorrelations@whji.com
Internet Website: www.whitehalljewellers.com
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 including the timely delivery to
the Company of appropriate merchandise on payment terms consistent with
past practice; (11) our ability to maintain adequate information systems
capacity and infrastructure; (12) our leverage, liquidity, 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) the
impact of current or future price reductions taken on certain merchandise
inventory identified from time to time as items which would not be part of
the Company's future merchandise presentation; (16) developments relating
to settlement of the consolidated Capital Factors actions, the entry into
an agreement with U.S. Attorney's office and the SEC investigation, 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; (17) regulation
affecting the industry generally, including regulation of marketing
practices; and (18) the risk factors identified from time to time in our
filings with the SEC.
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For Investor Relations info: investorrelations@whji.com
Internet Website: www.whitehalljewellers.com