HAMILTON, Bermuda, June 4 /PRNewswire-FirstCall/ -- Signet Jewelers
Ltd ("Signet") (NYSE and LSE: SIG), the world's largest specialty
retail jeweler, today announced its results for the 13 weeks ended
May 2, 2009. First Quarter Highlights -- Significant progress made
towards achieving financial objectives for fiscal 2010(1) --
Operational initiatives increasing profitable market share in a
consolidating sector -- Same store sales: down 2.9% compared to a
decline of 14.9% in Q4 fiscal 2009(1) -- Total sales: $762.6
million, down 1.1% at constant exchange rates(2) -- Increased gross
merchandise margin in US and UK -- Income before income taxes:
$41.4 million, up 3.2% -- Basic and diluted earnings per share
$0.31 -- Free cash inflow towards the top end of the $175 million
to $225 million range now expected for fiscal 2010 (1) Fiscal 2009
is the year ended January 31, 2009 and fiscal 2010 is the year
ending January 30, 2010. (2) See note 12. Terry Burman, Chief
Executive, Signet Jewelers commented: "We have had a good start to
the year reflecting the impact of our operational initiatives, and
have made significant progress towards achieving our financial
objectives for fiscal 2010. The retail environment remains very
uncertain therefore we will continue to execute our strategy of
enhancing Signet's position as the strongest middle market
specialty jeweler, strengthening our balance sheet by maximizing
profits and cash flow, and reducing business risk." Enquiries Terry
Burman, Chief Executive, Signet Jewelers +1 441 296 5872 Walker
Boyd, Finance Director, Signet Jewelers +1 441 296 5872 Michael
Henson, Taylor Rafferty +1 212 889 4350 Jonathan Glass, Brunswick
+44 (0)20 7404 5959 Signet Jewelers Ltd is the world's largest
specialty retail jeweler and operated 1,957 stores at May 2, 2009;
these included 1,400 stores in the US, where it trades as "Kay
Jewelers", "Jared The Galleria Of Jewelry", and under a number of
regional names. At that date the Group operated 557 stores in the
UK, where it trades as "H.Samuel", "Ernest Jones", and "Leslie
Davis". Further information on Signet is available at
http://www.signetjewelers.com/. See also http://www.kay.com/,
http://www.jared.com/, http://www.hsamuel.co.uk/ and
http://www.ernestjones.co.uk/. Conference call A conference call
will take place for all interested parties today at 9.00 a.m. EDT
(2.00 p.m. BST) with a simultaneous audio webcast on
http://www.signetjewelers.com/. The call details are: European
dial-in: +44 (0)20 7806 1950 US dial-in: +1 718 354 1385 European
replay until June 8: +44 (0)20 7806 1970 Access code: 6934146# US
replay until June 8: +1 718 354 1112 Access code: 6934146# Group
performance During the first quarter Signet made good progress
towards achieving its strategic and financial objectives for fiscal
2010. These are: Strategy -- Enhance position as strongest middle
market specialty retail jeweler -- Focus on profit and cash flow
maximization to further strengthen balance sheet -- Reduce business
risk Financial Objectives -- $100 million US cost reduction program
-- Significant working capital reduction -- Reduce capital
expenditure by about 50%, to some $55 million -- $175 million to
$225 million cash inflow before financing activities Same store
sales decreased by 2.9%, an encouraging performance compared to the
fourth quarter of fiscal 2009. Total sales fell by 7.3% to $762.6
million (13 weeks to May 3, 2008: $822.5 million) reflecting an
underlying decrease of 1.1% at constant exchange rates (see note
12). The average US dollar rate was pounds Sterling 1/$1.45 (13
weeks to May 3, 2008: pounds Sterling 1/$1.98). Operating income
increased 14.2% to $52.4 million (13 weeks to May 3, 2008: $45.9
million), up by 13.4% at constant exchange rates (see note 12).
This included a favorable impact of $4.0 million from a previously
announced change in US vacation policy. Operating margin was 6.9%
(13 weeks to May 3, 2008: 5.6%). Income before income tax rose by
3.2% to $41.4 million (13 weeks to May 3, 2008: $40.1 million). The
tax rate was 36.5% (13 weeks to May 3, 2008: 36.0%). Basic and
diluted earnings per share were $0.31 (13 weeks to May 3, 2009:
$0.30). US division (circa 80% of annual sales) Total sales were
down by 1.0% at $624.9 million (13 weeks to May 3, 2008: $631.1
million). The division gained profitable market share as a result
of operational initiatives in a sector that in the past year
experienced an accelerated level of capacity reduction. Same store
sales decreased by 2.6%, reflecting a significant improvement in
trend from the fourth quarter of fiscal 2009, although the trading
environment remained very challenging. Valentine's Day trading was
stronger than the rest of the period, with the performance of
differentiated merchandise being beneficial to both sales and gross
merchandise margin. Average unit selling price decreased by 9% in
the mall brands and, on an underlying basis, by 7% in Jared,
excluding the impact of a new merchandising program. While Kay
achieved an increase in same store sales, Jared was adversely
affected by the general weakness in expenditure among households
with above average incomes. Operating income increased by 20.8% to
$56.4 million (13 weeks to May 3, 2008: $46.7 million) including
the impact of $4.0 million from the change in vacation policy.
Gross merchandise margin was up 90 basis points, benefiting from
price increases implemented during the first quarter of fiscal 2009
and favorable changes in the sales mix, offsetting a higher cost of
gold and greater promotional cadence. It is anticipated that the
gross merchandise margin for fiscal 2010 will be at least at the
level of fiscal 2009, however this is subject to future movements
in commodity costs. The division made good progress towards
achieving the fiscal 2010 target of reducing the underlying cost
base by $100 million (excluding inflation, net bad debt and volume
related costs on sales above plan), the reduction in the quarter
being $32 million. Reflecting the economic environment, the net bad
debt to total sales ratio was up by 130 basis points. The
division's operating margin was 9.0% (13 weeks to May 3, 2008:
7.4%). UK division (circa 20% of annual sales) Total sales were
down by 1.8% at constant exchange rates (see note 12) and by 28.1%
as reported to $137.7 million (13 weeks to May 3, 2008: $191.4
million). Same store sales fell by 4.2%, with H.Samuel down 2.0%
and Ernest Jones 6.7%. The division's performance was a little
weaker towards the end of the period. There was an operating loss
of $1.3 million (13 weeks to May 3, 2008: $3.5 million operating
income) reflecting deleverage due to the decline in same store
sales, partly offset by a 40 basis points improvement in gross
merchandise margin. Selective price increases more than offset the
increased cost of gold and an increase in promotional cadence. It
is anticipated that the gross merchandise margin for fiscal 2010
will be somewhat lower than that of fiscal 2009. In sterling terms,
there was a small increase in costs in the quarter largely due to
property expenses, and the division remains on target to achieve
stable costs for the year as a whole. Central and Financing Costs
Central costs were $2.7 million (13 weeks to May 3, 2008: $4.3
million), reflecting the impact of the change in the average
exchange translation rate and a gain on foreign exchange. Financing
costs rose to $11.0 million (13 weeks to May 3, 2008: $5.8 million)
as a result of fees during the quarter of $3.4 million associated
with the previously announced amendment to the borrowing
agreements, the higher level of year end debt and increased
interest rates under the new facilities. The balance of amendment
fees ($5.9 million) will be amortized over the expected term of the
borrowing agreements. Cash Flow and Net Debt Partly assisted by
timing differences, the quarter saw a very significant improvement
in "free cash flow" (cash inflow from operating activities less
cash used in investing activities and amendment fees). The free
cash flow was $181.2 million in the 13 weeks to May 2, 2009 (13
weeks to May 3, 2008: $3.4 million outflow). Inventories decreased
by $43.2 million (13 weeks to May 3, 2008: $48.7 million increase)
as a result of a better than expected sales performance, planned
inventory reductions and meaningful timing differences. Accounts
receivable reduced by $55.3 million (13 weeks to May 3, 2008: $62.0
million), with the decline in sales in the US division being partly
offset by a little slower collection rate. There was an increase in
accounts payables of $65.9 million (13 weeks to May 3, 2008: $8.8
million), reflecting the low level of payables at the start of the
quarter. Net capital expenditure was $8.4 million (13 weeks to May
3, 2008: $25.4 million) as a result of a planned full year
reduction to about $55 million. For fiscal 2010, free cash inflow
is expected to be towards the top end of the $175 million to $225
million range indicated in the fiscal 2009 annual report, subject
to general economic uncertainties. Net debt at May 2, 2009 was
$290.2 million (May 3, 2008: $377.0 million) (see note 13). During
the quarter, amended borrowing agreements were entered into, the
details of which were announced on March 16, 2009. The amended
agreements provide Signet with additional financial flexibility
until 2013 and more appropriately structured the borrowing
facilities, including the prepayment of $100 million of the private
placement notes at par. Investor Relations Program Details Annual
general meeting The annual general meeting is to be held at 11.00
a.m. on June 16, 2009 at the Hilton Akron/Fairlawn, 3180 West
Market Street, Akron, Ohio, 44333, USA. Second quarter sales The
second quarter sales performance for the 13 weeks ending August 1,
2009 is expected to be announced on Thursday, August 6, 2009.
Second quarter results The second quarter results for the 13 weeks
ending August 1, 2009 are expected to be announced on Wednesday,
September 9, 2009. Goldman Sachs 16th Annual Global Retailing
Conference in New York Signet will be presenting at the Goldman
Sachs 16th Annual Global Retailing Conference taking place in New
York on Thursday, September 10, 2009. The presentation, which will
also be webcast on http://www.signetjewelers.com/, will be given by
Terry Burman, Chief Executive. Terry Burman and Walker Boyd,
Finance Director, will also be available for one-on-one meetings.
This release includes statements which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements, based upon management's
beliefs as well as on assumptions made by and data currently
available to management, appear in a number of places throughout
this release and include statements regarding, among other things,
our results of operation, financial condition, liquidity,
prospects, growth, strategies and the industry in which Signet
operates. Our use of the words "expects," "intends," "anticipates,"
"estimates," "may," "forecast," "objective," "plan" or "target,"
and other similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to a number of
risks and uncertainties, including but not limited to general
economic conditions, the merchandising, pricing and inventory
policies followed by management, the reputation of the business,
the level of competition in the jewelry sector, the price and
availability of diamonds, gold and other precious metals,
seasonality of the business and financial market risk. For a
discussion of these and other risks and uncertainties which could
cause actual results to differ materially, see the "Risk Factors"
section of the Company's fiscal 2009 annual report on Form 20-F
filed with the U.S. Securities and Exchange Commission on April 1,
2009 and other filings made by the Company with the Commission.
Actual results may differ materially from those anticipated in such
forward-looking statements even if experience or future changes
make it clear that any projected results expressed or implied
therein may not be realized. The Company undertakes no obligation
to update or revise any forward-looking statements to reflect
subsequent events or circumstances. Unaudited condensed
consolidated income statements for the 13 weeks ended May 2, 2009
13 weeks 13 weeks ended ended May 2, 2009 May 3, 2008 $m $m Notes
Sales 762.6 822.5 2 Cost of sales (507.1) (544.8) Gross margin
255.5 277.7 Selling, general and administrative expenses (232.8)
(261.7) Other operating income, net 29.7 29.9 Operating income 52.4
45.9 2 Interest income 0.6 1.7 Interest expense (11.6) (7.5) Income
before income taxes 41.4 40.1 Income taxes (15.1) (14.4) Net income
26.3 25.7 Earnings per share - basic $0.31 $0.30 5 - diluted $0.31
$0.30 5 All of the above relate to continuing activities
attributable to equity shareholders. The accompanying notes are an
integral part of these unaudited condensed consolidated financial
statements. Unaudited condensed consolidated balance sheets at May
2, 2009 May 2, May 3, Jan. 31, 2009 2008 2009 $m $m $m Notes Assets
Current assets: Cash and cash equivalents 69.2 29.2 96.8 Accounts
receivable, net 770.1 787.4 825.2 Other receivables 65.0 33.5 81.8
Other current assets 58.0 25.9 45.0 Inventories 1,327.1 1,516.0
1,364.4 6 Total current assets 2,289.4 2,392.0 2,413.2 Non-current
assets: Property, plant and equipment, net of accumulated
depreciation of $575.8 million, $658.0 million and $572.6 million,
respectively. 437.7 491.0 452.1 Goodwill - 556.7 - Other intangible
assets, net 23.4 22.0 23.9 Other assets 9.7 40.5 9.9 Deferred tax
assets 59.3 76.2 54.8 Total assets 2,819.5 3,578.4 2,953.9 2
Liabilities and Shareholders' equity: Current liabilities: Loans
and overdrafts 79.4 26.2 187.5 Accounts payable 108.8 100.3 42.2
Accrued expenses and other current liabilities 256.9 229.8 274.8
Deferred revenue 113.5 115.8 120.1 7 Deferred tax liabilities 58.1
55.0 56.9 Income taxes payable 55.6 65.1 55.8 Total current
liabilities 672.3 592.2 737.3 Non-current liabilities: Long-term
debt 280.0 380.0 380.0 Other liabilities 72.7 109.9 71.5 Deferred
revenue 142.4 140.8 142.5 7 Retirement benefit obligation 12.6 4.6
12.9 Total liabilities 1,180.0 1,227.5 1,344.2 Commitments and
contingencies (see note 9) Shareholders' equity: Common shares of
$0.18 par value: authorized 500 million shares, 85.3 million shares
issued and outstanding (January 31, 2009: 85.3 million shares
issued and outstanding; May 3, 2008 0.9c par value: authorized
5,929.9 million shares, 1,705.5 million shares issued and
outstanding) 15.3 15.3 15.3 Deferred shares, pounds Sterling1 par
value: nil authorized, nil issued and outstanding (January 31,
2009: nil authorized, nil issued and outstanding; May 3, 2008:
authorized 50,000 shares, 50,000 shares issued and outstanding) -
0.1 - Additional paid-in capital 165.1 163.0 164.5 Other reserves
235.2 235.2 235.2 Treasury shares (10.7) (10.8) (10.7) Retained
earnings 1,427.2 1,944.1 1,400.9 Accumulated other comprehensive
(loss)/income (192.6) 4.0 (195.5) Total shareholders' equity
1,639.5 2,350.9 1,609.7 Total liabilities and shareholders' equity
2,819.5 3,578.4 2,953.9 The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
Unaudited condensed consolidated statements of cash flows for the
13 weeks ended May 2, 2009 13 weeks 13 weeks ended ended May 2, May
3, 2009 2008 $m $m Cash flows from operating activities: Net income
26.3 25.7 Adjustments to reconcile net income to cash flows
provided by operations: Depreciation of property, plant and
equipment 24.2 27.1 Amortization of other intangible assets 1.4 1.3
Pension expense - 0.2 Share-based compensation expense 0.7 0.3
Deferred taxation (2.6) (1.5) Facility amendment fees included in
net income 3.4 - Other non-cash movements 9.3 (4.2) Loss/(profit)
on disposal of property, plant and equipment 0.4 (0.3) Changes in
operating assets and liabilities: Decrease in accounts receivable
55.3 62.0 Decrease/(increase) in other receivables 16.9 (1.1)
(Increase)/decrease in other current assets (18.4) 2.0
Decrease/(increase) in inventories 43.2 (48.7) Increase in accounts
payable 65.9 8.8 Decrease in accrued expenses and other liabilities
(20.6) (30.0) Decrease in deferred revenue (7.0) (9.6) Decrease in
income taxes payable (0.4) (10.0) Net cash provided by operating
activities 198.0 22.0 Investing activities: Purchase of property,
plant and equipment (7.3) (25.1) Purchase of other intangible
assets (1.1) (1.3) Proceeds from sale of property, plant and
equipment - 1.0 Net cash flows used in investing activities (8.4)
(25.4) Financing activities: Facility amendment fees paid (8.4) -
Repayment of short-term borrowings (109.2) (10.4) Repayment of
long-term debt (100.0) - Net cash flows used in financing
activities (217.6) (10.4) Cash and cash equivalents at beginning of
period 96.8 41.7 Decrease in cash and cash equivalents (28.0)
(13.8) Effect of exchange rate changes on cash and cash equivalents
0.4 1.3 Cash and cash equivalents at end of period 69.2 29.2 The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements. Unaudited condensed
consolidated statement of shareholders' equity for the 13 weeks
ended May 2, 2009 Accu- Common Addi- mulated shares tional other
Total at paid- Other compre- share- par in re- Treasury Retained
hensive holders value capital serves shares earnings loss equity $m
$m $m $m $m $m $m Balance at January 31, 2009 15.3 164.5 235.2
(10.7) 1,400.9 (195.5) 1,609.7 Net income - - - - 26.3 - 26.3
Foreign currency translation adjustments - - - - - 4.0 4.0 Changes
in fair value of derivative instruments, net - - - - - (1.7) (1.7)
Actuarial gain on pension plan, net - - - - - 0.6 0.6 Share-based
compensation expense - 0.6 - - - - 0.6 Balance at May 2, 2009 15.3
165.1 235.2 (10.7) 1,427.2 (192.6) 1,639.5 The accompanying notes
are an integral part of these unaudited condensed consolidated
financial statements. Unaudited condensed consolidated statements
of comprehensive income for the 13 weeks ended May 2, 2009 13 weeks
13 weeks ended ended May 2, May 3, 2009 2008 $m $m Net income 26.3
25.7 Foreign currency translation 4.0 3.8 Changes in fair value of
derivative instruments (2.3) 1.8 Actuarial gain 1.1 0.5 Prior
service cost (0.2) 0.3 Deferred tax on items recognized in equity
0.3 (2.9) Comprehensive income 29.2 29.2 The accompanying notes are
an integral part of these unaudited condensed consolidated
financial statements Notes to the financial statements for the 13
weeks ended May 2, 2009 1. Principal accounting policies and basis
of preparation Basis of preparation Signet Jewelers Limited (the
"Company") and its subsidiary undertakings (collectively, the
"Group") is a leading retailer of jewelry, watches and associated
services. The Group manages its business as two geographical
segments, being the United Kingdom (the "UK") and the United States
of America (the "US"). The US segment operates retail stores under
brands including Kay Jewelers, Jared the Galleria of Jewelry and
various regional brands while the UK segment's retail stores
operate under brands including H.Samuel and Ernest Jones. These
quarterly financial statements should be read in conjunction with
the consolidated financial statements and accompanying notes
included on Form 20-F for the year ended January 31, 2009, filed
with the SEC on April 1, 2009. These quarterly financial statements
of the Group are unaudited. They have been prepared in accordance
with accounting principles generally accepted in the United States
of America ("US GAAP"). Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with US GAAP have been condensed or omitted from these
quarterly financial statements. However, these quarterly financial
statements include all adjustments that are, in the opinion of
management, necessary to fairly state the results of the quarterly
periods. Use of estimates in interim financial statements The
preparation of quarterly financial statements, in conformity with
US GAAP for quarterly reporting, requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated quarterly financial
statements and reported amounts of sales and expenses during the
reporting period. Actual results could differ from those estimates.
Estimates and assumptions are primarily made in relation to
valuation of intangible assets, valuation of inventory,
depreciation, valuation of employee benefits, income taxes and
contingencies. Seasonality The Group's business is highly seasonal
with a very significant proportion of its sales and operating
profit generated during its fourth quarter, which includes the
Christmas season. The Group expects to continue to experience a
seasonal fluctuation in sales and profit. Accounting pronouncements
adopted during the period SFAS No. 141(R) In December 2007, the
FASB issued Statement of Financial Accounting Standards ("SFAS")
No. 141 (Revised 2007), "Business Combinations" ("SFAS 141(R)").
Under SFAS 141(R), an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited
exceptions. It also amends the accounting treatment for certain
specific items including acquisition costs and non-controlling
minority interests and includes a substantial number of new
disclosure requirements. SFAS 141(R) applies prospectively to
business combinations for which the acquisition date is on or after
December 15, 2008. SFAS No. 160 In December 2007, the FASB issued
SFAS No. 160, "Non-controlling Interests in Consolidated Financial
Statements - An Amendment of ARB No. 51" ("SFAS 160"). SFAS 160
establishes new accounting and reporting standards for the
non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement
requires the recognition of a non-controlling interest (minority
interest) as equity in the consolidated financial statements,
separate from the parent's equity. The amount of net income
attributable to the non-controlling interest will be included in
consolidated net income on the face of the income statement. SFAS
160 also includes expanded disclosure requirements regarding the
interests of the parent and its non-controlling interest. SFAS 160
is effective for fiscal years and quarterly periods beginning after
December 15, 2008. Currently, the Group does not have any
non-controlling interests in its subsidiaries. SFAS No. 161 In
March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161"), which
amends SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133"). The Statement requires companies
with derivative instruments to disclose information that should
enable financial statements users to understand how and why a
company uses derivative instruments, how derivative instruments and
related hedged items are accounted for under SFAS 133 and how
derivative instruments and related hedged items affect a company's
financial position, financial performance and cash flows. The
required disclosures include the fair value of derivative
instruments and their gains or losses in tabular format,
information about credit risk related contingent features in
derivative agreements, counterparty credit risk and a company's
strategies and objectives for using derivative instruments. SFAS
161 expands the current disclosure framework in SFAS 133 and is
effective prospectively for periods beginning on or after November
15, 2008. New accounting pronouncements to be adopted in future
periods There have been no recent accounting pronouncements or
changes in accounting pronouncements during the 13 week period
ended May 2, 2009, as compared to the recent accounting
pronouncements described in the Company's Annual Report on Form
20-F for the fiscal year ended January 31, 2009, that are of
significance, or potential significance to the Company. 2.
Segmental information The consolidated sales are derived from the
retailing of jewelry, watches, other products and services. The
Group is managed as two geographical operating segments, being the
US and UK divisions. These segments represent channels of
distribution that offer similar merchandise and service and have
similar marketing and distribution strategies. Both divisions are
managed by executive committees, which report through the Chief
Executive to the Board. Each divisional executive committee is
responsible for operating decisions within parameters set by the
Board. The performance of each segment is regularly evaluated based
on sales and operating income. The operating segments do not
include income taxes or certain central costs, and there are no
material transactions between the operating segments. The
accounting policies of the segments are the same as those used to
report under US GAAP. 13 weeks 13 weeks ended ended May 2, May 3,
2009 2008 $m $m Sales: US 624.9 631.1 UK 137.7 191.4 Consolidated
total 762.6 822.5 Operating income, net: US 56.4 46.7 UK (1.3) 3.5
Unallocated(1) (2.7) (4.3) Consolidated total 52.4 45.9 May 2, May
3, Jan. 31, 2009 2008 2009 $m $m $m Total assets: US 2,411.6
2,754.3 2,287.0 UK 377.3 591.8 343.1 Unallocated 30.6 232.3 323.8
Consolidated total 2,819.5 3,578.4 2,953.9 (1) Unallocated
principally relates to central costs. 3. Exchange rates The
exchange rates used in these quarterly statements for the
translation of UK pound sterling transactions and balances into US
dollars are as follows: May 2, May 3, Jan. 31, 2009 2008 2009
Income statement (average rate) 1.45 1.98 1.75 Balance sheet
(closing rate) 1.49 1.98 1.45 4. Taxation The Group has business
activity in all states within the US and files income tax returns
for the US federal jurisdiction and all applicable states. The
Group also files income tax returns in the UK and certain other
foreign jurisdictions. The Group is subject to US federal and state
examinations by tax authorities for tax years after October 30,
2004 and is subject to examination by the UK tax authority for tax
years after January 31, 2004. As of January 31, 2009, the Group had
approximately $18.8 million of unrecognized tax benefits in respect
of uncertain tax positions, all of which would favorably affect the
effective income tax rate if resolved in the Group's favor. These
unrecognized tax benefits relate to financing arrangements and
intra-group charges which are subject to different and changing
interpretations of tax law. During the quarter ended May 2, 2009,
agreement was reached with the Internal Revenue Service in the US
in respect of the treatment of certain financing arrangements and a
cash settlement was paid of approximately $4.0 million, excluding
interest thereon. Apart from this settlement there has been no
material change in the amount of unrecognized tax benefits in
respect of uncertain tax positions during the quarter ended May 2,
2009. The Group recognizes accrued interest and penalties related
to unrecognized tax benefits within income tax expense. As of
January 31, 2009 the Group had accrued interest and penalties of
$3.8 million and this has been reduced to approximately $2.5
million as of May 2, 2009, due to the payment of interest during
the quarter on the above cash settlement. Over the next twelve
months management believes that it is reasonably possible that
there could be a reduction of substantially all of the unrecognized
tax benefits as of January 31, 2009, due to settlement of the
uncertain tax positions with the tax authorities. 5. Earnings per
share 13 weeks 13 weeks ended ended May 2, May 3, 2009 2008 Net
income ($million) 26.3 25.7 Basic weighted average number of shares
in issue (million) 85.2 85.2 Dilutive effect of share options
(million) 0.2 0.1 Diluted weighted average number of shares in
issue (million) 85.4 85.3 Earnings per share - basic $0.31 $0.30
Earnings per share - diluted $0.31 $0.30 Earnings per share for the
comparative period has been recalculated for the 1 for 20 share
consolidation undertaken as part of the move of the primary listing
of the parent company's shares, effective September 11, 2008. The
basic weighted average number of shares excludes shares held by the
Employee Stock Ownership Trust as such shares are not considered
outstanding and do not qualify for dividends. The effect of this is
to reduce the average number of shares in the 13 week period ended
May 2, 2009 by 81,951 (13 week period ended May 3, 2008: 85,489
(recalculated)). The calculation of fully diluted earnings per
share for the 13 week period ended May 2, 2009 excludes options to
purchase 3,162,191 shares (13 week period ended May 3, 2008:
2,657,465 share options (recalculated)) on the basis that their
effect on earnings per share was anti-dilutive. 6. Inventories May
2, May 3, Jan. 31, 2009 2008 2009 $m $m $m Raw materials 10.8 24.1
25.5 Finished goods 1,316.3 1,491.9 1,338.9 Total inventory 1,327.1
1,516.0 1,364.4 7. Deferred revenue 13 weeks 13 weeks ended ended
May 2, May 3, 2009 2008 $m $m Warranty reserve 243.8 246.5 Other
12.1 10.1 255.9 256.6 Current liabilities 113.5 115.8 Non-current
liabilities 142.4 140.8 255.9 256.6 Warranty deferred revenue,
beginning of period 243.1 246.6 Warranties sold 40.2 38.1 Revenue
recognized (39.5) (38.2) Warranty deferred revenue, end of period
243.8 246.5 8. Derivative instruments and hedging activities The
Group is exposed to foreign currency exchange risk arising from
various currency exposures. The Group enters into forward foreign
currency exchange purchase contracts, principally in US dollars, in
order to limit the impact of movements in foreign exchange rates on
its forecast foreign currency purchases. The total notional amount
of these foreign currency contracts outstanding as at May 2, 2009
was $43.6 million. These contracts have been designated as cash
flow hedges and will be settled over the next 15 months. The Group
enters into forward purchase contracts for commodities in order to
reduce its exposure to significant movements in the price of the
underlying precious metal raw material. The total notional amount
of commodity contracts outstanding as at May 2, 2009 was $88.9
million. These contracts have been designated as cash flow hedges
and will be settled over the next 9 months. For derivatives that
are designated and qualify as a cash flow hedge, the effective
portion of the gain or loss on the derivative is reported as a
component of other comprehensive income ("OCI") and reclassified
into earnings in the same period in which the hedged item affects
net income or loss. Gains and losses on derivatives that do not
qualify for hedge accounting, together with any hedge
ineffectiveness, are recognized immediately in other operating
income, net. The Group does not hold derivative contracts for
trading purposes. Foreign currency contracts not designated as cash
flow hedges are used to hedge currency flows through the Group's
bank accounts to ensure the Group is not exposed to foreign
currency exchange risk in its cash and borrowings. 8. Derivative
instruments and hedging activities (continued) The following table
summarizes the fair value and presentation of derivative
instruments in the consolidated balance sheets: Derivative assets
May 2, 2009 Jan. 31, 2009 Balance Fair Balance Fair sheet value
sheet value location $m location $m Derivatives designated as
hedging instruments: Foreign currency contracts Other assets 8.0
Other assets 12.0 Commodity contracts Other assets 5.4 Other assets
12.0 13.4 24.0 Derivatives not designated as hedging instruments:
Foreign currency contracts Other assets - Other assets 0.1 - 0.1
Total derivative assets 13.4 24.1 Derivative liabilities May 2,
2009 Jan. 31, 2009 Balance Fair Balance Fair sheet value sheet
value location $m location $m Derivatives designated as hedging
instruments: Foreign currency Other Other contracts liabilities
(0.1) liabilities - Commodity contracts Other Other liabilities
(1.5) liabilities - (1.6) - Derivatives not designated as hedging
instruments: Foreign currency Other Other contracts liabilities -
liabilities - - - Total derivative liabilities (1.6) - The
following tables summarize the effect of derivative instruments on
the consolidated income statements: Amount of Amount of gain/(loss)
gain/(loss) reclassified recognized in OCI Location of from
accumulated on derivatives gain/(loss) OCI into income (Effective
portion) reclassified (Effective portion) 13 weeks 13 weeks from 13
weeks 13 weeks ended ended Accumulated ended ended May 2, May 3,
OCI May 2, May 3, 2009 2008 into income 2009 2008 $m $m (Effective
portion) $m $m Derivatives in SFAS 133 cash flow hedging
relationships Foreign currency contracts 0.6 7.9 Cost of sales 0.1
(8.2) Commodity contracts (4.2) (6.1) Cost of Sales (1.4) (3.3)
Total (3.6) 1.8 (1.3) (11.5) The ineffective portion of hedging
instruments taken to other operating income, net was $nil in the
current and comparative periods. 8. Derivative instruments and
hedging activities (continued) Amount of gain/(loss) recognized in
income on derivatives Location of 13 weeks 13 weeks gain/(loss)
ended ended Derivatives not designated recognized in May 2, May 3,
as hedging instruments income on 2009 2008 under SFAS 133
derivatives $m $m Foreign currency contracts Other operating
income, net - (2.2) Total - (2.2) SFAS 157 defines fair value,
establishes a consistent framework for measuring fair value and
expands disclosure requirements about fair value measurements. SFAS
157 enables the reader of the financial statements to assess the
inputs used to develop those measurements by establishing a
hierarchy for ranking the quality and reliability of the
information used to determine fair values. SFAS 157 requires that
assets and liabilities carried at fair value be classified and
disclosed in one of the following three categories: Level 1 -
quoted market prices in active markets for identical assets and
liabilities Level 2 - observable market based inputs or
unobservable inputs that are corroborated by market data Level 3 -
unobservable inputs that are not corroborated by market data The
Group determines fair value based upon quoted prices when available
or through the use of alternative approaches, such as discounting
the expected cash flows using market interest rates commensurate
with the credit quality and duration of the investment. The methods
the Group uses to determine fair value on an instrument specific
basis are detailed below. The following table summarizes the
valuation of financial instruments categorized by fair valuation
level: May 2, 2009 May 3, 2008 $m $m Significant Significant other
other observable observable Description Carrying inputs Carrying
inputs Value (Level 2) Value (Level 2) Assets: Forward foreign
currency contracts and swaps 8.0 8.0 1.6 1.6 Forward commodity
contracts 5.4 5.4 1.9 1.9 Liabilities: Borrowings (359.4) (354.1)
(406.2) (385.6) Forward foreign currency contracts and swaps (0.1)
(0.1) (0.1) (0.1) Forward commodity contracts (1.5) (1.5) (7.0)
(7.0) The fair values of the Group's derivative instruments are
based on market value equivalents at the balance sheet date. 9.
Commitments and contingencies Litigation The Group is not party to
any legal proceedings considered to be material to the financial
statements. Furthermore, no director, officer or affiliate of the
Group or any associate of any such director has been a party
adverse to the Group or any of its subsidiaries or has a material
interest adverse to the Group or any of its subsidiaries. A class
action lawsuit for an unspecified amount has been filed against
Sterling Jewelers Inc, a subsidiary of the Company, in the New York
federal court by private plaintiffs. The US Equal Opportunities
Commission has filed a separate lawsuit alleging that US
store-level employment practices are discriminatory as to
compensation and promotional activities. The Group denies these
allegations and intends to defend them vigorously. 10. Share
options The Group recorded net share-based compensation expense of
$0.7 million and $0.3 million for the 13 weeks ended May 2, 2009
and May 3, 2008, after crediting $nil and $1.1 million relating to
the change in fair value during the period of awards with an
inflation condition accounted for as liability awards under SFAS
No. 123(R) "Share-Based Payment". 11. Long-term debt On March 13,
2009 the Group entered into amendment agreements to the revolving
credit facility agreement and note purchase agreement. Under the
amended agreements Signet prepaid $100 million of the notes at par
plus interest on March 18, 2009 and the revolving credit agreement
was reduced in size to $370 million on March 13, 2009. In addition,
the margins paid on the revolving credit agreement and the coupon
on the notes have increased. The most stringent condition under the
original agreements was a fixed charge cover covenant. The
definition of this covenant has been amended to include
depreciation in the earnings and exclude service charges and rates
from expenses. This covenant is set at 1.4:1, using the amended
definition, until the end of fiscal 2012, equivalent to a reduction
to about 1.1:1 from 1.4:1 under the former definition of fixed
charge cover. The fixed charge cover is then set at 1.55:1 until
the end of fiscal 2013 and thereafter is set at 1.85:1. The amended
agreements also reduce the permitted ratio of net debt to earnings
before interest, tax, depreciation and amortization covenant to 2:1
from 3:1 (2.5 in the third quarter of each fiscal year) until the
end of the fiscal year 2013 and places restrictions on the Group's
ability to undertake certain activities, including cash
distributions to shareholders. Amendment fees and other related
costs of $5.9 million have been capitalized, with a further $3.4
million charged in the period. A more detailed description of the
amendments can be found on the Company's Form 20-F for the year
ended January 31, 2009. 12. Impact of constant exchange rates The
Group has historically used constant exchange rates to compare
period-to-period changes in certain financial data. This is
referred to as 'at constant exchange rates' throughout this
release. The Group considers this a useful measure for analyzing
and explaining changes and trends in the Group's results. The
impact of the re-calculation of sales, profit and earnings per
share at constant exchange rates, including a reconciliation to the
Group's GAAP results, is analyzed below. 13 13 Growth At Growth at
weeks weeks at Impact constant constant ended ended actual of
exchange exchange May 2, May 3, exchange exchange rates rates 2009
2008 rates rate movement (non-GAAP) (non-GAAP) $m $m % $m $m %
Sales US 624.9 631.1 -1.0% - 631.1 -1.0% UK 137.7 191.4 -28.1%
(51.2) 140.2 -1.8% 762.6 822.5 -7.3% (51.2) 771.3 -1.1% $m $m % $m
$m % Operating income, net US 56.4 46.7 20.8% - 46.7 20.8% UK (1.3)
3.5 n/a (0.9) 2.6 n/a Un- Alloca- ted (2.7) (4.3) -37.2% 1.2 (3.1)
-12.9% Operating income 52.4 45.9 14.2% 0.3 46.2 13.4% Income
before income taxes 41.4 40.1 3.2% (0.1) 40.0 3.5% Earnings per
share - basic $0.31 $0.30 3.3% - $0.30 3.3% 13. Net debt May 2, May
3, Jan. 31, 2009 2008 2009 $m $m $m Cash and cash equivalents 69.2
29.2 96.8 Loans and overdrafts (79.4) (26.2) (187.5) Long-term debt
(280.0) (380.0) (380.0) Net debt (290.2) (377.0) (470.7)
DATASOURCE: Signet Jewelers Ltd CONTACT: Enquiries Terry Burman,
Chief Executive, +1-441-296-5872, or Walker Boyd, Finance Director,
+1-441-296-5872, both of Signet Jewelers; or Michael Henson, Taylor
Rafferty, +1-212-889-4350; or Jonathan Glass, Brunswick, +44 0 20
7404 5959 Web Site: http://www.signetjewelers.com/
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