Exhibit 99.1
[WHITEHALL JEWELLERS LOGO] News Release
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For: Whitehall Jewellers, Inc.
Contact: John R. Desjardins
Executive Vice President,
Chief Financial Officer
IMMEDIATE RELEASE TX: 312-762-9751
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WHITEHALL JEWELLERS, INC. ANNOUNCES NEW CHIEF EXECUTIVE OFFICER
AND REPORTS SECOND QUARTER RESULTS
... COMPANY TO CLOSE 77 UNPROFITABLE STORES ...
Chicago, Illinois, November 1, 2005 - Whitehall Jewellers, Inc. (OTC:
jwlr.pk; the "Company") announced today that Robert L. Baumgardner, 59, has been
hired as President and Chief Executive Officer of the national fine jewelry
retailer. He plans to join Whitehall by November 14, 2005.
Mr. Baumgardner is President of Little Switzerland, a wholly owned
subsidiary of Tiffany & Co. and formerly Senior Vice President of Bailey Banks
and Biddle a division of Zale Corporation. Mr. Daniel Levy, Director and interim
Chief Executive Officer of the Company, commented, "Bob possesses the seasoned
leadership, drive and experience that, in combination with the capital infusion
provided by Prentice Capital Management, L.P. and Holtzman Opportunity Fund,
Whitehall needs to build on the strengths of our franchise. We are extremely
fortunate to attract Bob to lead our organization."
Mr. Baumgardner commented "Whitehall has a long and successful history
in fine jewelry retailing. With Whitehall I envision the opportunity to forge a
future of growth and profitability with its valuable brand and its high quality
real estate. I also am extremely pleased to be working with our new investors
from Prentice Capital and Holtzman."
The Company also announced that it expects to close 77 unprofitable
stores in the near term. For the trailing 12 months ended July 31, 2005, these
stores posted store operating losses of $5.1 million (i.e., revenues less direct
merchandise cost, personnel, rent, utilities and other store operating expenses,
but excluding corporate allocations other than for certain advertising and
regional supervisory costs). The Company plans to run inventory liquidation
sales at these stores to generate cash flow from the inventory and close the
stores shortly after the upcoming holiday season. Such sales will require
additional inventory valuation allowances. It is currently anticipated that such
inventory allowances will be no
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less than $14.0 million. In connection with the store closings, the Company will
record a long-lived asset impairment charge of $5.4 million, which equals the
current net book value of the assets at these closed stores during the third
quarter of fiscal year 2005. The Company also is expecting to take a charge in
the fourth quarter for lease termination and other closing related expenses,
which may be material to the financial statements.
Mr. Levy, commented, "Closing unproductive stores is expected to have
three significant benefits. First, we are eliminating stores that lost $5.1
million over the last twelve months and were a drain on cash flow. Second,
closing the stores will provide us a vehicle to accelerate the liquidation of
excess inventory for additional cash flow that can be used for the purchase of
more core assortments. Finally, the closings will permit management to focus on
improving the results of its remaining stores. We believe that the Company's
decision to close 77 unprofitable operations will provide Bob and his team a
strong foundation of stores with attractive merchandise assortments. This
trimmed down store platform, in combination with the new capital infused by
Prentice Capital and Holtzman, should provide a strong base for Bob to begin his
tenure."
Mr. Baumgardner commented, "The steps the Company has taken to infuse
capital, close unproductive stores and liquidate non-core inventory will permit
me to focus on building a robust operation with significant future
opportunities."
The Company today also reported financial results for the second
quarter ended July 31, 2005. Net sales for the quarter ended July 31, 2005
decreased 5.4% to $68.4 million compared to $72.3 million in the second quarter
last year. Comparable store sales decreased 6.2% in the second quarter compared
to a decrease of 0.6% last year. For the quarter ended July 31, 2005, the
Company posted a net loss of $24.1 million or $1.72 per share compared to a net
loss of $3.2 million or $0.23 per share for the same period a year ago. The
Company's second quarter 2005 operating loss, excluding non-cash charges of $5.7
million for goodwill impairment and $3.1 million for long-lived asset
impairment, totaled $8.0 million or $0.57 per share compared to an operating
loss of $4.6 million or $0.33 for the same period last year. In addition, during
the second quarter of fiscal year 2005, the company recorded a full valuation
allowance of $13.5 million against all of its deferred tax assets.
For the six-month period ended July 31, 2005, the Company reported net
sales of $139.4 million compared to $145.3 million last year. Comparable store
sales decreased 5.0% in the six-month period ended July 31, 2005. Net loss was
$29.0 million versus a net loss of $6.9 million for the same period a year ago.
Net loss per share for the six-month period was $2.08 compared to a net loss per
share of $0.49 for the six-month period last
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year. Operating loss for the six-month period ended July 31, 2005, excluding
non-cash charges of $5.7 million for goodwill impairment and $3.1 million for
long-lived asset impairment, totaled $14.4 million compared to a $10.0 million
loss for the same period last year.
Mr. Levy commented, "While second quarter results were unsatisfactory,
the Company has addressed the critical issue of liquidity through the capital
investment by Prentice Capital and Holtzman. The Company is appreciative of the
strong support of the Company's banks and the trade vendor community. Thanks to
their support the Company is receiving timely delivery of our holiday
merchandise needs."
On October 17, 2005, the Company received notification from the New
York Stock Exchange (the "NYSE") that the Company was not in compliance with the
NYSE continued listing standards because its average market capitalization had
been less than $25 million over a consecutive 30 trading-day period. The
Company's common stock was delisted from the NYSE at the close of the market on
October 27, 2005. The Company's stock is currently being quoted on the OTC Pink
Sheets under the jwlr.pk symbol.
On October 27, 2005 the Company announced that it received a proposal
from Newcastle Partners, L.P. ("Newcastle"). The proposal, which is subject to a
number of conditions and definitive documentation, expresses Newcastle's
willingness to offer $1.10 per share in cash by merger or otherwise and cash out
warrants and in-the-money options based on that price. Under the proposal,
Newcastle would pay off the Company's recent bridge loan. Newcastle expects to
obtain a commitment to replace the Company's senior credit facility or obtain
consents from the Company's senior lenders. A copy of the proposal letter is
contained in an amendment to Newcastle's Schedule 13D filed electronically with
the Securities and Exchange. The Company has determined that, with the advice of
its financial advisors and counsel, from the information provided in the
Newcastle letter, it cannot conclude that the proposal is reasonably likely to
result in a Superior Proposal, within the meaning of the exclusivity provision
of the Securities Purchase Agreement dated as of October 3, 2005.
Whitehall Jewellers, Inc. is a national specialty retailer of fine
jewelry, operating 389 stores in 38 states. The Company operates stores in
regional and super regional shopping malls under the names Whitehall Co.
Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers.
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Internet Website: www.whitehalljewellers.com
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," "opinion" 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. The Company undertakes
no obligation to update forward-looking statements. The following factors, among
others, may impact forward-looking statements contained in this release: (1) our
ability to execute our business strategy and our continued net losses and
declines in comparable store sales; (2) our ability to manage our liquidity and
to obtain adequate financing on acceptable terms and the effect on us if an
event of default were to occur under any of the Company's financing
arrangements; (3) 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; (4) reduced levels of mall traffic caused by
economic or other factors; (5) increased competition from specialty jewelry
retail stores, the Internet and mass merchant discount stores which may
adversely impact our sales and gross margin; (6) the high degree of fourth
quarter seasonality of our business and the impact on the Company's sales,
profitability and liquidity; (7) the extent and success of our merchandising,
marketing and/or promotional programs; (8) personnel costs and the extent to
which we are able to retain and attract key personnel and disruptions caused by
the loss of key personnel; (9) the availability, terms and cost of consumer
credit; (10) relationships with suppliers including the timely delivery to the
Company of appropriate merchandise on acceptable payment, delivery and other
terms; (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 financing costs; (13) developments relating to the
Securities Purchase Agreement, Notes, Warrants and Registration Rights Agreement
with Prentice Capital and Holtzman Opportunity Fund, including the impact of any
adverse developments with respect to such agreements, that may require the
Company to seek new financing, for which there can be no assurance of
availability on acceptable terms or at all; (14) the lease termination and other
expenses that we will incur in connection with closing stores and the revenues
we achieve in the liquidation of their inventory and associated inventory
valuation allowances taken; (15) our ability to maintain adequate loss
prevention measures, especially in connection with stores expected to be closed;
(16) fluctuations in raw material prices, including diamond, gem and gold
prices; (17) the impact of current or future price reductions on margins and
resultant valuation allowances taken on certain merchandise inventory identified
from time to time as items which would not be part of the Company's future
merchandise presentation as well as
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alternative methods of disposition of this merchandise inventory and resulting
valuation allowances taken; (18) developments relating to settlement of the
consolidated Capital Factors actions, the non-prosecution agreement entered into
with the United States Attorney's Office, 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; (19) regulation affecting the industry generally, including
regulation of marketing practices; and (20) the risk factors identified from
time to time in our filings with the SEC.
Tables to follow
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ADDITIONAL INFORMATION
In connection with the Company's solicitation of proxies with respect to the
meeting of stockholders to be called with respect to the approval of the reverse
stock split, share issuances contemplated under the convertible notes and
election of certain directors, the Company will file with the Securities and
Exchange Commission (the "SEC"), and will furnish to stockholders of the
Company, a proxy statement. Stockholders are advised to read the proxy statement
when it is finalized and distributed to stockholders, because it will contain
important information. Stockholders will be able to obtain a free-of-charge copy
of the proxy statement (when available) and other relevant documents filed with
the SEC from the SEC's website at www.sec.gov. Stockholders also will be able to
obtain a free-of-charge copy of the proxy statement and other relevant documents
(when available) by directing a request by mail or telephone to Whitehall
Jewellers, Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606,
Attention: Investor Relations, Telephone: 312/732-6800 or from the Company's
website, www.whitehalljewellers.com.
The Company and certain of its directors, executive officers and other members
of management and employees may, under the rules of the SEC, be deemed to be
"participants" in the solicitation of proxies from stockholders of the Company
in favor of the actions described above. Information regarding the persons who
may be considered "participants" in the solicitation of proxies will be set
forth in the Company's proxy statement when it is filed with the SEC.
Information regarding certain of these persons and their beneficial ownership of
the Company common stock as of June 1, 2005 is also set forth the Schedule 14A
filed by the Company on June 8, 2005.
Whitehall Jewellers, Inc.
Statements of Operations
For the three months and six months ended July 31, 2005 and 2004
(unaudited)
(in thousands, except per share data)
Three months ended Six months ended
July 31, 2005 July 31, 2004 July 31, 2005 July 31, 2004
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Net sales $ 68,410 $ 72,284 $ 139,409 $ 145,312
Cost of sales (including buying and occupancy
expenses) 50,928 48,220 99,371 96,971
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Gross profit 17,482 24,064 40,038 48,341
Selling, general and administrative expenses 27,652 26,972 55,336 54,007
Professional fees and other charges 1,007 1,644 2,229 4,298
Impairment of goodwill 5,662 -- 5,662 --
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Loss from operations (16,839) (4,552) (23,189) (9,964)
Interest expense 2,123 1,094 3,421 2,000
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Loss before income taxes (18,962) (5,646) (26,610) (11,964)
Income tax expense (benefit) 5,124 (2,463) 2,420 (5,085)
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Net loss $ (24,086) $ (3,183) $ (29,030) $ (6,879)
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Basic earnings per share:
Net loss $ (1.72) $ (0.23) $ (2.08) $ (0.49)
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Weighted average common share and common share
equivalents 13,967 13,947 13,962 13,937
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Diluted earnings per share:
Net loss $ (1.72) $ (0.23) $ (2.08) $ (0.49)
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Weighted average common share and common share
equivalents 13,967 13,947 13,962 13,937
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Whitehall Jewellers, Inc.
Balance Sheets
(unaudited, in thousands)
July 31, 2005 January 31, 2005 July 31, 2004
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ASSETS
Current Assets:
Cash $ 1,530 $ 2,206 $ 1,433
Accounts receivable, net 2,909 2,688 2,295
Merchandise inventories 199,221 183,676 199,241
Other current assets 682 383 797
Current income tax benefit 249 3,959 4,255
Deferred financing costs 988 360 301
Deferred income taxes, net -- 2,255 6,273
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Total current assets 205,579 195,527 214,595
Property and equipment, net 48,179 54,200 57,750
Goodwill, net -- 5,662 5,662
Deferred financing costs -- 539 603
Deferred income taxes, net -- 902 --
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Total assets $ 253,758 $ 256,830 $ 278,610
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolver loan $ 102,426 $ 73,793 $ 97,496
Current portion of long-term debt -- -- 640
Accounts payable 56,599 60,076 42,559
Customer deposits 3,009 3,042 3,047
Accrued payroll 3,314 3,829 3,474
Other accrued expenses and credits 14,202 14,587 25,828
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Total current liabilities 179,550 155,327 173,044
Deferred income taxes, net -- -- 2,990
Other long-term liabilities and credits 6,433 4,880 3,589
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Total liabilities 185,983 160,207 179,623
Commitments and contingencies -- -- --
Stockholders' equity:
Common stock 18 18 18
Class B common stock -- -- --
Additional paid-in capital 106,162 106,123 106,162
Retained earnings 398 29,428 32,432
Treasury stock, at cost (4,092,611; 4,108,703 and
4,117,172 shares, respectively) (38,803) (38,946) (39,625)
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Total stockholders' equity, net 67,775 96,623 98,987
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Total liabilities and stockholders' equity $ 253,758 $ 256,830 $ 278,610
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Internet Website: www.whitehalljewellers.com