<PAGE> 1
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: October 31, 2000
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: 0-028176
Whitehall Jewellers, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-1433610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 No. Wacker, Chicago, IL. 60606
(Address of principal executive offices)
312/782-6800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal
year, if changed since last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of the Registrant's common stock $.001 par value per share,
outstanding as of October 31, 2000 was 15,090,011 and the number of the
Registrant's Class B common stock $1.00 par value as of such date was 147.69.
<PAGE> 2
Whitehall Jewellers, Inc.
Statements of Operations
for the three months and nine months ended October 31, 2000 and 1999
(unaudited)(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October October October October
31, 2000 31, 1999 31, 2000 31, 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 71,035 $ 62,933 $ 220,809 $ 187,754
Cost of sales (including buying and
occupancy expenses) 44,896 37,894 135,951 113,105
--------- --------- --------- ---------
Gross profit 26,139 25,039 84,858 74,649
Selling, general and administrative
expenses 27,684 21,605 80,442 62,978
--------- --------- --------- ---------
Income (loss) from operations (1,545) 3,434 4,416 11,671
Interest expense 1,700 1,669 4,021 4,318
--------- --------- --------- ---------
Income (loss) before income taxes (3,245) 1,765 395 7,353
Income tax (benefit) expense (1,249) 680 153 2,832
--------- --------- --------- ---------
Net income (loss) before
cumulative effect of accounting
change (1,996) 1,085 242 4,521
Cumulative effect of accounting
Change, net of tax -- -- (3,068) --
--------- --------- --------- ---------
Net income (loss) $ (1,996) $ 1,085 $ (2,826) $ 4,521
========= ========= ========= =========
Basic earnings per share:
Net income (loss) before
cumulative effect of accounting
change $ (0.13) $ 0.07 $ 0.02 $ 0.31
========= ========= ========= =========
Cumulative effect of accounting
Change, net of tax $ -- $ -- $ (0.20) $ --
========= ========= ========= =========
Net income (loss) $ (0.13) $ 0.07 $ (0.18) $ 0.31
========= ========= ========= =========
Weighted average common share
and common share equivalents 15,178 14,477 15,902 14,589
========= ========= ========= =========
Diluted earnings per share:
Net income (loss) before
cumulative effect of accounting
change $ (0.13) $ 0.07 $ 0.02 $ 0.30
========= ========= ========= =========
Cumulative effect of accounting
Change, net of tax $ -- $ -- $ (0.19) $ --
========= ========= ========= =========
Net income (loss) $ (0.13) $ 0.07 $ (0.17) $ 0.30
========= ========= ========= =========
Weighted average common share
and common share equivalents 15,178 15,215 16,385 15,080
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
Whitehall Jewellers, Inc.
Balance Sheets
as of October 31, 2000, January 31, 2000 and October 31, 1999
(unaudited, in thousands)
<TABLE>
<CAPTION>
(audited)
------------------- ------------------- -------------------
October 31, 2000 January 31, 2000 October 31, 1999
------------------- ------------------- -------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Accounts receivable, net $ 2,213 $ 3,159 $ 3,020
Layaway receivables, net - 5,638 5,061
Merchandise inventories 203,785 147,691 161,848
Other current assets 730 1,109 951
Prepaid taxes 1,833 --- 1,671
Deferred income taxes, net 4,006 362 1,518
Deferred financing costs 383 2,086 362
--------- --------- ---------
Total current assets 212,950 160,045 174,431
Property and equipment, net 62,747 49,144 47,246
Goodwill 5,990 6,186 6,252
Deferred income tax, net 613 948 926
Deferred financing costs 1,023 613 1,038
--------- --------- ---------
Total assets $ 283,323 $ 216,936 $ 229,893
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Outstanding checks, net $ 2,912 $ 17,207 $ 5,854
Revolver loans 76,532 41,117 64,129
Current portion of long-term debt 4,000 3,250 3,000
Accounts payable 63,159 37,005 60,492
Customer deposits 4,365 --- ---
Accrued payroll 3,823 5,945 3,697
Income taxes --- 7,315 ---
Other accrued expenses 18,015 16,868 17,454
--------- --------- ---------
Total current liabilities 172,806 128,707 154,626
Term loan 11,000 14,000 15,500
Subordinated debt 640 640 640
Other long-term liabilities 2,021 1,661 2,085
--------- --------- ---------
Total liabilities 186,467 145,008 172,851
Commitments and contingencies
Stockholders' equity:
Common stock 17 15 15
Class B common stock --- --- ---
Class C common stock --- --- ---
Class D common stock --- --- ---
Additional paid-in capital 103,341 60,426 60,353
Accumulated earnings 18,654 21,484 6,671
--------- --------- ---------
122,012 81,925 67,039
--------- --------- ---------
Less:
Treasury stock, at cost(2,643,376, 883,376 and
883,376, shares respectively)
(25,156) (9,997) (9,997)
--------- --------- ---------
Total stockholders' equity, net 96,856 71,928 57,042
--------- --------- ---------
Total liabilities and stockholders' equity $ 283,323 $ 216,936 $ 229,893
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
Whitehall Jewellers, Inc.
Statements of Cash Flows
for the nine months ended October 31, 2000 and 1999
(unaudited, in thousands)
<TABLE>
<CAPTION>
Nine months ended
-----------------
October 31, 2000 October 31, 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,826) $ 4,521
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 6,865 5,089
Loss on disposition of assets 48 89
Cumulative effect of accounting change, net 3,068
Changes in assets and liabilities:
Decrease in accounts receivable, net 946 127
Increase in layaway receivables, net - (1,547)
Increase in merchandise inventories, net of gold consignment (53,505) (45,100)
Decrease in other current assets 379 378
Increase in prepaid taxes (1,833) (1,671)
Increase in customer deposits 411 -
Increase in accounts payable 26,154 34,891
Decrease in accrued income tax (7,315) (5,226)
(Decrease) Increase in accrued liabilities (616) 4,004
--------- ---------
Net cash used in operating activities (28,224) (4,445)
Cash flows from investing activities:
Capital expenditures (20,045) (17,652)
Purchase of assets --- ---
Proceeds from assets sold --- ---
--------- ---------
Net cash used in investing activities (20,045) (17,652)
Cash flows from financing activities:
Borrowing on revolver loan 343,180 232,694
Repayment of revolver loan (307,765) (200,466)
Proceeds from term loan --- ---
Repayment of term loan (2,250) (1,500)
Proceeds from gold consignment 2,016 3,015
Proceeds from exercise of stock options 380 350
Proceeds from equity offering 42,537 ---
Financing costs (375) ---
Purchases of treasury stock (15,159) (9,997)
Decrease in outstanding checks, net (14,295) (1,999)
--------- ---------
Net cash provided by financing activities 48,269 22,097
--------- ---------
Net change in cash and cash equivalents --- ---
Cash and cash equivalents at beginning of period --- ---
--------- ---------
Cash and cash equivalents at end of period $ --- $ ---
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
Whitehall Jewellers, Inc.
Notes to Financial Statements
1. Description of Operations
The financial statements of Whitehall Jewellers, Inc. (the "Company")
include the results of the Company's chain of specialty retail fine jewelry
stores. The Company operates exclusively in one business segment, specialty
retail jewelry. The Company has a national presence with 347 stores as of
October 31, 2000, located in 36 states, operating in regional or super-regional
shopping malls.
2. Equity Offering
In March, 2000, the Company completed an offering of Common Stock (the
"Offering"). The Company issued 2,325,500 shares of Common Stock, and received
proceeds of $42.5 million net of underwriting discounts and offering costs. The
Company used the proceeds to reduce the Company's indebtedness and for working
capital and other general corporate purposes.
3. Common Stock Repurchase Program
On July 14, 2000, the Board of Directors authorized the Company to
repurchase up to $15.0 million of its Common Stock. On August 23, 2000, the
Company announced that its Board of Directors had increased the authorization to
purchase shares under the Stock Repurchase Program from $15.0 million to $20.0
million of the Company's Common Stock. Shares repurchased by the Company reduce
the weighted average number of common shares outstanding for basic and diluted
earnings per share calculations.
As of October 31, 2000, the Company had repurchased 1,760,000 shares
under this Stock Repurchase Program at a total cost of approximately $15.2
million.
4. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Balance Sheet as of January 31, 2000 was
derived from the audited financial statements for the year ended January 31,
2000. The accompanying unaudited Balance Sheets as of October 31, 2000 and 1999
and the Statements of Operations for the three months and nine months ended
October 31, 2000 and 1999 have been prepared in accordance with generally
accepted accounting principles for interim financial information. The interim
financial statements reflect all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented. The interim
financial statements should be read in the context of the Financial Statements
and footnotes thereto included in the Whitehall Jewellers, Inc. Annual Report
for the fiscal year ended January 31, 2000. References in the following notes to
years and quarters are references to fiscal years and fiscal quarters.
5. Accounts Receivables, Net
Accounts receivable are shown net of the allowance for
doubtful accounts of $ 984,000, $720,000 and $1,579,000 as of October 31, 2000,
January 31, 2000 and October 31, 1999, respectively.
5
<PAGE> 6
6. Inventory
As of October 31, 2000, January 31, 2000 and October 31, 1999,
merchandising inventories consist of:
October 31, 2000 January 31, 2000 October 31, 1999
(in thousands)
Raw Materials $ 12,733 $ 7,557 $ 7,300
Finished Goods 191,052 140,134 154,548
---------------- ---------------- -----------------
Inventory $ 203,785 $ 147,691 $ 161,848
================ ================ =================
Raw materials primarily consist of diamonds, precious gems,
semi-precious gems and gold. There was no work-in-progress as of October 31,
2000, January 31, 2000, or October 31, 1999. Included within finished goods
inventory are allowances for inventory shrink, scrap, and miscellaneous costs of
$3,827,000, $3,517,000 and $3,559,000 as of October 31, 2000, January 31, 2000
and October 31, 1999, respectively. As of October 31, 2000, January 31, 2000 and
October 31, 1999, consignment inventories held by the Company that are not
included in the balance sheets total $49,769,000, $52,620,000, and $53,490,000,
respectively.
In addition, gold consignments of $26,310,000, $24,294,000 and
$24,294,000 are not included in the Company's balance sheets as of October 31,
2000, January 31, 2000 and October 31, 1999, respectively.
7. Financing Arrangements
Effective June 26, 2000, the Company amended its Amended and Restated
Revolving Credit, Term Loan and Gold Consignment Agreement (the "Credit
Agreement") with its bank group to provide for a total facility of $166.5
million through June 30, 2004. Interest rates and the commitment fee charged on
the unused portion of the facility float based upon the Company's quarterly
financial performance.
Under this Credit Agreement, the banks have a collateral security
interest in substantially all of the assets of the Company. The Credit Agreement
contains certain restrictions on capital expenditures, investments, payment of
dividends, assumption of additional debt, acquisitions and divestitures, among
others, and requires the Company to maintain certain financial ratios based on
levels of funded debt, capital expenditures and earnings before interest, taxes,
depreciation and amortization.
Revolver Loan
The revolving loan facility under the Credit Agreement is available up
to a maximum of $150.0 million, including amounts consigned under the gold
consignment facility, and is limited by a borrowing base computed based on a
percentage of the value of the Company's inventory and accounts receivable.
Interest rates and commitment fees on the unused facility float based on the
Company's quarterly financial performance.
The interest rates for borrowings under this agreement are, at the
Company's option, based on Eurodollar rates or the banks' prime rate. Interest
is payable monthly for prime borrowings and upon maturity for Eurodollar
borrowings.
Term Loans
The term loan under the Credit Agreement is available up to a maximum of
$15.0 million ($16.5 million, less principal repayments). The interest rates for
these borrowings are, at the Company's option, based on Eurodollar rates or the
banks' prime rate. Interest is payable monthly for prime borrowings and upon
maturity for
6
<PAGE> 7
Eurodollar borrowings. Interest rates and the commitment fee charged on the
unused facility float based on the Company's quarterly financial performance.
Gold Consignment Facility
During the second quarter of fiscal 2000, the Company sold and
simultaneously consigned an additional 7,000 troy ounces of gold for $2.0
million under a gold consignment facility resulting in a total of 76,500 troy
ounces for $26.3 million outstanding under the gold consignment facility. The
facility provides for the sale of a maximum 115,000 troy ounces or $40.0
million. Under the agreement, the Company pays consignment fees based on the
London Interbank Bullion Rates payable monthly. Consignment rates and commitment
fees on the unused portion of the gold consignment facility float based upon the
Company's quarterly financial performance. On June 30, 2004, the Company is
required to repurchase 76,500 troy ounces of gold under this agreement at the
prevailing gold rate in effect on that date, or the facility will be renewed.
Subordinated Notes
Series C Senior Subordinated Notes due 2004 (the "Series C Notes") totaling
$640,000 aggregate principal amount outstanding as of July 31, 2000, bear
interest at 12.15% per annum payable in cash, with interest payments due
quarterly.
8. Dilutive Shares That Were Outstanding During the Period
The following table summarizes the reconciliation of the numerators and
denominators, as required by SFAS No. 128, for the basic and diluted EPS
computations at October 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended Nine months ended
(in thousands, except per share amounts)
October October October October
31, 2000 31, 1999 31, 2000 31, 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings (loss) for basic and diluted EPS $ (1,996) $ 1,085 $ (2,826) $ 4,521
Weighted average shares for basic EPS 15,178 14,477 15,902 14,589
Incremental shares upon conversions:
Stock options - 738 483 491
Weighted average shares for diluted EPS 15,178 15,215 16,385 15,080
</TABLE>
9. Accounting Change
On December 3, 1999 the SEC issued certain accounting guidance in Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101, among other things, indicates that revenue from layaway sales
should only be recognized upon delivery of merchandise to the customer. In
consideration of this guidance, the Company implemented a change in accounting
in the first quarter of fiscal year 2000.
The Company has recorded a charge of approximately $5.0 million, $3.1
million net of tax, which has been reported as a cumulative effect of this
accounting change in the first quarter of 2000.
7
<PAGE> 8
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Three Months Ended October 31, 2000
Net sales for the third quarter of fiscal 2000 increased $8.1
million, or 12.9%, to $71.0 million from $62.9 in the third quarter of fiscal
1999. Comparable store sales decreased $0.5 million, or 0.9%, in the third
quarter of fiscal 2000 from the third quarter of fiscal 1999. Comparable store
sales are defined as net sales of stores which are operating for the month in
the current reporting period as well as open for the same month during the prior
year reporting period. Sales from new stores contributed $10.3 million to the
overall sales increase. These sales changes were offset by a sales decrease of
$0.3 million related to closed stores and by a decrease of $1.4 million due to
the change in accounting for revenue recognition on layaways. The total number
of merchandise units sold increased by approximately 14.5% in the third quarter
of fiscal 2000 from the third quarter of fiscal 1999, while the average price
per merchandise sale increased to $368 in the third quarter of fiscal 2000 from
$347 in the third quarter of fiscal 1999. Comparable store sales decreased
primarily due to the economic environment. The Company opened 16 new stores in
the third quarter of fiscal 2000 increasing the number of stores opened to 347
as of October 31, 2000 compared to 289 as of October 31, 1999.
Gross profit increased $1.1 million to $26.1 million in the third
quarter of fiscal 2000 compared to the third quarter of fiscal 1999. Gross
profit as a percentage of sales decreased to 36.8% in the third quarter of
fiscal 2000 compared to 39.8% in the third quarter of fiscal 1999. The decrease
in gross profit as a percentage of sales was primarily a result of several
factors including deleveraging of buying and occupancy expenses as a result of
lower average store sales levels, a shift in sales mix from higher margin gold
and semiprecious stone jewelry to lower margin diamond jewelry sales and
increased promotional pricing offset by the increased positive gross profit
impact of lower gold prices on the Company's consigned gold.
Selling, general and administrative expenses increased $6.1
million, or 28.2%, to $27.7 million in the third quarter of fiscal 2000 from
$21.6 million in the third quarter of fiscal 1999. This increase was primarily
attributable to new stores opened. As a percentage of net sales, selling,
general and administrative expenses increased to 39.0% from 34.3% in the prior
year quarter. The dollar increase primarily relates to higher payroll expenses
of $4.3 million and higher other expenses of $1.5 million. Credit sales as a
percentage of net sales increased to 48.2% in the third quarter of fiscal 2000
from 46.7% in the third quarter of fiscal 1999, primarily as a result of
increased sales through increased promotions.
Interest expense remained constant at $1.7 million in the
third quarter of fiscal 2000 and 1999.
An income tax benefit of $1.2 million was recorded in the
third quarter of fiscal 2000 as compared to income tax expense of $0.7 million
in the third quarter of fiscal 1999, reflecting an effective annual tax rate of
38.5% in both periods.
Results of Operations for the Nine Months Ended October 31, 2000
Net sales for the nine months ended October 31, 2000 increased
$33.1 million, or 17.6%, to $220.8 million from $187.8 in the third quarter of
fiscal 1999. Comparable store sales increased $5.1 million, or 2.8%, in the
first nine months of fiscal 2000 from the same period in fiscal 1999. Comparable
store sales are defined as net sales of stores which are operating for the month
in the current reporting period as well as open for the same month during the
prior year reporting period. Sales from new stores contributed $31.5 million to
the overall sales increase while $0.6 million of the increase resulted from a
lower provision for returns. These increases were offset by a sales decrease of
$1.6 million related to closed stores and by a decrease of $2.5 million due to
the change in accounting for revenue recognition on layaways. The total number
of merchandise units sold increased by approximately 9.0% for the
8
<PAGE> 9
first nine months of fiscal 2000, while the average price per merchandise sale
increased to $341 in the first nine months of fiscal 2000 from $315 in the first
nine months of fiscal 1999. Comparable store sales increased in part due to the
increased use of non-recourse credit, expanded direct mail marketing programs
and strong store inventory assortments. The Company opened 60 new stores and
closed three stores in the first nine months of fiscal 2000 increasing the
number of stores opened to 347 as of October 31, 2000 compared to 289 as of
October 31, 1999.
Gross profit increased $10.2 million, or 13.7%, to $84.9 million in the
first nine months of fiscal 2000 compared to the first nine months of fiscal
1999. Gross profit as a percentage of sales decreased to 38.4% in the first nine
months of fiscal 2000 compared to 39.8% in to the same period of fiscal 1999.
The decrease in gross profit as a percentage of sales was primarily a result of
several factors including deleveraging of buying and occupancy expenses as a
result of lower average store sales levels.
Selling, general and administrative expenses increased $17.4 million,
or 27.7%, to $80.4 million in the first nine months of fiscal 2000 from $63.0
million in the prior period. This increase was primarily attributable to new
stores opened. As a percentage of net sales, selling, general and administrative
expenses increased to 36.4% from 33.5% in the prior year period. The dollar
increase primarily relates to higher payroll expenses of $11.9 million, higher
other expenses of $2.1 million, and higher credit costs of $2.0 million. Credit
sales as a percentage of net sales increased to 44.3% in the first nine months
of fiscal 2000 from 43.5% in the first nine months of fiscal 1999, primarily as
a result of increased sales through increased promotions.
Interest expense decreased $0.3 million to $4.0 million in the first
nine months of fiscal 2000 from $4.3 million in the first nine months of fiscal
1999.
Income tax expense decreased approximately $2.7 million to $0.2 million
in the first nine months of fiscal 2000 from $2.8 million in the prior period,
reflecting an effective annual tax rate of 38.5% in both periods.
9
<PAGE> 10
Liquidity and Capital Resources
The Company's cash requirements consist principally of funding
increases in inventory at existing stores, capital expenditures and acquisitions
of new stores and working capital (primarily inventory) associated with the
Company's new stores. The Company's primary sources of liquidity have
historically been bank borrowings under the Company's revolver and cash flow
from operations.
The Company's inventory levels and working capital requirements have
historically been highest in advance of the Christmas season. The Company has
funded these seasonal working capital needs through borrowings under the
Company's revolver and increases in trade payables and accrued expenses.
In March, 2000, the Company completed an offering of Common Stock (the
"Offering"). The Company issued 2,325,500 shares of Common Stock, and received
proceeds of $42.5 million net of underwriting discounts and offering costs. The
Company used the proceeds to reduce the Company's indebtedness and for working
capital and other general corporate purposes.
On July 14, 2000, the Board of Directors authorized the Company to
repurchase up to $15.0 million of its Common Stock. The repurchase program
authorizes the Company to purchase shares over an 18-month period in the open
market or through privately negotiated transactions. On August 23, 2000 the
Company announced that its Board of Directors increased the authorization to
repurchase shares under the repurchase program from $ 15.0 million to $20.0
million of the Company's Common Stock. As of October 31, 2000, the Company has
repurchased 1,760,000 shares under this repurchase program at a total cost of
approximately $15.2 million. The repurchase program has been financed using the
Company's revolving credit facility.
Effective June 26, 2000, the Company amended and expanded its Amended
and Restated Revolving Credit, Term Loan and Gold Consignment Agreement (the
"Credit Agreement") with its bank group to provide for a total facility of
$166.5 million through June 30, 2004. The Company has a $150.0 million revolving
facility (including amounts borrowed under a gold consignment facility), and a
$15.0 million term loan (originally $16.5 million, less principal repayments)
through June 30, 2004. A gold consignment facility of $40.0 million is available
under the revolving credit facility. Interest rates and the commitment fee
charged on the unused facility float based upon the Company's quarterly
financial performance. The amendment, among other things, permits the Company to
repurchase up to $15.0 million of it's common stock and modifies certain terms
and conditions. On August 18, 2000, the Company amended the Credit Agreement to
increase the amount of repurchases of common stock permitted from $15.0 to $20.0
million. On November 16, 2000 the Company amended the Credit Agreement to modify
certain terms and conditions and to permit the creation of certain subsidiaries.
The Company's cash flow used in operating activities increased
to $28.2 million in the nine months ended October 31, 2000 from $4.4 million
used in operating activities in the nine months ended October 31, 1999.
Increases in accounts payable ($26.2 million) and higher depreciation and
amortization ($6.9 million) were offset by increases in merchandise inventories
($53.5 million), increases in prepaid taxes ($1.8 million), decreases in accrued
income taxes ($7.3 million) and lower operating results. The increase in
merchandise inventories primarily related to inventory for new store openings
and an increase in inventories in advance of the Christmas selling season. In
the first nine months of 2000, the primary sources of the Company's liquidity
included proceeds from the Offering of $42.5 million net of offering expenses, a
$35.4 million net increase in the amount outstanding under the Company's
revolver, proceeds of $2.0 million from gold consignment, partially offset by a
decrease of $14.3 million in outstanding checks. The Company utilized cash in
the first nine months of fiscal 2000 primarily to fund capital expenditures of
$20.0 million, primarily related to the opening of 60 new stores in the first
nine months of 2000, to fund the purchase of the Company's Common Stock ($15.2
million) and to repay a portion of the term loan ($2.3 million).
Management expects that cash flow from operating activities
and funds available under its revolving credit facility should be sufficient to
support the
10
<PAGE> 11
Company's current new store expansion program and seasonal working capital needs
for the foreseeable future.
Inflation
Management believes that inflation generally has not had a material
effect on results of its operations.
Item 3 - Quantitative and Qualitative Disclosure About Market Risk
This information is set forth in the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 2000, and is incorporated herein by
reference. There have been no material changes to the Company's market risk
during the nine months ended October 31, 2000.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 5 - Other Information
Forward-Looking Statements
All statements, trend analysis and other information contained in this release
relative to markets for our products, trends in our operations or financial
results, plans, expectations, estimates and beliefs, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect,"
"intend" and other similar expressions, constitute forward-looking statements
under the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to known and unknown risks, uncertainties
and other factors which may cause actual results to be materially different from
those contemplated by the forward-looking statements. Such factors include,
among other things: (1) the extent and results of our store expansion strategy
and associated occupancy costs, and access to funds for new store openings; (2)
the seasonality of our business; (3) economic conditions, the retail sales
environment and our ability to execute our business strategy and the related
effects on comparable store sales and other results; (4) the extent and success
of our marketing and promotional programs; (5) personnel costs and the extent to
which we are able to retain and attract key personnel; (6) competition; (7) the
availability and cost of consumer credit; (8) relationships with suppliers; (9)
our ability to maintain adequate information systems capacity and
infrastructure; (10) our leverage and cost of funds; (11) our ability to
maintain adequate loss prevention measures; (12) fluctuations in raw material
prices, including diamond, gem and gold prices; (13) the extent and results of
our E-commerce strategies and those of others; (14) regulation affecting the
industry generally, including regulation of marketing practices; (15) the
successful integration of acquired locations and assets into our existing
operations; and (16) the risk factors listed from time to time in our filings
with the Securities and Exchange Commission.
12
<PAGE> 13
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule (SEC/EDGAR only)
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITEHALL JEWELLERS, INC.
(Registrant)
Date: December 15, 2000 By: /s/ Jon H. Browne
--------------------------
Jon H. Browne
Executive Vice President -
Chief Financial Officer and Treasurer
(principal financial officer)
13
