8-K 1 a07-29482_18k.htm CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES

 

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

FORM 8-K

 

Current Report

 

Dated November 15, 2007

 

of

 

ZALE CORPORATION

 

A Delaware Corporation

 

IRS Employer Identification No. 75-0675400

 

SEC File Number 001-04129

 

901 West Walnut Hill Lane

 

Irving, Texas  75038

 

(972) 580-4000

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Securities Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Securities Act (17 CFR 240.13e-2(c))

 

 


 

Item 2.01 Completion of Acquisition or Disposition of Asset.

 

On November 9, 2007, Zale Corporation (the “Company”) completed the sale of its wholly owned business unit, Bailey Banks & Biddle, to Finlay Fine Jewelry Corporation (“Finlay”) for a purchase price of $200 million, subject to post-closing adjustments in respect of (i) inventory and (ii) certain liabilities and prepaid amounts. In connection with the sale, Finlay and the Company entered into a Transition Services Agreement at the closing of the sale pursuant to which the Company will provide certain services for a transition period in exchange for a fee. As a result of the sale, the Company expects to recognize a gain in the second quarter of approximately $8.5 million, net of tax.

 

Item 9.01  Financial Statements and Exhibits.

 

(b) Pro forma financial information.

 

The following unaudited pro forma financial statements give effect to the sale of certain assets and liabilities of the Bailey Banks & Biddle brand, a wholly owned business unit of the Company.

 

The unaudited pro forma balance sheet as of July 31, 2007 gives effect to the sale as if it had occurred on July 31, 2007. The unaudited pro forma statement of operations for the fiscal year ended July 31, 2007, give effect to the sale as if it had occurred as of the beginning of the period. These unaudited pro forma consolidated financial statements and related notes do not give any utilization of cash proceeds from the sale.

 

These unaudited pro forma consolidated financial statements should be read together with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2007. This pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had these transactions actually occurred on the dates presented or to project the Company’s results of operations or financial position for any future period.

 

2


 

ZALE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JULY 31, 2007

(In thousands, except per share amounts)

 

 

 

Historical

 

Pro forma
adjustments

 

Notes

 

Pro forma

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

2,437,075

 

$

(284,289

)

(1)

 

$

2,152,786

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales

 

1,187,601

 

(162,322

)

(1)

 

1,025,279

 

Selling, general and administrative

 

1,070,478

 

(102,429

)

(1)

 

968,049

 

Cost of insurance operations

 

6,798

 

—

 

 

 

6,798

 

Depreciation and amortization

 

61,887

 

(5,291

)

(1)

 

56,596

 

Derivative loss

 

7,184

 

—

 

 

 

7,184

 

Operating earnings

 

103,127

 

(14,247

)

 

 

88,880

 

Interest expense

 

18,969

 

—

 

 

 

18,969

 

Earnings before income taxes

 

84,158

 

(14,247

)

 

 

69,911

 

Income taxes

 

24,906

 

(5,556

)

(1)

 

19,350

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

59,252

 

(8,691

)

 

 

50,561

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of discontinued operations, net of taxes

 

—

 

8,540

 

(2)

 

8,540

 

Net earnings

 

$

59,252

 

$

(151

)

 

 

$

59,101

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share:

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.22

 

$

(0.18

)

 

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of discontinued operations

 

$

—

 

$

0.18

 

 

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

1.22

 

$

(0.00

)

 

 

$

1.22

 

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share:

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.21

 

$

(0.18

)

 

 

$

1.03

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of discontinued operations

 

$

—

 

$

0.18

 

 

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

1.21

 

$

0.00

 

 

 

$

1.21

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

48,694

 

48,694

 

 

 

48,694

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

48,995

 

48,995

 

 

 

48,995

 

 

3


 

ZALE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AT JULY 31, 2007

(In thousands)

 

 

 

Historical

 

Pro forma
adjustments

 

Notes

 

Pro forma

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,643

 

$

193,028

 

(3)

 

$

230,671

 

Merchandise inventories

 

1,021,164

 

(154,769

)

(4)

 

866,395

 

Other current assets

 

113,511

 

(559

)

(4)

 

112,952

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

1,172,318

 

37,700

 

 

 

1,210,018

 

 

 

 

 

 

 

 

 

 

 

Property and equipment

 

304,396

 

(27,556

)

(4)

 

276,840

 

Goodwill

 

100,740

 

—

 

 

 

100,740

 

Other assets

 

35,187

 

—

 

 

 

35,187

 

Deferred tax asset

 

1,305

 

—

 

 

 

1,305

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,613,946

 

$

10,144

 

 

 

$

1,624,090

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

300,929

 

$

(5,272

)

(4)

 

$

295,657

 

Deferred tax liability

 

73,529

 

—

 

 

 

73,529

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

374,458

 

(5,272

)

 

 

369,186

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

227,306

 

—

 

 

 

227,306

 

Other liabilities

 

109,609

 

(3,377

)

(4)

 

106,232

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ investment:

 

 

 

 

 

 

 

 

 

Common stock

 

487

 

—

 

 

 

487

 

Additional paid-in capital

 

138,036

 

—

 

 

 

138,036

 

Accumulated other comprehensive income

 

45,939

 

—

 

 

 

45,939

 

Accumulated earnings

 

868,111

 

18,793

 

(5)

 

886,904

 

 

 

1,052,573

 

18,793

 

 

 

1,071,366

 

 

 

 

 

 

 

 

 

 

 

Treasury stock

 

(150,000

)

—

 

 

 

(150,000

)

Total stockholders’ investment

 

902,573

 

18,793

 

 

 

921,366

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ investment

 

$

1,613,946

 

$

10,144

 

 

 

$

1,624,090

 

 

4


 

ZALE CORPORATION AND SUBSIDIARIES

NOTES TO PRO FORMA

CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2007

AND PRO FORMA CONSOLIDATED BALANCE SHEET AT JULY 31, 2007

(Unaudited)

 

Pro forma Consolidated Statement of Operations for the year ended July 31, 2007 (unaudited)

 

(1) The pro forma statement of operations for the year ended July 31, 2007, reflects the sale of Bailey Banks & Biddle assets as though the sale had occurred at the beginning of the period. Accordingly, the revenues and costs associated with those assets have been adjusted for the entire year.

 

(2) The gain on sale of discontinued operations is estimated at $8.5 million which is net of estimated transaction costs and associated tax expense of $5.5 million.

 

Pro forma Consolidated Balance Sheet at July 31, 2007 (unaudited)

 

(3) The Company sold substantially all the assets and certain liabilities related to Bailey Banks & Biddle and received cash proceeds of approximately $193 million, net of transaction costs and before taxes and certain working capital adjustments. The Company’s balance sheet as of July 31, 2007, has been adjusted on a pro forma basis to show the receipt of these funds.

 

(4) The pro forma balance sheet has been adjusted to remove Bailey Banks & Biddle assets sold and certain liabilities that were assumed by Finlay Fine Jewelry Corporation.

 

(5) Accumulated earnings have been adjusted to reflect the cumulative effect on accumulated earnings as a result of the above adjustments. Included in this amount is a gain that would be recorded upon consummation of the sale.

 

5


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

ZALE CORPORATION

 

 

 

 

 

 

Date: November 15, 2007

By:

/s/ Cynthia T. Gordon

 

 

 

 

 

 

Cynthia T. Gordon

 

 

Senior Vice President,

 

 

Controller

 

 

(Principal Accounting Officer

 

 

  of the Registrant)

 

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