Form 10-Q
Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended May 3, 2014 or

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                     to                     

Commission File Number 1-32349

 

 

Signet Jewelers Limited

(Exact name of Registrant as specified in its charter)

 

 

 

Bermuda   Not Applicable

(State or other jurisdiction of

incorporation)

 

(I.R.S. Employer

Identification No.)

Clarendon House

2 Church Street

Hamilton HM11

Bermuda

(441) 296 5872

(Address and telephone number of principal executive offices)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨      Smaller reporting company   ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common Stock, $0.18 par value, 80,203,014 shares as of May 30, 2014

 

 


Table of Contents

TABLE OF CONTENTS

 

         PAGE
NUMBER
 

PART I

 

FINANCIAL INFORMATION

     1   

Item 1

 

Financial Statements (Unaudited)

     1   
 

Condensed Consolidated Income Statements

     1   
 

Condensed Consolidated Statements of Comprehensive Income

     2   
 

Condensed Consolidated Balance Sheets

     3   
 

Condensed Consolidated Statements of Cash Flows

     4   
 

Condensed Consolidated Statement of Shareholders’ Equity

     5   
 

Notes to the Condensed Consolidated Financial Statements

     6   

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     31   

Item 3

 

Quantitative and Qualitative Disclosures about Market Risk

     41   

Item 4

 

Controls and Procedures

     41   

PART II

 

OTHER INFORMATION

     42   

Item 1

 

Legal Proceedings

     42   

Item 1A

 

Risk Factors

     42   

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

     45   

Item 6

 

Exhibits

     45   


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)

 

     13 weeks ended        
(in millions, except per share amounts)    May 3,
2014
    May 4,
2013
    Notes  

Sales

   $ 1,056.1      $ 993.6        2   

Cost of sales

     (648.9     (610.8  
  

 

 

   

 

 

   

Gross margin

     407.2        382.8     

Selling, general and administrative expenses

     (310.5     (287.0  

Other operating income, net

     54.0        47.0     
  

 

 

   

 

 

   

Operating income

     150.7        142.8        2   

Interest expense, net

     (1.8     (0.9  
  

 

 

   

 

 

   

Income before income taxes

     148.9        141.9     

Income taxes

     (52.3     (50.1  
  

 

 

   

 

 

   

Net income

   $ 96.6      $ 91.8     
  

 

 

   

 

 

   

Earnings per share: basic

   $ 1.21      $ 1.14        5   

diluted

   $ 1.20      $ 1.13        5   

Weighted average common shares outstanding: basic

     79.9        80.8        5   

diluted

     80.3        81.3        5   

Dividends declared per share

   $ 0.18      $ 0.15        6   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     13 weeks ended May 3, 2014     13 weeks ended May 4, 2013  
(in millions)    Pre-tax
amount
    Tax
(expense)
benefit
    After-tax
amount
    Pre-tax
amount
    Tax
(expense)
benefit
    After-tax
amount
 

Net income

       $ 96.6          $ 91.8   

Other comprehensive income (loss):

            

Foreign currency translation adjustments

   $ 9.6      $ —         9.6      $ (1.8   $ —         (1.8

Cash flow hedges:

            

Unrealized gain (loss)

     0.7        (0.4     0.3        (17.5     6.1        (11.4

Reclassification adjustment for losses (gains) to net income

     7.4        (2.7     4.7        (1.0     0.4        (0.6

Pension plan:

            

Reclassification adjustment to net income for amortization of actuarial loss

     0.5        (0.1 )     0.4        0.6        (0.1 )     0.5   

Reclassification adjustment to net income for amortization of prior service credits

     (0.4     0.1        (0.3     (0.4           (0.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

   $ 17.8      $ (3.1   $ 14.7      $ (20.1   $ 6.4      $ (13.7
      

 

 

       

 

 

 

Total comprehensive income

       $ 111.3          $ 78.1   
      

 

 

       

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(in millions, except par value per share amount)    May 3,
2014
    February 1,
2014
    May 4,
2013
    Notes  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 249.1      $ 247.6      $ 263.7     

Accounts receivable, net

     1,308.2        1,374.0        1,157.5        8   

Other receivables

     47.1        51.5        40.2     

Other current assets

     91.0        87.0        81.8        10   

Deferred tax assets

     2.7        3.0        2.3     

Income taxes

     10.7        6.5        10.1     

Inventories

     1,523.9        1,488.0        1,426.4        9   
  

 

 

   

 

 

   

 

 

   

Total current assets

     3,232.7        3,257.6        2,982.0     
  

 

 

   

 

 

   

 

 

   

Non-current assets:

        

Property, plant and equipment, net of accumulated depreciation of $816.3, $788.1 and $737.5, respectively

     494.0        487.6        429.9     

Other assets

     120.3        114.0        107.2        10   

Deferred tax assets

     114.8        113.7        124.9     

Retirement benefit asset

     59.8        56.3        50.3     
  

 

 

   

 

 

   

 

 

   

Total assets

   $ 4,021.6      $ 4,029.2      $ 3,694.3        2   
  

 

 

   

 

 

   

 

 

   

Liabilities and Shareholders’ equity

        

Current liabilities:

        

Loans and overdrafts

   $ 8.8      $ 19.3      $ 5.7        17   

Accounts payable

     163.1        162.9        176.8     

Accrued expenses and other current liabilities

     293.8        328.5        269.4        12   

Deferred revenue

     174.4        173.0        157.6        11   

Deferred tax liabilities

     123.9        113.1        145.6     

Income taxes

     32.2        103.9        64.5     
  

 

 

   

 

 

   

 

 

   

Total current liabilities

     796.2        900.7        819.6     
  

 

 

   

 

 

   

 

 

   

Non-current liabilities:

        

Deferred tax liabilities

     2.7       —         1.0     

Other liabilities

     121.6        121.7        113.3        12   

Deferred revenue

     457.3        443.7        415.9        11   
  

 

 

   

 

 

   

 

 

   

Total liabilities

     1,377.8        1,466.1        1,349.8     
  

 

 

   

 

 

   

 

 

   

Commitments and contingencies

           15   

Shareholders’ equity:

        

Common shares of $0.18 par value: authorized 500 shares, 80.2 shares outstanding (February 1, 2014: 80.2 shares outstanding; May 3, 2014: 80.9 shares outstanding)

     15.7        15.7        15.7     

Additional paid-in capital

     258.8        258.8        242.0     

Other reserves

     235.2        235.2        235.2     

Treasury shares at cost: 7.0 shares (February 1, 2014: 7.0 shares; May 3, 2014: 6.3 shares)

     (362.3     (346.2 )     (297.7 )     6  

Retained earnings

     2,660.2        2,578.1        2,338.7     

Accumulated other comprehensive loss

     (163.8     (178.5 )     (189.4     7  
  

 

 

   

 

 

   

 

 

   

Total shareholders’ equity

     2,643.8        2,563.1        2,344.5     
  

 

 

   

 

 

   

 

 

   

Total liabilities and shareholders’ equity

   $ 4,021.6      $ 4,029.2      $ 3,694.3     
  

 

 

   

 

 

   

 

 

   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     13 weeks ended  
(in millions)    May 3,
2014
    May 4,
2013
 

Cash flows from operating activities

    

Net income

   $ 96.6      $ 91.8   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization of property, plant and equipment

     28.0        25.6   

Pension benefit

     (0.6 )     (0.1

Share-based compensation

     3.2        3.0   

Deferred taxation

     9.4        1.9   

Excess tax benefit from exercise of share awards

     (7.7      

Facility amendment fee amortization and charges

     1.0        0.1   

Other non-cash movements

     (0.6 )     (0.2

Changes in operating assets and liabilities:

    

Decrease in accounts receivable

     66.2        47.6   

Increase in other receivables and other assets

     (1.7     (5.5 )

Decrease in other current assets

     0.5        4.5   

Increase in inventories

     (19.9 )     (54.7

(Decrease) increase in accounts payable

     (4.2     18.3   

Decrease in accrued expenses and other liabilities

     (42.9 )     (51.3

Increase in deferred revenue

     14.9        8.0   

Decrease in income taxes payable

     (68.0     (42.4 )

Pension plan contributions

     (1.1     (1.8 )

Effect of exchange rate changes on currency swaps

     0.4        0.3   
  

 

 

   

 

 

 

Net cash provided by operating activities

     73.5        45.1   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (28.1 )     (23.2
  

 

 

   

 

 

 

Net cash used in investing activities

     (28.1 )     (23.2
  

 

 

   

 

 

 

Financing activities

    

Dividends paid

     (12.0 )     (9.8

Proceeds from issuance of common shares

     1.0        5.0   

Excess tax benefit from exercise of share awards

     7.7         

Repurchase of common shares

     (11.4 )     (50.1

Net settlement of equity based awards

     (15.3 )     (9.1

Payment of debt issuance costs

     (3.0 )      

(Repayment of) proceeds from short-term borrowings

     (10.5 )     5.7   
  

 

 

   

 

 

 

Net cash used in financing activities

     (43.5 )     (58.3

Cash and cash equivalents at beginning of period

     247.6        301.0   

Increase (decrease) in cash and cash equivalents

     1.9        (36.4 )

Effect of exchange rate changes on cash and cash equivalents

     (0.4     (0.9
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 249.1      $ 263.7   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

(in millions)    Common
shares at
par value
     Additional
paid-in
capital
    Other
reserves
     Treasury
shares
    Retained
earnings
    Accumulated
other
comprehensive
loss
    Total
shareholders’
equity
 

Balance at February 1, 2014

   $ 15.7       $ 258.8      $ 235.2       $ (346.2 )   $ 2,578.1      $ (178.5   $ 2,563.1   

Net income

     —          —         —          —         96.6        —         96.6   

Other comprehensive income (loss)

     —          —         —          —         —         14.7        14.7   

Dividends

     —          —         —          —         (14.4 )     —         (14.4 )

Repurchase of common shares

     —          —         —          (12.9 )     —         —         (12.9 )

Net settlement of equity based awards

     —          (3.1 )     —          (4.4 )     (0.1 )     —         (7.6 )

Share options exercised

     —          (0.1 )     —          1.2        —         —         1.1   

Share-based compensation expense

     —          3.2        —          —         —         —         3.2   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at May 3, 2014

   $ 15.7       $ 258.8      $ 235.2       $ (362.3 )   $ 2,660.2      $ (163.8   $ 2,643.8   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Principal accounting policies and basis of preparation

Basis of preparation

Signet Jewelers Limited (“Signet”, or the “Company”) is a holding company, incorporated in Bermuda, that operates through its subsidiaries. Signet is a leading retailer whose results are principally derived from one business segment – the retailing of jewelry, watches and associated services. The Company manages its business as two geographical reportable segments, being the United States of America (the “US”) and the United Kingdom (the “UK”). The US division operates retail stores under brands including Kay Jewelers, Jared The Galleria Of Jewelry and various regional brands. The UK division’s retail stores operate under brands including H.Samuel and Ernest Jones.

In the fourth quarter of Fiscal 2014, subsequent to the November 4, 2013 acquisition of a diamond polishing factory in Gaborone, Botswana, management established a separate operating segment (“Other”), which consists of all non-reportable segments including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

These condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in Signet’s Annual Report on Form 10-K for the year ended February 1, 2014.

Use of estimates

The preparation of these condensed consolidated financial statements, in conformity with US GAAP and SEC regulations for interim 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 condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to the valuation of receivables, inventory and deferred revenue, fair value of derivatives, depreciation and asset impairment, the valuation of employee benefits, income taxes and contingencies.

Fiscal year

The Company’s fiscal year ends on the Saturday nearest to January 31st. Fiscal 2015 is the 52 week year ending January 31, 2015 and Fiscal 2014 is the 52 week year ending February 1, 2014. Within these condensed consolidated financial statements, the first quarter of the fiscal years 2015 and 2014 refers to the 13 weeks ended May 3, 2014 and May 4, 2013, respectively.

Seasonality

Signet’s sales are seasonal, with the first and second quarters each normally accounting for slightly more than 20% of annual sales, the third quarter a little under 20% and the fourth quarter for about 40% of sales, with December being by far the most important month of the year. Sales made in November and December are known as the “Holiday Season.” Due to sales leverage, Signet’s operating income is even more seasonal; about 45% to 50% of Signet’s operating income normally occurs in the fourth quarter, comprised of nearly all of the UK division’s operating income and about 40% to 50% of the US division’s operating income.

 

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Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

New accounting pronouncements adopted during the period

Presentation of Unrecognized Tax Benefit

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The new guidance requires, unless certain conditions exist, an unrecognized tax benefit to be presented as a reduction to a deferred tax asset in the financial statements for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. Signet adopted this guidance effective for the first quarter ended May 3, 2014 and the implementation of this accounting pronouncement did not have an impact on Signet’s condensed consolidated financial statements.

Reclassification

Signet has reclassified the presentation of certain prior year information to conform to the current year presentation.

2. Segment information

Effective with the fourth quarter of Fiscal 2014, management changed the Company’s segment reporting in order to align with a change in its organizational and management reporting structure. Signet’s sales are derived from the retailing of jewelry, watches, other products and services. Signet has identified two geographical reportable segments, being the US and UK divisions. These segments represent channels of distribution that offer similar merchandise and services and have similar marketing and distribution strategies. Both divisions are managed by executive committees, which report to Signet’s Chief Executive Officer, who reports 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.

In the fourth quarter of Fiscal 2014, subsequent to the November 4, 2013 acquisition of a diamond polishing factory in Gaborone, Botswana, management established the Other operating segment which consists of all non-reportable segments including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones. This segment was determined to be non-reportable and will be aggregated with corporate administrative functions for segment reporting. Prior year results have been revised to reflect this change. All inter-segment sales and transfers are eliminated.

 

      13 weeks ended  
(in millions)    May 3,
2014
    May 4,
2013
 

Sales:

    

US

   $ 903.5      $ 857.2   

UK

     151.7        135.0   

Other

     0.9        1.4   
  

 

 

   

 

 

 

Total sales

   $ 1,056.1      $ 993.6   
  

 

 

   

 

 

 

Operating income (loss):

    

US

   $ 166.3      $ 152.8   

UK

            (4.1

Other

     (15.6 )(1)      (5.9
  

 

 

   

 

 

 

Total operating income

   $ 150.7      $ 142.8   
  

 

 

   

 

 

 

 

(1) Fiscal 2015 balance includes $8.4 million of acquisition related costs, see Note 19 for additional information.

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

Total assets:

        

US

   $ 3,263.8         $3,311.0       $ 3,017.0   

UK

     493.2         484.6         441.7   

Other

     264.6         233.6         235.6   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 4,021.6         $4,029.2       $ 3,694.3   
  

 

 

    

 

 

    

 

 

 

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

3. Foreign currency translation

Assets and liabilities denominated in the UK pound sterling are translated into the US dollar at the exchange rate prevailing at the balance sheet date. Equity accounts denominated in the UK pound sterling are translated into US dollars at historical exchange rates. Revenues and expenses denominated in the UK pound sterling are translated into the US dollar at the monthly average exchange rate for the period. Gains and losses resulting from foreign currency transactions are included within the consolidated income statement, whereas translation adjustments and gains and losses related to intercompany loans of a long-term investment nature are reported as an element of other comprehensive income (loss) (“OCI”). In addition, as the majority of the sales and expenses related to the factory in Gaborone, Botswana are transacted in US dollars, there is no related foreign currency translation as the US dollar is the functional currency.

4. Income taxes

Signet has business activity in all states within the US and files income tax returns for the US federal jurisdiction and all applicable states. Signet also files income tax returns in the UK and certain other foreign jurisdictions. Signet is subject to US federal and state examinations by tax authorities for tax years ending after November 1, 2008 and is subject to examination by the UK tax authority for tax years ending after January 31, 2012.

As of February 1, 2014, Signet had approximately $4.6 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 Signet’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. There has been no material change in the amount of unrecognized tax benefits in respect of uncertain tax positions during the 13 weeks ended May 3, 2014.

Signet recognizes accrued interest and, where appropriate, penalties related to unrecognized tax benefits within income tax expense. As of February 1, 2014, Signet had accrued interest of $0.3 million and there has been no material change in the amount of accrued interest as of May 3, 2014.

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 February 1, 2014, due to settlement of the uncertain tax positions with the tax authorities.

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

5. Earnings per share

 

     13 weeks ended  
(in millions, except per share amounts)    May 3,
2014
     May 4,
2013
 

Net income

   $ 96.6       $ 91.8   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     79.9         80.8   

Dilutive effect of share awards

     0.4         0.5   
  

 

 

    

 

 

 

Diluted weighted average number of shares outstanding

     80.3         81.3   
  

 

 

    

 

 

 

Earnings per share – basic

   $ 1.21       $ 1.14   

Earnings per share – diluted

   $ 1.20       $ 1.13   

The basic weighted average number of shares excludes non-vested time-based restricted shares, shares held by the Employee Stock Ownership Trust and treasury shares. Such shares are not considered outstanding and do not qualify for dividends, except for time-based restricted shares for which dividends are earned and payable by the Company subject to full vesting. The effect of excluding these shares is to reduce the average number of shares in the 13 week period ended May 3, 2014 by 7,272,616 shares (13 week period ended May 4, 2013: 6,365,336 shares). The calculation of fully diluted earnings per share for the 13 week period ended May 3, 2014 does not exclude any non-vested time-based restricted shares (13 week period ended May 4, 2013: 105,771 shares excluded) on the basis that their effect on earnings per share was anti-dilutive.

6. Shareholders’ equity

Share repurchase

 

            13 weeks ended May 3, 2014      13 weeks ended May 4, 2013  
    

Amount

authorized

     Shares
repurchased
     Amount
repurchased
    Average
repurchase
price per
share
     Shares
repurchased
     Amount
repurchased
     Average
repurchase
price per
share
 
     (in millions)             (in millions)                   (in millions)         

2013 Program(1)

   $ 350.0         126,468       $ 12.9 (3)     $ 102.10         na         na         na   

2011 Program(2)

     350.0         na         na        na         749,245       $ 50.1       $ 66.92   
     

 

 

    

 

 

      

 

 

    

 

 

    

Total

        126,468       $ 12.9      $ 102.10         749,245       $ 50.1       $ 66.92   
     

 

 

    

 

 

      

 

 

    

 

 

    

 

(1) In June 2013, the Board authorized the repurchase of up to $350 million of Signet’s common shares (the “2013 Program”). The 2013 Program may be suspended or discontinued at any time without notice. The 2013 Program had $282.5 million remaining as of May 3, 2014.
(2) In October 2011, the Board authorized the repurchase of up to $300 million of Signet’s common shares (the “2011 Program”), which authorization was subsequently increased to $350 million. The 2011 Program was completed as of May 4, 2013.
(3) As of May 3, 2014, $11.4 million has been paid to repurchase common shares and $1.5 million has been recorded in accrued expenses and other current liabilities in the consolidated balance sheets reflecting shares repurchased but not yet settled and paid for by the end of the first quarter.
na Not applicable.

Dividend

 

     Fiscal 2015     Fiscal 2014  
     Cash dividend
per share
     Total
dividends
    Cash dividend
per share
     Total
dividends
 
            (in millions)            (in millions)  

First quarter(1)

   $ 0.18       $ 14.4 (2)     $ 0.15       $ 12.1   

 

(1) Signet’s dividend policy results in the dividend payment date being a quarter in arrears from the declaration date. As a result, the fourth quarter Fiscal 2014 $0.15 per share cash dividend was paid on February 27, 2014 in the aggregate amount of $12.0 million.
(2) As of May 3, 2014, $14.4 million has been recorded in accrued expenses and other current liabilities in the consolidated balance sheets reflecting the cash dividend declared for the first quarter of Fiscal 2015, which has a record date of May 2, 2014 and a payment date of May 28, 2014.

 

9


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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

7. Accumulated other comprehensive (loss) income

 

                 Pension plan        
(in millions)    Foreign
currency
translation
    Gains
(losses) on
cash flow
hedges
    Actuarial
(losses)
gains
    Prior
service
credit
(cost)
    Accumulated
other
comprehensive
(loss) income
 

Balance at February 1, 2014

   $ (137.0 )   $ (14.3 )   $ (42.5 )   $ 15.3      $ (178.5 )

OCI before reclassifications

     9.6        0.3        —         —         9.9   

Amounts reclassified from accumulated OCI

     —         4.7        0.4        (0.3     4.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period OCI

     9.6        5.0        0.4        (0.3     14.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at May 3, 2014

   $ (127.4 )   $ (9.3 )   $ (42.1 )   $ 15.0      $ (163.8 )
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Reclassification activity by individual accumulated OCI component:    Amounts
reclassified  from
accumulated OCI
    Amounts
reclassified  from
accumulated OCI
   

Income statement caption

     13 weeks ended
May 3, 2014
    13 weeks ended
May 4, 2013
     
(in millions)                 

(Gains) losses on cash flow hedges:

      

Foreign currency contracts

   $ —       $ (0.2   Cost of sales (see Note 13)

Commodity contracts

     7.4        (0.8   Cost of sales (see Note 13)
  

 

 

   

 

 

   

Total before income tax

     7.4        (1.0  
     (2.7 )     0.4      Income taxes
  

 

 

   

 

 

   

Net of tax

     4.7        (0.6  
  

 

 

   

 

 

   

Defined benefit pension plan items:

      

Amortization of unrecognized net prior service credit

     (0.4     (0.4   Selling, general and administrative expenses (1)

Amortization of unrecognized actuarial loss

     0.5        0.6      Selling, general and administrative expenses (1)
  

 

 

   

 

 

   

Total before income tax

     0.1        0.2     
     —         (0.1   Income taxes
  

 

 

   

 

 

   

Net of tax

     0.1        0.1     
  

 

 

   

 

 

   

Total reclassifications

   $ 4.8      $ (0.5  
  

 

 

   

 

 

   

 

(1) These items are included in the computation of net periodic pension benefit (cost). See Note 14 for additional information.

8. Accounts receivable, net

Signet’s accounts receivable primarily consist of US customer in-house financing receivables. The accounts receivable portfolio consists of a population that is of similar characteristics and is evaluated collectively for impairment. The allowance is an estimate of the losses as of the balance sheet date, and is calculated using a proprietary model that analyzes factors such as delinquency rates and recovery rates. A 100% allowance is made for any amount that is more than 90 days aged on a recency basis and any amount associated with an account the owner of which has filed for bankruptcy, as well as an allowance for those amounts 90 days aged and under based on historical loss information and payment performance. The calculation is reviewed by management to assess whether, based on economic events, additional analyses are required to appropriately estimate losses inherent in the portfolio.

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

Accounts receivable by portfolio segment, net:

        

US customer in-house finance receivables

   $ 1,294.8       $ 1,356.0       $ 1,145.9   

Other accounts receivable

     13.4         18.0         11.6   
  

 

 

    

 

 

    

 

 

 

Total accounts receivable, net

   $ 1,308.2       $ 1,374.0       $ 1,157.5   
  

 

 

    

 

 

    

 

 

 

 

10


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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Signet grants credit to customers based on a variety of credit quality indicators, including consumer financial information and prior payment experience. On an ongoing basis, management monitors the credit exposure based on past due status and collection experience, as it has found a meaningful correlation between the past due status of customers and the risk of loss.

Other accounts receivable is comprised primarily of gross accounts receivable relating to the insurance loss replacement business in the UK division of $12.2 million (February 1, 2014 and May 4, 2013: $12.8 million and $10.6 million, respectively) with a corresponding valuation allowance of $0.3 million (February 1, 2014 and May 4, 2013: $0.3 million and $0.4 million, respectively).

Allowance for credit losses on US customer in-house finance receivables:

 

(in millions)    13 weeks
ended
May 3,
2014
    52 weeks
ended
February 1,
2014
    13 weeks
ended
May 4,
2013
 

Beginning balance

   $ (97.8   $ (87.7   $ (87.7

Charge-offs

     32.3        128.2        29.4   

Recoveries

     8.5        26.0        7.4   

Provision

     (30.8     (164.3     (28.7
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ (87.8   $ (97.8   $ (79.6

Ending receivable balance evaluated for impairment

     1,382.6        1,453.8        1,225.5   
  

 

 

   

 

 

   

 

 

 

US customer in-house finance receivables, net

   $ 1,294.8      $ 1,356.0      $ 1,145.9   
  

 

 

   

 

 

   

 

 

 

Net bad debt expense is defined as the provision expense less recoveries.

Credit quality indicator and age analysis of past due US customer in-house finance receivables:

 

     May 3,
2014
    February 1,
2014
    May 4,
2013
 
(in millions)    Gross      Valuation
allowance
    Gross      Valuation
allowance
    Gross      Valuation
allowance
 

Performing:

               

Current, aged 0-30 days

   $ 1,130.8       $ (34.4   $ 1,170.4       $ (36.3   $ 999.1       $ (30.5

Past due, aged 31-90 days

     205.6         (7.2     229.9         (8.0     183.9         (6.6

Non Performing:

               

Past due, aged more than 90 days

     46.2         (46.2     53.5         (53.5     42.5         (42.5
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 1,382.6       $ (87.8   $ 1,453.8       $ (97.8   $ 1,225.5       $ (79.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     May 3,
2014
    February 1,
2014
    May 4,
2013
 
(as a percentage of the ending receivable balance)       Gross        Valuation
allowance
       Gross        Valuation
allowance
       Gross        Valuation
allowance
 

Performing

     96.7 %     3.1 %     96.3 %     3.2 %     96.5 %     3.2 %

Non Performing

     3.3 %     100.0 %     3.7 %     100.0 %     3.5 %     100.0 %
     100.0 %     6.4 %     100.0 %     6.7 %     100.0 %     6.5 %
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

9. Inventories

Inventories

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

Raw materials

   $ 38.0       $ 41.8       $ 36.4   

Finished goods

     1,485.9         1,446.2         1,390.0   
  

 

 

    

 

 

    

 

 

 

Total inventories

   $ 1,523.9       $ 1,488.0       $ 1,426.4   
  

 

 

    

 

 

    

 

 

 

 

11


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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

10. Other assets

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

Deferred extended service plan costs

   $ 63.6       $ 61.9       $ 58.6   

Goodwill

     26.8         26.8         24.6   

Other assets

     29.9         25.3         24.0   
  

 

 

    

 

 

    

 

 

 

Total other assets

   $ 120.3       $ 114.0       $ 107.2   
  

 

 

    

 

 

    

 

 

 

In addition, other current assets include deferred direct costs in relation to the sale of extended service plans (“ESP”) of $22.5 million as of May 3, 2014 (February 1, 2014 and May 4, 2013: $21.9 million and $20.8 million, respectively).

Goodwill

The following table summarizes the Company’s goodwill by reporting unit:

 

(in millions)    US     UK      Other      Total  

Balance at February 2, 2013

   $ 24.6      $  —        $  —        $ 24.6   

Acquisitions(1)

     (1.4 )     —          3.6         2.2   
  

 

 

   

 

 

    

 

 

    

 

 

 

Balance at February 1, 2014

     23.2        —          3.6         26.8   

Acquisition

     —         —          —          —    
  

 

 

   

 

 

    

 

 

    

 

 

 

Balance at May 3, 2014

   $ 23.2      $ —        $ 3.6       $ 26.8   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

(1) See Note 18 for additional discussion of the goodwill recorded by the Company during Fiscal 2014.

The Company’s reporting units align with the operating segments disclosed in Note 2. There have been no goodwill impairment losses recorded during the fiscal periods presented in the condensed consolidated income statements. If future economic conditions are different than those projected by management, future impairment charges may be required.

11. Deferred revenue

Deferred revenue is comprised primarily of ESP and voucher promotions as follows:

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

ESP deferred revenue

   $ 619.6       $ 601.2       $ 563.4   

Voucher promotions and other

     12.1         15.5         10.1   
  

 

 

    

 

 

    

 

 

 

Total deferred revenue

   $ 631.7       $ 616.7       $ 573.5   
  

 

 

    

 

 

    

 

 

 

Disclosed as:

        

Current liabilities

   $ 174.4       $ 173.0       $ 157.6   

Non-current liabilities

     457.3         443.7         415.9   
  

 

 

    

 

 

    

 

 

 

Total deferred revenue

   $ 631.7       $ 616.7       $ 573.5   
  

 

 

    

 

 

    

 

 

 

 

     13 weeks ended  
(in millions)    May 3,
2014
    May 4,
2013
 

ESP deferred revenue, beginning of period:

   $ 601.2      $ 549.7   

Plans sold

     64.2        55.3   

Revenue recognized

     (45.8 )     (41.6 )
  

 

 

   

 

 

 

ESP deferred revenue, end of period

   $ 619.6      $ 563.4   
  

 

 

   

 

 

 

 

12


Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

12. Warranty reserve

Warranty reserve for diamond and gemstone guarantee, included in accrued expenses and other current liabilities, and other non-current liabilities, is as follows:

 

(in millions)   

13 weeks

ended

   

52 weeks

ended

   

13 weeks

ended

 
      May 3,
2014
    February 1,
2014
    May 4,
2013
 

Warranty reserve, beginning of period:

   $ 19.1      $ 18.5      $ 18.5   

Warranty expense

     1.7        7.4        1.6   

Utilized

     (1.4     (6.8     (1.5
  

 

 

   

 

 

   

 

 

 

Warranty reserve, end of period

   $ 19.4      $ 19.1      $ 18.6   
  

 

 

   

 

 

   

 

 

 

Disclosed as:

      

Current liabilities

   $ 6.7      $ 6.7      $ 6.8   

Non-current liabilities

     12.7        12.4        11.8   
  

 

 

   

 

 

   

 

 

 

Total warranty reserve

   $ 19.4      $ 19.1      $ 18.6   
  

 

 

   

 

 

   

 

 

 

13. Financial instruments and fair value

Signet’s principal financial instruments are comprised of cash, cash deposits/investments and overdrafts, accounts receivable and payable, derivatives and a revolving credit facility. Signet does not enter into derivative transactions for trading purposes. Derivative transactions are used by Signet for risk management purposes to address risks inherent in Signet’s business operations and sources of finance. The main risks arising from Signet’s operations are market risk including foreign currency risk and commodity risk, liquidity risk and interest rate risk. Signet uses these financial instruments to manage and mitigate these risks under policies reviewed and approved by the Board.

Market risk

Signet generates revenues and incurs expenses in US dollars and pounds sterling. As a portion of Signet’s UK division purchases are denominated in US dollars, Signet enters into foreign currency forward exchange contracts, foreign currency option contracts and foreign currency swaps to manage this exposure to the US dollar.

Signet holds a fluctuating amount of pounds sterling cash reflecting the cash generative characteristics of the UK division. Signet’s objective is to minimize net foreign exchange exposure to the income statement on pounds sterling denominated items through managing this level of cash, pounds sterling denominated intercompany balances and US dollar to pounds sterling swaps. In order to manage the foreign exchange exposure and minimize the level of pounds sterling cash held by Signet, the pounds sterling denominated subsidiaries pay dividends regularly to their immediate holding companies and excess pounds sterling are sold in exchange for US dollars.

Signet’s policy is to minimize the impact of precious metal commodity price volatility on operating results through the use of outright forward purchases of, or by entering into options to purchase, precious metals within treasury guidelines approved by the Board. In particular, Signet undertakes some hedging of its requirement for gold through the use of options, net zero-cost collar arrangements (a combination of call and put option contracts), forward contracts and commodity purchasing, while fluctuations in the cost of diamonds are not hedged.

Liquidity risk

Signet’s objective is to ensure that it has access to, or the ability to generate sufficient cash from either internal or external sources in a timely and cost-effective manner to meet its commitments as they become due and payable. Signet manages liquidity risks as part of its overall risk management policy. Management produces forecasting and budgeting information that is reviewed and monitored by the Board. Cash generated from operations and external financing are the main sources of funding supplementing Signet’s resources in meeting liquidity requirements.

The main external source of funding is a $400 million senior unsecured multi-currency five year revolving credit facility expiring May 2016, under which there were no borrowings as of May 3, 2014, February 1, 2014 or May 4, 2013. Subsequent to May 3, 2014, Signet executed its Zale acquisition financing as described below in Note 19, amending its credit facility, issuing senior unsecured notes and securitizing credit card receivables.

 

13


Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Interest rate risk

Signet may enter into various interest rate protection agreements in order to limit the impact of movements in interest rates on its cash or borrowings. There were no interest rate protection agreements outstanding at May 3, 2014, February 1, 2014 or May 4, 2013.

Credit risk and concentrations of credit risk

Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted. Signet does not anticipate non-performance by counterparties of its financial instruments, except for customer in-house financing receivables as disclosed in Note 8. Signet does not require collateral or other security to support cash investments or financial instruments with credit risk; however, it is Signet’s policy to only hold cash and cash equivalent investments and to transact financial instruments with financial institutions with a certain minimum credit rating. Management does not believe Signet is exposed to any significant concentrations of credit risk that arise from cash and cash equivalent investments, derivatives or accounts receivable.

Derivatives

The following types of derivative financial instruments are utilized by Signet to mitigate certain risk exposures related to changes in commodity prices and foreign exchange rates:

Forward foreign currency exchange contracts (designated) — These contracts, which are principally in US dollars, are entered into in order to limit the impact of movements in foreign exchange rates on forecasted foreign currency purchases. The total notional amount of these foreign currency contracts outstanding as of May 3, 2014 was $40.4 million (February 1, 2014 and May 4, 2013: $42.3 million and $43.7 million, respectively). These contracts have been designated as cash flow hedges and will be settled over the next 12 months (February 1, 2014 and May 4, 2013: 12 months and 14 months, respectively).

Forward foreign currency exchange contracts (undesignated) — Foreign currency contracts not designated as cash flow hedges are used to hedge currency flows through Signet’s bank accounts to mitigate Signet’s exposure to foreign currency exchange risk in its cash and borrowings. The total notional amount of these foreign currency contracts outstanding as of May 3, 2014 was $39.7 million (February 1, 2014 and May 4, 2013: $22.1 million and $53.8 million, respectively).

Commodity forward purchase contracts and net zero-cost collar arrangements — These contracts are entered into in order to reduce Signet’s exposure to significant movements in the price of the underlying precious metal raw material. The total notional amount of these commodity derivative contracts outstanding as of May 3, 2014 was $49.6 million (February 1, 2014 and May 4, 2013: $63.0 million and $69.2 million, respectively). These contracts have been designated as cash flow hedges and will be settled over the next 10 months (February 1, 2014 and May 4, 2013: 12 months and 9 months, respectively).

The bank counterparties to the derivative contracts expose Signet to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Signet only contracts with counterparties that meet certain minimum requirements under its counterparty risk assessment process. As of May 3, 2014, Signet believes that this credit risk did not materially change the fair value of the foreign currency or commodity contracts.

 

14


Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The following table summarizes the fair value and presentation of derivative instruments in the condensed consolidated balance sheets:

 

     Derivative assets  
           Fair value  
(in millions)    Balance sheet location    May 3,
2014
    February 1,
2014
    May 4,
2013
 

Derivatives designated as hedging instruments:

         

Foreign currency contracts

   Other current assets    $ —       $ —       $ 1.1   

Foreign currency contracts

   Other assets      —         —         —    

Commodity contracts

   Other current assets              1.4        0.8        3.0   

Commodity contracts

   Other assets      —         —         —    
     

 

 

   

 

 

   

 

 

 
      $ 1.4      $ 0.8      $ 4.1   
     

 

 

   

 

 

   

 

 

 

Derivatives not designated as hedging instruments:

         

Foreign currency contracts

   Other current assets      —         0.2        —    
     

 

 

   

 

 

   

 

 

 

Total derivative assets

      $ 1.4      $ 1.0      $ 4.1   
     

 

 

   

 

 

   

 

 

 
     Derivative liabilities  
           Fair value  
(in millions)    Balance sheet location    May 3,
2014
    February 1,
2014
    May 4,
2013
 

Derivatives designated as hedging instruments:

         

Foreign currency contracts

   Other current liabilities    $ (2.6   $ (2.1   $ (0.1

Foreign currency contracts

   Other liabilities      —         —         —    

Commodity contracts

   Other current liabilities      (0.2     (0.8     (0.2

Commodity contracts

   Other liabilities      —         —         —    
     

 

 

   

 

 

   

 

 

 
      $ (2.8   $ (2.9   $ (0.3
     

 

 

   

 

 

   

 

 

 

Derivatives not designated as hedging instruments:

         

Foreign currency contracts

   Other current liabilities    $ (0.2   $
 

  
 
 
  $ (0.2
     

 

 

   

 

 

   

 

 

 

Total derivative liabilities

      $ (3.0   $ (2.9   $ (0.5
     

 

 

   

 

 

   

 

 

 

Derivatives designated as cash flow hedges

The following table summarizes the pre-tax gains (losses) recorded in accumulated OCI for derivatives designated in cash flow hedging relationships:

 

     May 3,
2014
    February 1,
2014
    May 4,
2013
 
(in millions)                   

Foreign currency contracts

   $ (3.6 )   $ (2.3 )   $ 1.6   

Commodity contracts

     (9.4 )(1)      (18.8 )(1)      (19.3 )(1)
  

 

 

   

 

 

   

 

 

 

Total

   $ (13.0 )   $ (21.1 )   $ (17.7 )
  

 

 

   

 

 

   

 

 

 

 

(1) As of May 3, 2014, losses include $11.1 million related to commodity contracts terminated prior to contract maturity that occurred in Fiscal 2014 (February 1, 2014 and May 4, 2013: $18.2 million and $22.0 million, respectively).

 

15


Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The following tables summarize the effect of derivative instruments designated as cash flow hedges in OCI and the consolidated income statements:

Foreign currency contracts

 

             13 weeks ended  
     Income statement caption      May 3,
2014
    May 4,
2013
 
(in millions)                    

(Losses) gains recorded in accumulated OCI, beginning of period

      $ (2.3 )   $ 1.3   

Current period (losses) gains recognized in OCI

        (1.3 )     0.5   

(Gains) losses reclassified from accumulated OCI to net income

     Cost of sales         —         (0.2 )
     

 

 

   

 

 

 

(Losses) gains recorded in accumulated OCI, end of period

      $ (3.6 )   $ 1.6   
     

 

 

   

 

 

 

Commodity contracts

 

             13 weeks ended  
     Income statement caption      May 3,
2014
    May 4,
2013
 
(in millions)                    

(Losses) gains recorded in accumulated OCI, beginning of period

      $ (18.8 )   $ (0.5 )

Current period gains (losses) recognized in OCI

        2.0        (18.0

Losses (gains) reclassified from accumulated OCI to net income

     Cost of sales         7.4        (0.8 )
     

 

 

   

 

 

 

(Losses) gains recorded in accumulated OCI, end of period

      $ (9.4 )   $ (19.3 )
     

 

 

   

 

 

 

There was no material ineffectiveness related to the Company’s derivative instruments designated in cash flow hedging relationships during the 13 weeks ended May 3, 2014 and May 4, 2013, respectively. Based on current valuations, the Company expects approximately $11.9 million of net pre-tax derivative losses to be reclassified out of accumulated OCI into earnings within the next 12 months, of which $11.2 will be recognized in the remaining nine months of Fiscal 2015.

Derivatives not designated as hedging instruments

The following table presents the effects of the Company’s derivatives instruments not designated as cash flow hedges in the consolidated income statements:

 

             Amount of gain  (loss)
recognized in income
 
            13 weeks ended  
      Income statement caption      May 3,
2014
    May 4,
2013
 
(in millions)                    

Derivatives not designated as hedging instruments:

       

Foreign currency contracts

     Other operating income, net       $ (1.6 )   $ (0.2 )
     

 

 

   

 

 

 

Total

      $ (1.6 )   $ (0.2 )
     

 

 

   

 

 

 

Fair value

The estimated fair value of Signet’s financial instruments held or issued to finance Signet’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that Signet would realize upon disposition nor do they indicate Signet’s intent or ability to dispose of the financial instrument. Assets and liabilities that are carried at fair value are required to 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

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Signet 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 Signet uses to determine fair value on an instrument-specific basis are detailed below:

 

     May 3, 2014     February 1, 2014     May 4, 2013  
(in millions)    Carrying
Value
    Significant  other
observable
inputs
(Level 2)
    Carrying
Value
    Significant  other
observable
inputs
(Level 2)
    Carrying
Value
    Significant  other
observable
inputs
(Level 2)
 

Assets:

            

Foreign currency contracts

   $     $     $ 0.2      $ 0.2      $ 1.1      $ 1.1   

Commodity contracts

     1.4        1.4        0.8        0.8        3.0        3.0   

Liabilities:

            

Foreign currency contracts

     (2.8     (2.8     (2.1 )     (2.1 )     (0.3     (0.3

Commodity contracts

     (0.2 )     (0.2 )     (0.8     (0.8     (0.2 )     (0.2 )

The fair value of derivative financial instruments has been determined based on market value equivalents at the balance sheet date, taking into account the current interest rate environment, foreign currency forward rates or commodity forward rates. These are held as assets and liabilities within other receivables and other payables, and all contracts have a maturity of less than 12 months. The carrying amounts of cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities approximate fair value because of the short-term maturity of these amounts.

14. Pensions

Signet operates a defined benefit pension plan in the UK (the “UK Plan”). The components of net periodic pension benefit were as follows:

 

     13 weeks ended  
(in millions)    May 3,
2014
    May 4,
2013
 

Components of net periodic pension benefit:

    

Service cost

   $ (0.6 )   $ (0.6 )

Interest cost

     (2.5 )     (2.3 )

Expected return on UK Plan assets

     3.8        3.2   

Amortization of unrecognized prior service credit

     0.4        0.4   

Amortization of unrecognized actuarial loss

     (0.5 )     (0.6 )
  

 

 

   

 

 

 

Net periodic pension benefit

   $ 0.6      $ 0.1   
  

 

 

   

 

 

 

In the 13 weeks ended May 3, 2014, Signet contributed $1.1 million to the UK Plan and expects to contribute a minimum aggregate of $4.2 million at current exchange rates to the UK Plan in Fiscal 2015. These contributions are in accordance with an agreed upon deficit recovery plan and based on the results of the actuarial valuation as of April 5, 2012.

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

15. Commitments and contingencies

Legal proceedings

As previously reported, in March 2008, a group of private plaintiffs (the “Claimants”) filed a class action lawsuit for an unspecified amount against Sterling Jewelers Inc. (“Sterling”), a subsidiary of Signet, in the U.S. District Court for the Southern District of New York alleging that US store-level employment practices are discriminatory as to compensation and promotional activities with respect to gender. In June 2008, the District Court referred the matter to private arbitration where the Claimants sought to proceed on a class-wide basis. Discovery has been completed. The Claimants filed a motion for class certification and Sterling opposed the motion. A hearing on the class certification motion was held in late February 2014. The motion is now pending before the Arbitrator.

Also as previously reported, on September 23, 2008, the U.S. Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against Sterling in the U.S. District Court for the Western District of New York. The EEOC’s lawsuit alleges that Sterling engaged in intentional and disparate impact gender discrimination with respect to pay and promotions of female retail store employees from January 1, 2003 to the present. The EEOC asserts claims for unspecified monetary relief and non-monetary relief against the Company on behalf of a class of female employees subjected to these alleged practices. Non-expert fact discovery closed in mid-May 2013. In September 2013, Sterling made a motion for partial summary judgment on procedural grounds, which was referred to a Magistrate Judge. The Magistrate Judge heard oral arguments on the summary judgment motion in December 2013. On January 2, 2014, the Magistrate Judge issued his Report, Recommendation and Order, recommending that the Court grant Sterling’s motion for partial summary judgment and dismiss the EEOC’s claims in their entirety. The EEOC filed its objections to the Magistrate Judge’s ruling and Sterling filed its response thereto. The District Court Judge heard oral arguments on the EEOC’s objections to the Magistrate Judge’s ruling on March 7, 2014 and on March 11, 2014 entered an order dismissing the action with prejudice. On May 12, 2014 the EEOC filed its Notice of Appeal of the District Court Judge’s dismissal of the action to United States Court of Appeals for the Second Circuit. The appeal is proceeding.

Sterling denies the allegations of both parties and has been defending these cases vigorously. At this point, no outcome or amount of loss is able to be estimated.

In the ordinary course of business, Signet may be subject, from time to time, to various other proceedings, lawsuits, disputes or claims incidental to its business, which the Company believe are not significant to Signet’s consolidated financial position, results of operations or cash flows.

16. Share-based compensation expense

Signet recorded share-based compensation expense of $3.2 million for the 13 weeks ended May 3, 2014 related to the Omnibus Plan and Share Saving Plans (13 weeks ended May 4, 2013: $3.0 million).

17. Loans, overdrafts and long-term debt

 

(in millions)    May 3,
2014
     February 1,
2014
     May 4,
2013
 

Current liabilities – loans and overdrafts

        

Revolving credit facility

   $ —        $ —        $ —    

Bank overdrafts

     8.8         19.3        5.7  
  

 

 

    

 

 

    

 

 

 

Total loans and overdrafts

   $ 8.8       $ 19.3      $ 5.7  
  

 

 

    

 

 

    

 

 

 

In May 2011, Signet entered into a $400 million senior unsecured multi-currency five year revolving credit facility agreement (the “Credit Facility”). The Credit Facility contains an expansion option that, with the consent of the lenders or the addition of new lenders, and subject to certain conditions, availability under the Credit Facility may be increased by an additional $200 million at the request of Signet. The Credit Facility has a five year term and matures in May 2016, at which time all amounts outstanding under the Credit Facility will be due and payable. The Credit Facility also contains various customary representations and warranties, financial reporting requirements and other affirmative and negative covenants. The Credit Facility requires that Signet maintain at all times a “Leverage Ratio” (as defined in the Credit Facility) to be no greater than 2.50 to 1.00 and a “Fixed Charge Coverage Ratio” (as defined in the Credit Facility) to be no less than 1.40 to 1.00, both determined as of the end of each fiscal quarter of Signet for the trailing twelve months.

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

At May 3, 2014, February 1, 2014 and May 4, 2013, there were no amounts outstanding under the Credit Facility, with no intra-period borrowings. Capitalized amendment fees for the Credit Facility were $2.1 million, with $1.4 million and $0.9 million of accumulated amortization as of May 3, 2014 and May 4, 2013, respectively. For the 13 weeks ended May 3, 2014, $0.2 million was charged to the condensed consolidated income statement (13 weeks ended May 4, 2013: $0.1 million). Signet had stand-by letters of credit of $8.7 million, $10.1 million and $9.5 million as of May 3, 2014, February 1, 2014 and May 4, 2013, respectively.

At May 3, 2014, February 1, 2014 and May 4, 2013, there were $8.8 million, $19.3 million and $5.7 million in overdrafts, which represents issued and outstanding checks where there are no bank balances with the right to offset.

On February 19, 2014, Signet entered into a definitive agreement to acquire Zale Corporation (“Zale”). In conjunction with the proposed acquisition, Signet entered into an $800 million 364-day unsecured bridge facility to finance the transaction. The bridge facility contains customary fees in addition to interest incurred on any borrowings drawn on the facility. Subsequent to May 3, 2014, Signet executed its Zale acquisition financing as described below in Note 19, replacing the bridge facility in addition to amending its Credit Facility, issuing senior unsecured notes and securitizing credit card receivables. No amounts were drawn on the bridge facility prior to replacement and fees of $4.2 million were incurred and capitalized. Of the $4.2 million fees incurred, $3.0 million was paid and $1.2 million was accrued as of May 3, 2014. Amortization related to these fees of $0.8 million were charged to the condensed consolidated income statement for the 13 weeks ended May 3, 2014.

18. Acquisition

On November 4, 2013, Signet acquired a diamond polishing factory in Gaborone, Botswana for $9.1 million. The acquisition expands the Company’s long-term diamond sourcing capabilities and provides resources for the Company to cut and polish stones.

The transaction was accounted for as a business combination during the fourth quarter of Fiscal 2014. The Company is in the process of finalizing the valuation of the net assets acquired, most notably the valuation of property, plant and equipment. The total consideration paid by the Company was funded through existing cash and allocated to the net assets acquired based on the preliminary fair values as follows: property, plant and equipment acquired of $5.5 million and goodwill of $3.6 million. None of the goodwill will be deductible for income tax purposes. The goodwill balance is recorded within other assets in the consolidated balance sheet. See Note 10.

The results of operations related to the acquired diamond polishing factory are reported within the Other operating segment of Signet’s consolidated results and included in Signet’s condensed consolidated financial statements commencing on the date of acquisition in the Other operating segment.

19. Subsequent events

Zale acquisition

On May 29, 2014, the Company completed its acquisition of Zale Corporation (“Zale”), pursuant to the Agreement and Plan of Merger dated as of February 19, 2014. As a result of the Company acquiring 100% of the outstanding shares of Zale, Zale became a wholly-owned consolidated subsidiary of Signet. Under the terms of the Agreement and Plan of Merger, Zale shareholders received $21 per share in cash for each outstanding share of common stock and the vesting, upon consummation of the acquisition, of certain outstanding Zale restricted stock units and Zale stock options, which converted into the right to receive the merger consideration. The cost of the transaction was $1.46 billion, including approximately $0.5 billion to extinguish Zale’s existing debt. The acquisition reflects our strategy to diversify our businesses and expand our international footprint.

In conjunction with the acquisition, the Company entered into a senior unsecured term loan facility of $400 million, and certain subsidiaries of the Company entered into an asset-backed securitization facility of $600 million, and completed the issuance and sale of registered senior unsecured notes of $400 million. The proceeds from these borrowings, together with cash on hand, were used to pay down Zale’s existing debt, finance the acquisition and to pay fees, costs and expenses related thereto. In conjunction with the senior unsecured term loan facility, the Company also amended and restated its existing $400 million revolving credit facility to, among other things, extend the maturity thereof until May 2019.

 

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SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The Company will account for this acquisition under the acquisition method of accounting for business combinations. All of the assets and liabilities of Zale will be recorded at their respective fair values as of the acquisition date and the results of operations will be reported in the Company’s consolidated financial statements beginning as of the effective date of the acquisition. Any transaction costs will be expensed as incurred. Due to the limited time between the acquisition date and the filing of this Quarterly Report on Form 10-Q for the 13 week period ended May 3, 2014, the initial purchase accounting has not been completed. As such, it is not practicable for the Company to disclose: (i) the allocation of purchase price to assets acquired and liabilities assumed, and (ii) pro forma revenues and earnings of the combined company for the 13 week period ended May 3, 2014. This information will be included in our Quarterly Report on Form 10-Q for the 13 week and 26 week periods ended August 2, 2014 to be filed with the SEC.

During the 13 week period ended May 3, 2014, the Company expensed $8.4 million of transaction costs in connection with the Company’s acquisition of Zale, which are included in selling, general and administrative expenses in the condensed consolidated income statement.

Issuance of senior unsecured notes due 2024

On May 19, 2014, Signet UK Finance plc (“Signet UK Finance”), a wholly owned subsidiary of the Company, issued $400 million aggregate principal amount of its 4.700% senior unsecured notes due in 2024 (the “Notes”). The Notes were issued under an effective registration statement previously filed with the SEC. Interest on the notes is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 2014. The Notes are jointly and severally guaranteed, on a full and unconditional basis, by the Company and by certain of the Company’s wholly owned subsidiaries (such subsidiaries, the “Guarantors”). The Notes were issued pursuant to a base indenture among the Company, Signet UK Finance, the Guarantors and Deutsche Bank Trust Company Americas as trustee, which indenture contains customary covenants and events of default provisions. The Company received proceeds from the offering of approximately $393.9 million, which were net of underwriting discounts, commissions and offering expenses.

Asset-backed securitization facility

On May 15, 2014, Sterling Jewelers Receivables Master Note Trust (the “Issuer”), a Delaware statutory trust and an indirect subsidiary of the Company, issued two-year revolving asset-backed variable funding notes pursuant to a master indenture dated as of November 2, 2001, as supplemented by an indenture supplement dated as of May 15, 2014 among the Issuer, Sterling Jewelers Inc. (“SJI”) and Deutsche Bank Trust Company Americas, the indenture trustee. Under terms of the notes, the Issuer has obtained $600 million of financing from commercial paper conduits sponsored by JPMorgan Chase Bank, N.A., which indebtedness is secured by credit card receivables originated from time to time by SJI. The credit card receivables will ultimately be transferred to the Issuer and are serviced by SJI. Signet guarantees the performance by SJI of its obligations under the agreements associated with this financing arrangement. Borrowings under the asset-backed variable funding notes will bear interest at a rate per annum equal to LIBOR plus an applicable margin.

New term loan and amended revolving credit agreement

On May 27, 2014, Signet amended and restated its existing credit agreement to (i) add a new $400 million term loan facility and (ii) amend its existing revolving credit facility. The new term loan facility is a $400 million 5-year senior unsecured facility with JPMorgan Chase Bank, N.A, acting as administrative agent. Signet simultaneously amended and restated its credit facility extending the maturity date to 2019. Borrowings under each of the term loan facility and the amended revolving credit facility will bear interest at a rate per annum equal to an applicable margin, plus, at Signet’s option, either (a) a base rate or (b) a LIBOR rate. The amended and restated credit agreement provides that Signet may voluntarily repay outstanding loans at any time without premium or penalty other than reimbursement of the lender’s redeployment and breakage costs in certain cases.

Signet will be required to make scheduled quarterly payments commencing on November 1, 2014 equal to the amounts per annum of the original principal amount of the term loan as follows: 5% in year one, 7.5% in year two, 10% in year three, 12.5% in year four and 15% in year five, with the balance due on May 27, 2019.

The amended and restated credit agreement contains various customary representatives and warranties, financial reporting requirements and other affirmative and negative covenants. As with Signet’s prior credit facility, Signet will be required to maintain at all times a leverage ratio of no greater than 2.50 to 1.00 and a fixed charge coverage ratio of no less than 1.40 to 1.00, both determined as of the end of each fiscal quarter of Signet for the trailing twelve months.

 

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Table of Contents

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

No borrowings were drawn on the prior credit facility as of May 3, 2014. As of the date of this report, $400 million was drawn on the new term loan facility and no borrowings were drawn on the amended revolving credit facility.

20. Condensed consolidating financial information

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” We and certain of our subsidiaries have guaranteed the obligations under certain debt securities that have been issued by Signet UK Finance plc. The following presents the condensed consolidating financial information for: (i) the indirect Parent Company (Signet Jewelers Limited); (ii) the Issuer of the guaranteed obligations (Signet UK Finance plc); (iii) the Guarantor subsidiaries, on a combined basis; (iv) the non-guarantor subsidiaries, on a combined basis; (v) consolidating eliminations; and (vi) Signet Jewelers Limited and Subsidiaries on a consolidated basis. Each Guarantor subsidiary is 100% owned by the Parent Company at the date of each balance sheet presented. The Guarantor subsidiaries, along with Signet Jewelers Limited, will fully and unconditionally guarantee the obligations of Signet UK Finance plc under any such debt securities. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements.

The accompanying condensed consolidating financial information has been presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries, and intercompany activity and balances.

 

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Table of Contents

Condensed Consolidated Income Statement

For the 13 week period ended May 3, 2014

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
    Signet UK
Finance  plc
     Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales

   $ —        $ —        $ 1,043.7      $ 12.4      $ —        $ 1,056.1   

Cost of sales

     —          —           (647.6 )     (1.3 )     —          (648.9 )
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     —          —           396.1        11.1        —          407.2   

Selling, general and administrative expenses

     (0.4 )     —           (303.8 )     (6.3 )     —          (310.5 )

Other operating income, net

     —          —           52.0        2.0        —          54.0   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (0.4 )     —           144.3        6.8        —          150.7   

Intercompany interest (expense) income

     —          —           (7.0 )     7.0        —          —     

Interest expense, net

     —          —           (1.8 )     —          —          (1.8 )
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (0.4 )     —           135.5        13.8        —          148.9   

Income taxes

     —          —           (55.9 )     3.6        —          (52.3 )

Equity in income of subsidiaries

     97.0        —           91.2        80.8        (269.0 )     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 96.6      $ —        $ 170.8      $ 98.2      $ (269.0 )   $ 96.6   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

22


Table of Contents

Condensed Consolidated Income Statement

For the 13 week period ended May 4, 2013

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
    Signet UK
Finance  plc
     Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales

   $ —        $ —        $ 981.7      $ 11.9      $ —        $ 993.6   

Cost of sales

     —          —           (609.3 )     (1.5 )     —          (610.8 )
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     —          —           372.4        10.4        —          382.8   

Selling, general and administrative expenses

     (0.4 )     —           (285.6 )     (1.0 )     —          (287.0 )

Other operating income, net

     —          —           47.4        (0.4 )     —          47.0   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (0.4 )     —           134.2        9.0        —          142.8   

Intercompany interest (expense) income

     —          —           (8.1 )     8.1        —          —     

Interest expense, net

     —          —           (0.9 )     —          —          (0.9 )
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (0.4 )     —           125.2        17.1        —          141.9   

Income taxes

     —          —           (48.8 )     (1.3 )     —          (50.1 )

Equity in income of subsidiaries

     92.2        —           83.7        76.0        (251.9 )     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 91.8      $ —        $ 160.1      $ 91.8      $ (251.9 )   $ 91.8   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Condensed Consolidated Statement of Comprehensive Income

For the 13 week period ended May 3, 2014

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
     Signet UK
Finance  plc
     Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Net income

   $ 96.6       $ —        $ 170.8      $ 98.2      $ (269.0 )   $ 96.6   

Other comprehensive income (loss):

              

Foreign currency translation adjustments

     —           —           10.9        (1.8 )     0.5        9.6   

Cash flow hedges:

              

Unrealized gain

     —           —           0.3        —          —          0.3   

Reclassification adjustment for losses to net income

     —           —           4.7        —          —          4.7   

Pension plan:

              

Actuarial gain

     —           —           —          —          —          —     

Reclassification adjustment to net income for amortization of actuarial loss

     —           —           0.5        —          —          0.4   

Prior service benefit

     —           —           —          —          —          —     

Reclassification adjustment to net income for amortization of prior service credits

     —           —           (0.4 )     —          —          (0.3 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive (loss) income

     —           —          16.0        (1.8 )     0.5        14.7   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 96.6       $ —        $ 186.8      $ 96.4      $ (268.5 )   $ 111.3   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Condensed Consolidated Statement of Comprehensive Income

For the 13 week period ended May 4, 2013

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
     Signet UK
Finance  plc
     Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
     Eliminations     Consolidated  

Net income

   $ 91.8       $ —        $ 160.1      $ 91.8       $ (251.9 )   $ 91.8   

Other comprehensive (loss) income:

               

Foreign currency translation adjustments

     —           —           (2.1 )     0.4         (0.1 )     (1.8 )

Cash flow hedges:

               

Unrealized loss

     —           —           (11.4 )     —           —          (11.4 )

Reclassification adjustment for gains to net income

     —           —           (0.6 )     —           —          (0.6 )

Pension plan:

               

Actuarial loss

     —           —           —          —           —          —     

Reclassification adjustment to net income for amortization of actuarial loss

     —           —           0.5        —           —          0.5   

Prior service costs

     —           —           —          —           —          —     

Reclassification adjustment to net income for amortization of prior service credits

     —           —           (0.4 )     —           —          (0.4 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total other comprehensive (loss) income

     —           —          (14.0 )     0.4         (0.1 )     (13.7 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income

   $ 91.8       $ —        $ 146.1      $ 92.2       $ (252.0 )   $ 78.1   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

25


Table of Contents

Condensed Consolidated Balance Sheet

May 3, 2014

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
     Signet UK
Finance  plc
     Guarantor
Subsidiaries
     Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Assets

               

Current assets:

               

Cash and cash equivalents

   $ 1.7       $ —        $ 226.7       $ 20.7      $ —        $ 249.1   

Accounts receivable, net

     —           —           1,299.4         8.8        —          1,308.2   

Intercompany receivables, net

     24.3         —           —           233.5        (257.8 )     —     

Other receivables

     —           —           46.0         1.1        —          47.1   

Other current assets

     0.1         —           90.5         0.4        —          91.0   

Deferred tax assets

     —           —           2.5         0.2        —          2.7   

Income taxes

     —           —           10.1         0.6        —          10.7   

Inventories

     —           —           1,469.4         54.5        —          1,523.9   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     26.1         —           3,144.6         319.8        (257.8 )     3,232.7   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-current assets:

               

Property, plant and equipment, net

     —           —           487.8         6.2        —          494.0   

Investment in subsidiaries

     2,634.0         —           1,559.9         1,243.9        (5,437.8 )     —     

Intercompany receivables, net

     —           —           —           1,098.0        (1,098.0 )     —     

Other assets

     —           —           116.7         3.6        —          120.3   

Deferred tax assets

     —           —           114.8         —          —          114.8   

Retirement benefit asset

     —           —           59.8         —          —          59.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,660.1       $ —        $ 5,483.6       $ 2,671.5      $ (6,793.6 )   $ 4,021.6   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ equity

               

Current liabilities:

               

Loans and overdrafts

   $ —         $ —        $ 8.8       $ —        $ —        $ 8.8   

Accounts payable

     —           —           162.9         0.2        —          163.1   

Intercompany payables, net

     —           —           257.8         —          (257.8 )     —     

Accrued expenses and other current liabilities

     16.3         —           274.2         3.3        —          293.8   

Deferred revenue

     —           —           174.4         —          —          174.4   

Deferred tax liabilities

     —           —           123.9         —          —          123.9   

Income taxes

     —           —           35.7         (3.5     —          32.2   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     16.3         —           1,037.7         —          (257.8 )     796.2   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-current liabilities:

               

Intercompany payables, net

     —           —           1,098.0         —          (1,098.0 )     —     

Deferred tax liabilities

     —           —           2.7         —          —          2.7   

Other liabilities

     —           —           118.5         3.1        —          121.6   

Deferred revenue

     —           —           457.3         —          —          457.3   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     16.3         —           2,714.2         3.1        (1,355.8 )     1,377.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     2,643.8         —           2,769.4         2,668.4        (5,437.8 )     2,643.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 2,660.1       $ —        $ 5,483.6       $ 2,671.5      $ (6,793.6 )   $ 4,021.6   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

Condensed Consolidated Balance Sheet

February 1, 2014

 

(in millions)    Signet
Jewelers
Limited
     Signet UK
Finance  plc
     Guarantor
Subsidiaries
     Non-
Guarantor
Subsidiaries
     Eliminations     Consolidated  

Assets

                

Current assets:

                

Cash and cash equivalents

   $ 1.4       $ —        $ 237.0       $ 9.2       $ —        $ 247.6   

Accounts receivable, net

     —           —           1,361.3         12.7         —          1,374.0   

Intercompany receivables, net

     47.7         —           —           238.0         (285.7 )     —     

Other receivables

     —           —           51.1         0.4         —          51.5   

Other current assets

     —           —           86.5         0.5         —          87.0   

Deferred tax assets

     —           —           2.8         0.2         —          3.0   

Income taxes

     —           —           6.0         0.5         —          6.5   

Inventories

     —           —           1,434.5         53.5         —          1,488.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     49.1         —           3,179.2         315.0         (285.7 )     3,257.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Non-current assets:

                

Property, plant and equipment, net

     —           —           481.5         6.1         —          487.6   

Investment in subsidiaries

     2,526.3         —           1,452.8         1,143.2         (5,122.3 )     —     

Intercompany receivables, net

     —           —           —           1,098.0         (1,098.0 )     —     

Other assets

     —           —           110.4         3.6         —          114.0   

Deferred tax assets

     —           —           113.6         0.1         —          113.7   

Retirement benefit asset

     —           —           56.3         —           —          56.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 2,575.4       $ —        $ 5,393.8       $ 2,566.0       $ (6,506.0 )   $ 4,029.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Shareholders’ equity

                

Current liabilities:

                

Loans and overdrafts

   $ —         $ —        $ 19.3       $ —         $ —        $ 19.3   

Accounts payable

     —           —           160.5         2.4         —          162.9   

Intercompany payables, net

     —           —           285.7         —           (285.7 )     —     

Accrued expenses and other current liabilities

     12.3         —           313.1         3.1         —          328.5   

Deferred revenue

     —           —           173.0         —           —          173.0   

Deferred tax liabilities

     —           —           113.1         —           —          113.1   

Income taxes

     —           —           101.3         2.6         —          103.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     12.3         —           1,166.0         8.1         (285.7 )     900.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Non-current liabilities:

                

Intercompany payables, net

     —           —           1,098.0         —           (1,098.0 )     —     

Other liabilities

     —           —           118.5         3.2         —          121.7   

Deferred revenue

     —           —           443.7         —           —          443.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     12.3         —           2,826.2         11.3         (1,383.7 )     1,466.1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total shareholders’ equity

     2,563.1         —           2,567.6         2,554.7         (5,122.3 )     2,563.1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 2,575.4       $ —        $ 5,393.8       $ 2,566.0       $ (6,506.0 )   $ 4,029.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

27


Table of Contents

Condensed Consolidated Balance Sheet

May 4, 2013

(Unaudited)

 

(in millions)    Signet
Jewelers
Limited
     Signet UK
Finance  plc
     Guarantor
Subsidiaries
     Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Assets

               

Current assets:

               

Cash and cash equivalents

   $ 9.4       $ —        $ 225.0       $ 29.3      $ —        $ 263.7   

Accounts receivable, net

     —           —           1,149.6         7.9        —          1,157.5   

Intercompany receivables, net

     26.6         —           —           710.1        (736.7 )     —     

Other receivables

     —           —           40.1         0.1        —          40.2   

Other current assets

     0.1         —           81.8         (0.1 )     —          81.8   

Deferred tax assets

     —           —           2.0         0.3        —          2.3   

Income taxes

     —           —           10.1         —          —          10.1   

Inventories

     —           —           1,388.7         37.7        —          1,426.4   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     36.1         —           2,897.3         785.3        (736.7 )     2,982.0   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-current assets:

               

Property, plant and equipment, net

     —           —           429.3         0.6        —          429.9   

Investment in subsidiaries

     2,320.6         —           1,398.2         1,101.5        (4,820.3 )     —     

Intercompany receivables, net

     —           —           —           600.0        (600.0 )     —     

Other assets

     —           —           107.2         —          —          107.2   

Deferred tax assets

     —           —           124.9         —          —          124.9   

Retirement benefit asset

     —           —           50.3         —          —          50.3   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,356.7       $ —        $ 5,007.2       $ 2,487.4      $ (6,157.0 )   $ 3,694.3   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ equity

               

Current liabilities:

               

Loans and overdrafts

   $ —         $ —        $ 5.7       $ —        $ —        $ 5.7   

Accounts payable

     —           —           176.4         0.4        —          176.8   

Intercompany payables, net

     —           —           736.7         —          (736.7 )     —     

Accrued expenses and other current liabilities

     12.2         —           253.5         3.7        —          269.4   

Deferred revenue

     —           —           157.6         —          —          157.6   

Deferred tax liabilities

     —           —           145.6         —          —          145.6   

Income taxes

     —           —           63.2         1.3        —          64.5   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     12.2         —           1,538.7         5.4        (736.7 )     819.6   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-current liabilities:

               

Intercompany payables, net

     —           —           600.0         —          (600.0 )     —     

Deferred tax liabilities

     —              1.0         —          —          1.0   

Other liabilities

     —           —           108.2         5.1        —          113.3   

Deferred revenue

     —           —           415.9         —          —          415.9   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     12.2         —           2,663.8         10.5        (1,336.7 )     1,349.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     2,344.5         —           2,343.4         2,476.9        (4,820.3 )     2,344.5   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 2,356.7       $ —        $ 5,007.2       $ 2,487.4      $ (6,157.0 )   $ 3,694.3   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

28


Table of Contents

Condensed Consolidated Statement of Cash Flows

For the 13 week period ended May 3, 2014

(Unaudited)

 

(in millions)   Signet
Jewelers
Limited
    Signet UK
Finance  plc
    Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash flows from operating activities

           

Other cash (used in) provided by operating activities

  $ (0.5 )   $ —       $ 62.4      $ 11.6      $ —       $ 73.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by operating activities

    (0.5 )     —          62.4        11.6        —          73.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing activities

           

Purchase of property, plant and equipment

    —          —          (27.8 )     (0.3 )     —          (28.1 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

    —          —          (27.8 )     (0.3 )     —          (28.1 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing activities

           

Dividends paid

    (12.0 )     —          —          —          —          (12.0 )

Intercompany dividends paid

    —          —          1.1        (1.1 )     —          —     

Proceeds from issuance of common shares

    1.0        —          —          —          —          1.0   

Excess tax benefit from exercise of share awards

    —          —          7.7        —          —          7.7   

Repurchase of common shares

    (11.4 )     —