SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
________________________
FORM 8-K
Current
Report
Dated May
25, 2011
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
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On May 25, 2011, Zale Corporation issued a press release reporting its financial results for the three months ended April 30, 2011. A copy of the press release is being furnished as Exhibit 99.1 and is incorporated herein by reference.
The information set forth in Exhibit 99.1 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Non-GAAP Financial Measures
From time to time, we include non-GAAP measurements of financial performance in our publicly available earnings conference calls. Such non-GAAP measures of financial performance include earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA which excludes the impact of store closure adjustments. We use these measurements as part of our evaluation of the performance of the Company. In addition, we believe these measures provide useful information to investors, particularly in evaluating the performance of the Company in the most recent twelve month period as compared to prior periods. Management does not, nor does it suggest investors should consider such non-GAAP measures in isolation from, or in substitution for, information prepared in accordance with U.S. GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
A reconciliation of Loss from continuing operations as determined in accordance with GAAP to non-GAAP EBITDA and Adjusted EBITDA is as follows (in thousands):
For the Twelve Months Ended | |||||||
April 30, 2011 | April 30, 2010 | ||||||
Loss from continuing operations | $ | (107,956 | ) | $ | (133,816 | ) | |
Interest expense | 83,165 | 7,691 | |||||
Income tax benefit | (3,761 | ) | (47,618 | ) | |||
Depreciation and amortization | 42,933 | 52,573 | |||||
EBITDA | 14,381 | (121,170 | ) | ||||
Store closure adjustments | (219 | ) | 30,743 | ||||
Adjusted EBITDA | $ | 14,162 | $ | (90,427 | ) |
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.
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ZALE CORPORATION |
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By: |
/s/ Matthew W. Appel |
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Matthew W. Appel |
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Chief Administrative Officer and |
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Chief Financial Officer |
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Date: |
May 25, 2011 |
Exhibit 99.1
Zale Corporation Reports Third Quarter Fiscal 2011 Results
DALLAS--(BUSINESS WIRE)--May 25, 2011--Zale Corporation (NYSE: ZLC) today announced that for the third fiscal quarter ended April 30, 2011, it had a net loss from continuing operations of $10 million, or $0.31 per share, compared to a net loss from continuing operations of $15 million, or $0.46 per share, in the comparable quarter last year.
Revenues for the quarter ended April 30, 2011 were $412 million, an increase of $52 million, or 14.5%, compared to $360 million in the same period last year. Comparable store sales during the quarter ended April 30, 2011 increased 15.2%, compared to a decrease of 2.2% during the same period last year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, comparable store sales increased 14.2% for the quarter.
For the quarter ended April 30, 2011, gross margin on sales was $206 million, an increase of 13% compared to $183 million in the same period last year. The Company achieved gross margin on sales of 50.1%, compared to 50.8% in the comparable quarter last year.
Selling, general and administrative expenses were $202 million, or 49.1% of revenues, in the quarter ended April 30, 2011, compared to $194 million, or 53.9% of revenues, in the same period last year. The Company’s operating loss for the quarter was $5 million compared to an operating loss of $25 million in the prior year quarter. Operating margin improved 560 basis points, to a negative 1.3%, for the quarter ended April 30, 2011, compared to negative 6.9% in the same period last year.
In the quarter ended April 30, 2011, the Company recorded an income tax benefit of $4 million, compared to a benefit of $12 million in the comparable quarter last year.
Inventory at April 30, 2011 stood at $756 million, compared to $693 million in the same period last year. As of April 30, 2011, the Company had outstanding debt of $375 million, compared to $299 million as of April 30, 2010.
“We continue to make progress in our multi-year initiatives to return the Company to profitability,” commented Theo Killion, Chief Executive Officer. “Our results validate that the work we’ve done to improve our marketing, our product and our guest experience is beginning to take hold.”
“This quarter marked the second consecutive quarter of positive same store sales,” commented Matt Appel, Chief Administrative Officer and Chief Financial Officer. “We are pleased with the trend of improved financial performance resulting from our turnaround initiatives.”
Conference Call
A conference call will be held today at 9:00 a.m. Eastern Time. Parties interested in participating should dial 877-545-6744 or 706-634-1959 (passcode: 65599346) five minutes prior to the scheduled start time. A live webcast of the conference call, as well as a replay, will be available on the Company’s web site at www.zalecorp.com on the Investor Relations section. For additional information, contact Investor Relations at 972-580-4391.
About Zale Corporation
Zale Corporation is a leading specialty retailer of diamonds and other jewelry products in North America, operating approximately 1,845 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Zale also operates online at www.zales.com, www.zalesoutlet.com, www.gordonsjewelers.com, www.peoplesjewellers.com and www.pagoda.com. Additional information on Zale Corporation and its brands is available at www.zalecorp.com.
This release and related presentations contain forward-looking statements, including statements regarding future sales, expenses, margins and profitability. Forward-looking statements are not guarantees of future performance and a variety of factors could cause the Company's actual results to differ materially from the results expressed in the forward-looking statements. These factors include, but are not limited to: if the general economy continues to perform poorly, discretionary spending on goods that are, or are perceived to be, “luxuries” may decrease; the concentration of a substantial portion of the Company’s sales in three, relatively brief selling seasons means that the Company’s performance is more susceptible to disruptions; most of the Company’s sales are of products that include diamonds, precious metals and other commodities, and fluctuations in the availability and pricing of commodities could impact the Company’s ability to obtain and produce products at favorable prices; the Company’s sales are dependent upon mall traffic; the Company operates in a highly competitive industry; the financing market remains difficult, and if we are unable to meet the financial commitments in our current financing arrangements it will be difficult to replace or restructure these arrangements; and changes in regulatory requirements may increase the cost or adversely affect the Company’s operations and its ability to provide consumer credit and write credit insurance. For other factors, see the Company's filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2011. The Company disclaims any obligation to update or revise publicly or otherwise any forward-looking statements to reflect subsequent events, new information or future circumstances, except as required by law.
ZALE CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Revenues | $ | 411,843 | $ | 359,843 | $ | 1,365,296 | $ | 1,271,305 | ||||||||||
Cost of Sales | 205,424 | 177,103 | 678,677 | 639,019 | ||||||||||||||
Gross Margin | 206,419 | 182,740 | 686,619 | 632,286 | ||||||||||||||
% of Revenue | 50.1 | % | 50.8 | % | 50.3 | % | 49.7 | % | ||||||||||
Selling, General and Administrative | 202,347 | 194,069 | 655,635 | 649,518 | ||||||||||||||
% of Revenue | 49.1 | % | 53.9 | % | 48.0 | % | 51.1 | % | ||||||||||
Depreciation and Amortization | 9,773 | 11,593 | 31,052 | 38,123 | ||||||||||||||
Other (Gains) Charges | (265 | ) | 1,802 | 3,715 | 28,759 | |||||||||||||
Operating Loss | (5,436 | ) | (24,724 | ) | (3,783 | ) | (84,114 | ) | ||||||||||
% of Revenue | (1.3 | )% | (6.9 | )% | (0.3 | )% | (6.6 | )% | ||||||||||
Interest Expense (a) | 8,653 | 1,954 | 73,433 | 5,924 | ||||||||||||||
Loss Before Income Taxes | (14,089 | ) | (26,678 | ) | (77,216 | ) | (90,038 | ) | ||||||||||
Income Tax (Benefit) Expense | (4,161 | ) | (12,047 | ) | 2,124 | (22,865 | ) | |||||||||||
Loss from Continuing Operations | (9,928 | ) | (14,631 | ) | (79,340 | ) | (67,173 | ) | ||||||||||
Earnings (Loss) from Discontinued Operations, Net of Taxes | 935 | 2,536 | (324 | ) | 2,021 | |||||||||||||
Net Loss | $ | (8,993 | ) | $ | (12,095 | ) | $ | (79,664 | ) | $ | (65,152 | ) | ||||||
Basic Net Loss per Common Share: | ||||||||||||||||||
Loss from Continuing Operations | $ | (0.31 | ) | $ | (0.46 | ) | $ | (2.47 | ) | $ | (2.10 | ) | ||||||
Earnings (Loss) from Discontinued Operations | 0.03 | 0.08 | (0.01 | ) | 0.07 | |||||||||||||
Net Loss per Share | $ | (0.28 | ) | $ | (0.38 | ) | $ | (2.48 | ) | $ | (2.03 | ) | ||||||
Diluted Net Loss per Common Share: | ||||||||||||||||||
Loss from Continuing Operations | $ | (0.31 | ) | $ | (0.46 | ) | $ | (2.47 | ) | $ | (2.10 | ) | ||||||
Earnings (Loss) from Discontinued Operations | 0.03 | 0.08 | (0.01 | ) | 0.07 | |||||||||||||
Net Loss per Share | $ | (0.28 | ) | $ | (0.38 | ) | $ | (2.48 | ) | $ | (2.03 | ) | ||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||||
Basic | 32,135 | 32,107 | 32,122 | 32,047 | ||||||||||||||
Diluted | 32,135 | 32,107 | 32,122 | 32,047 | ||||||||||||||
(a) | During the first quarter of fiscal year 2011, we recorded a charge totalling $45.8 million associated with the first amendment to our Senior Secured Term Loan ("Term Loan"). The amendment was considered a significant modification which required us to account for the Term Loan as an extinguishment and record the amended Term Loan at fair value. The charge consisted of $20.3 million related to the unamortized discount associated with the warrants issued in connection with the Term Loan, a $12.5 million amendment fee, $10.3 million related to the unamortized debt issuance costs associated with the Term Loan and $2.7 million related to the prepayment premium and other costs associated with the amendment. |
ZALE CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED CONDENSED BALANCE SHEET | ||||||||
(Unaudited, in thousands) | ||||||||
April 30, 2011 | April 30, 2010 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 36,875 | $ | 23,906 | ||||
Merchandise inventories | 756,439 | 693,127 | ||||||
Other current assets | 37,635 | 56,054 | ||||||
Total current assets | 830,949 | 773,087 | ||||||
Property and equipment | 704,131 | 708,306 | ||||||
Less accumulated depreciation and amortization | (555,046 | ) | (518,596 | ) | ||||
Net property and equipment | 149,085 | 189,710 | ||||||
Other assets | 213,272 | 185,094 | ||||||
Total assets | $ | 1,193,306 | $ | 1,147,891 | ||||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 332,293 | $ | 289,103 | ||||
Deferred tax liability | 58,729 | 48,194 | ||||||
Total current liabilities | 391,022 | 337,297 | ||||||
Long-term debt | 375,454 | 299,300 | ||||||
Other liabilities | 180,795 | 184,879 | ||||||
Stockholders’ Investment | 246,035 | 326,415 | ||||||
Total liabilities and stockholders’ investment | $ | 1,193,306 | $ | 1,147,891 |
CONTACT:
Zale Corporation
Roxane Barry, 972-580-4391
Director
of Investor Relations