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Zale Reports Fourth Quarter And Fiscal Year 2012 Results

Interest expense was $15 million, compared to $9 million in the fourth quarter of fiscal 2011. The 2012 quarter includes a charge of $5 million, or $0.15 per share, related to the previously announced debt refinancing transactions.

Net loss from continuing operations was $20 million, or $0.61 per share, compared to a net loss from continuing operations of $33 million, or $1.02 per share, in the fourth quarter of fiscal 2011. The previously disclosed change in warranty revenue recognition improved the net loss per share from continuing operations for the fourth quarter of fiscal 2012 by $0.20.

Inventory at July 31, 2012 stood at $742 million, compared to $721 million in the same period last year.

As previously announced, on July 24, 2012, the company secured a new $665 million credit facility, which includes an amended and extended $650 million Revolving Credit Facility and a new $15 million First-In, Last-Out (FILO) Credit Facility. The company utilized increased availability from these facilities to fund a prepayment of $60.5 million on its Senior Secured Term Loan and amended and extended its term loan with Golden Gate Capital for the remaining $80 million. As a result of these transactions, at current interest rates, the company’s overall average borrowing cost was reduced from about eight percent to about four percent, resulting in projected annual pretax savings in fiscal year 2013 of approximately $17 million.

Fiscal Year 2012 Results

Revenues were $1.87 billion, an increase of $124 million, or 7.1 percent, compared to $1.74 billion in fiscal year 2011. Revenues in fiscal year 2012 include $35 million resulting from the previously disclosed change in warranty revenue recognition.

In fiscal year 2012, comparable store sales increased 6.9 percent. This increase follows an 8.1 percent rise in fiscal year 2011. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, comparable store sales increased 7.1 percent.
  • U.S. Fine Jewelry brands (70 percent of revenues), consisting of Zales Jewelers, Zales Outlet and Gordon’s Jewelers, increased comparable store sales 9.5 percent. This increase follows a 7.7 percent rise in the prior year.
  • Canadian Fine Jewelry brands (17 percent of revenues), consisting of Peoples Jewellers and Mappins Jewellers, increased comparable store sales 2.9 percent. This increase follows a 13.5 percent rise in the prior year. At constant exchange rates, comparable store sales increased 4.5 percent in fiscal year 2012 following an increase of 7.5 percent in the prior year.
  • Kiosk Jewelry (13 percent of revenues) decreased comparable store sales 1.0 percent. In the prior year, comparable store sales rose 3.6 percent.

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