Net Share Settlement Amendment Further Reduces Diluted Share
Count Increases FY2025 Non-GAAP EPS Guidance by 9% to
10%
HAMILTON, Bermuda, April 3,
2024 /PRNewswire/ -- Signet Jewelers Limited (NYSE:
SIG) ("Signet", "the Company"), the world's largest retailer of
diamond jewelry, and Leonard Green
& Partners, L.P. ("LGP"), a leading private equity investment
firm, today announced the amendment of the terms of the Series A
Convertible Preference Shares ("Preferred Shares") to net share
settlement and the repurchase of half of the Preferred Shares.
"LGP has been a strong supporter of Signet through our
transformation journey from the time of our agreement in 2016 and
throughout the execution of our Path to Brilliance strategy.
Since launching this strategy, Signet has grown revenue double
digits while optimizing our fleet, increased gross margins by more
than 400 basis points, drove a nearly 60% increase to our non-GAAP
diluted earnings per share, and returned more than $1.5 billion to shareholders while investing for
future competitive advantage. Signet's Board appreciates the many
years of partnership from LGP," said Virginia C. Drosos, Signet's Chief Executive
Officer.
"Our flexible operating model has consistently generated well
over 70% free cash flow conversion from non-GAAP operating income.
This has enabled Signet to build a fortress balance sheet as we
have significantly reduced our leverage ratio and nearly tripled
liquidity to create one of the strongest financial profiles among
peers. We are pleased that our partnership with LGP has resulted in
a well-planned and orderly transition of its preferred investment
at an attractive price for shareholders," said Joan M. Hilson, Signet's Chief Financial,
Strategy & Services Officer.
Jonathan Seiffer, Senior Partner at LGP, added, "The
transaction announced today represents half of the investment that
LGP made in Signet, a leading and innovative retailer which has
some of the world's most recognizable jewelry brands. LGP has been
pleased to partner with Signet as the Company has successfully
pursued its Path to Brilliance strategy, improving its balance
sheet, return on invested capital, and e-commerce capabilities. LGP
looks forward to continuing to partner with Signet to further
execute on its strategic priorities and drive shareholder
value."
Preferred Share Repurchase Transaction
The Preferred Shares, scheduled to mature in November 2024, were convertible into
approximately 8.2 million Signet common shares. Signet will
repurchase half of the Preferred Shares for approximately $414
million in cash, based on the volume weighted average share price
on the date of the transaction signing, April 1, 2024, including accrued dividends, and
is expected to be settled within 10 business days. Following the
transaction there will be $328
million remaining in stated value of the Preferred Shares
which carry a dividend of 5.0%.
This transaction will immediately reduce Signet's diluted share
count by approximately 4.1 million shares, or 7.6% of Signet's
diluted share count. Signet will settle the transaction from the
$1.4 billion in cash on hand at the
end of Fiscal 2024. During the first quarter of Fiscal 2025, the
Company will record a reduction to GAAP net income attributable to
common shareholders of approximately $83
million as a deemed dividend. This deemed dividend reflects
the excess of the above one-time cash payment over the carrying
value of the Preferred Shares at the date of the transaction.
Net Share Settlement Amendment
The Company modified terms of the Preferred Shares held by LGP
to provide that Signet will deliver cash for the stated value of
the Preferred Shares. Any remaining value owed will be delivered in
cash, shares or a combination of cash and shares at Signet's
election. The flexibility provided by this amendment for any
remaining value will facilitate an orderly retirement of the
remaining instrument and smooth the cadence of any further early
redemption. This amendment to the net share settlement structure
will immediately reduce Signet's diluted share count by
approximately 2.9 million shares, or approximately 5%, at expected
share prices. LGP can begin future conversions per the net share
settlement amendment beginning on May 1,
2024. Once fully retired, the Preferred Shares would
represent a reduction of approximately 15% to Signet's diluted
share count on an annualized basis.
Evercore acted as exclusive financial advisor to Signet in
connection with the Preferred Share repurchase and amendment.
Fiscal 2025 Guidance Update
As a result of this Preferred Shares repurchase transaction and
amendment to the Preferred Shares agreement, Signet is increasing
its Fiscal 2025 non-GAAP diluted EPS outlook to a range of
$9.90 to $11.52 per diluted share from its previous range
of $9.08 to $10.48 per diluted share.
This revised range reflects the diluted share impact of the
repurchase and amendment with a weighted average diluted share
count of approximately 46.3 million shares for Fiscal 2025 and
excludes the deemed dividend to net income available to common
shareholders of $83 million, both of
which are discussed above.
In addition, this non-GAAP diluted EPS range contemplates the
Company will allocate up to $1.1
billion to a combination of retiring outstanding debt,
retiring Preferred Shares and the repurchase of common shares
during Fiscal 2025.
Forecasted non-GAAP diluted EPS provided excludes potential
non-recurring charges, such as restructuring charges, asset
impairments or integration-related costs associated with the
acquisition of Blue Nile. Given the potential impact of
non-recurring charges to GAAP diluted EPS, the Company cannot
provide forecasted GAAP diluted EPS or the probable significance of
such items without unreasonable efforts. As such, the Company does
not present a reconciliation of forecasted non-GAAP diluted EPS to
corresponding forecasted GAAP diluted EPS.
About Signet and Safe Harbor Statement:
Signet Jewelers Limited is the world's largest retailer of
diamond jewelry. As a Purpose-driven and sustainability-focused
company, Signet is a participant in the United Nations Global
Compact and adheres to its principles-based approach to responsible
business. Signet operates approximately 2,700 stores primarily
under the name brands of Kay Jewelers, Zales, Jared, Banter by
Piercing Pagoda, Diamonds Direct, Blue Nile, JamesAllen.com,
Rocksbox, Peoples Jewellers, H. Samuel, and Ernest Jones. Further information on Signet is
available at www.signetjewelers.com. See also www.kay.com,
www.zales.com, www.jared.com, www.banter.com,
www.diamondsdirect.com, www.bluenile.com, www.jamesallen.com,
www.rocksbox.com, www.peoplesjewellers.com, www.hsamuel.co.uk,
www.ernestjones.co.uk.
This release contains statements which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based upon management's
beliefs and expectations as well as on assumptions made by and data
currently available to management, appear in a number of places
throughout this document and include statements regarding, among
other things, results of operations, financial condition,
liquidity, prospects, growth, strategies and the industry in which
we operate. The use of the words "expects," "intends,"
"anticipates," "estimates," "predicts," "believes," "should,"
"potential," "may," "preliminary," "forecast," "objective," "plan,"
or "target," and other similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to a number of
risks and uncertainties which could cause the actual results to not
be realized, including, but not limited to: difficulty or delay in
executing or integrating an acquisition, including Diamonds Direct
and Blue Nile; executing other major business or strategic
initiatives, such as expansion of the services business or
realizing the benefits of our restructuring plans; the impact of
the Israel-Hamas conflict on our operations; the negative impacts
that public health crisis, disease outbreak, epidemic or pandemic
has had, and could have in the future, on our business, financial
condition, profitability and cash flows, including without
limitation risks relating to shifts in consumer spending away from
the jewelry category, trends toward more experiential purchases
such as travel, disruptions in the dating cycle caused by the
COVID-19 pandemic and the pace at which such impacts on engagements
are expected to recover, and the impacts of the expiration of
government stimulus on overall consumer spending (including the
recent expiration of student loan relief); general economic or
market conditions, including impacts of inflation or other pricing
environment factors on our commodity costs (including diamonds) or
other operating costs; a prolonged slowdown in the growth of the
jewelry market or a recession in the overall economy; financial
market risks; a decline in consumer discretionary spending or
deterioration in consumer financial position; disruptions in our
supply chain; our ability to attract and retain labor; our ability
to optimize our transformation strategies; changes to regulations
relating to customer credit; disruption in the availability of
credit for customers and customer inability to meet credit payment
obligations, which has occurred and may continue to deteriorate;
our ability to achieve the benefits related to the outsourcing of
the credit portfolio, including due to technology disruptions
and/or disruptions arising from changes to or termination of the
relevant outsourcing agreements, as well as a potential increase in
credit costs due to the current interest rate environment;
deterioration in the performance of individual businesses or of our
market value relative to its book value, resulting in impairments
of long-lived assets or intangible assets or other adverse
financial consequences; the volatility of our stock price; the
impact of financial covenants, credit ratings or interest
volatility on our ability to borrow; our ability to maintain
adequate levels of liquidity for our cash needs, including debt
obligations, payment of dividends, planned share repurchases
(including future Preferred Share conversions, execution of
accelerated share repurchases and the payment of related excise
taxes) and capital expenditures as well as the ability of our
customers, suppliers and lenders to access sources of liquidity to
provide for their own cash needs; potential regulatory changes;
future legislative and regulatory requirements in the US and
globally relating to climate change, including any new climate
related disclosure or compliance requirements, such as those
recently issued in the state of California or adopted by the SEC; exchange
rate fluctuations; the cost, availability of and demand for
diamonds, gold and other precious metals, including any impact on
the global market supply of diamonds due to the ongoing
Russia-Ukraine conflict or related sanctions;
stakeholder reactions to disclosure regarding the source and use of
certain minerals; scrutiny or detention of goods produced in
certain territories resulting from trade restrictions; seasonality
of our business; the merchandising, pricing and inventory policies
followed by us and our ability to manage inventory levels; our
relationships with suppliers including the ability to continue to
utilize extended payment terms and the ability to obtain
merchandise that customers wish to purchase; the failure to
adequately address the impact of existing tariffs and/or the
imposition of additional duties, tariffs, taxes and other charges
or other barriers to trade or impacts from trade relations; the
level of competition and promotional activity in the jewelry
sector; our ability to optimize our multi-year strategy to gain
market share, expand and improve existing services, innovate and
achieve sustainable, long-term growth; the maintenance and
continued innovation of our OmniChannel retailing and ability to
increase digital sales, as well as management of digital marketing
costs; changes in consumer attitudes regarding jewelry and failure
to anticipate and keep pace with changing fashion trends; changes
in the supply and consumer acceptance of and demand for gem quality
lab created diamonds and adequate identification of the use of
substitute products in our jewelry; ability to execute successful
marketing programs and manage social media; the ability to optimize
our real estate footprint, including operating in attractive trade
areas and accounting for changes in consumer traffic in mall
locations; the performance of and ability to recruit, train,
motivate and retain qualified team members - particularly in
regions experiencing low unemployment rates; management of social,
ethical and environmental risks; ability to deliver on our
environmental, social and governance goals; the reputation of
Signet and its banners; inadequacy in and disruptions to internal
controls and systems, including related to the migration to new
information technology systems which impact financial reporting;
security breaches and other disruptions to our or our third-party
providers' information technology infrastructure and databases; an
adverse development in legal or regulatory proceedings or tax
matters, including any new claims or litigation brought by
employees, suppliers, consumers or shareholders, regulatory
initiatives or investigations, and ongoing compliance with
regulations and any consent orders or other legal or regulatory
decisions; failure to comply with labor regulations; collective
bargaining activity; changes in corporate taxation rates, laws,
rules or practices in the US and other jurisdictions in which our
subsidiaries are incorporated, including developments related to
the tax treatment of companies engaged in Internet commerce or
deductions associated with payments to foreign related parties that
are subject to a low effective tax rate; risks related to
international laws and Signet being a Bermuda corporation; risks relating to the
outcome of pending litigation; our ability to protect our
intellectual property or assets including cash which could be
affected by failure of a financial institution or conditions
affecting the banking system and financial markets as a whole;
changes in assumptions used in making accounting estimates relating
to items such as extended service plans; or the impact of
weather-related incidents, natural disasters, organized crime or
theft, increased security costs, strikes, protests, riots or
terrorism, acts of war (including the ongoing Russia-Ukraine and Israel-Hamas conflicts), or
another public health crisis or disease outbreak, epidemic or
pandemic on our business.
For a discussion of these and other risks and uncertainties
which could cause actual results to differ materially from those
expressed in any forward-looking statement, see the "Risk Factors"
and "Forward-Looking Statements" sections of Signet's Fiscal 2024
Annual Report on Form 10-K filed with the SEC on March 21, 2024, and quarterly reports on Form
10-Q and the "Safe Harbor Statements" in current reports on Form
8-K filed with the SEC. Signet undertakes no obligation to update
or revise any forward-looking statements to reflect subsequent
events or circumstances, except as required by law.
Investors:
Rob Ballew
SVP, Investor Relations
+1 336 202 1203
robert.ballew@signetjewelers.com
Media:
Colleen Rooney
Chief Communications & ESG Officer
+1 330 668 5932
colleen.rooney@signetjewelers.com
About LGP
LGP is a leading private equity investment firm founded in 1989
and based in Los Angeles with over
$75 billion of assets under
management. The firm partners with experienced management teams and
often with founders to invest in market-leading companies. Since
inception, LGP has invested in over 120 companies in the form of
traditional buyouts, going-private transactions, recapitalizations,
growth equity, and selective public equity and debt positions. The
firm primarily focuses on companies providing services, including
consumer, healthcare, and business services, as well as retail,
distribution, and industrials. For more information, please
visit www.leonardgreen.com.
Non-GAAP Financial Measures
In addition to reporting the Company's financial results in
accordance with generally accepted accounting principles ("GAAP"),
the Company reports certain financial measures on a non-GAAP basis.
The Company believes that non-GAAP financial measures, when
reviewed in conjunction with GAAP financial measures, can provide
more information to assist investors in evaluating historical
trends and current period performance and liquidity. These non-GAAP
financial measures should be considered in addition to, and not
superior to or as a substitute for, the GAAP financial measures
presented in this press release and the Company's consolidated
financial statements and other publicly filed reports. In addition,
our non-GAAP financial measures may not be the same as or
comparable to similar non-GAAP measures presented by other
companies.
The Company reports certain non-GAAP financial measures
including the following: free cash flow, adjusted free cash flow,
free cash flow conversion, non-GAAP operating income and non-GAAP
diluted earnings per share ("EPS").
Free cash flow, adjusted free cash flow and free cash flow
conversion
Free cash flow is a non-GAAP measure defined as the net cash
provided by operating activities less purchases of property, plant
and equipment. Management considers this metric to be helpful in
understanding how the business is generating cash from its
operating and investing activities that can be used to meet the
financing needs of the business. Adjusted free cash flow, a
non-GAAP measure, excludes the proceeds from the sale of in-house
finance receivables. Free cash flow and adjusted free cash flow are
indicators frequently used by management in evaluating its overall
liquidity needs and determining appropriate capital allocation
strategies. Free cash flow and adjusted free cash flow do not
represent the residual cash flow available for discretionary
purposes. Free cash flow conversion is defined as pro-forma
adjusted free cash flow as a percentage of non-GAAP operating
income(1).
(in millions)
|
Fiscal
2024
|
|
Fiscal
2023
|
|
Fiscal
2022
|
|
Fiscal
2021
|
|
Fiscal
2020
|
Net cash provided by
operating activities
|
$
546.9
|
|
$
797.9
|
|
$ 1,257.3
|
|
$ 1,372.3
|
|
$
555.7
|
Purchase of property,
plant and equipment
|
(125.5)
|
|
(138.9)
|
|
(129.6)
|
|
(83.0)
|
|
(136.3)
|
Free cash
flow
|
$
421.4
|
|
$
659.0
|
|
$ 1,127.7
|
|
$ 1,289.3
|
|
$
419.4
|
Proceeds from sale of
in-house finance receivables
|
—
|
|
—
|
|
(81.3)
|
|
—
|
|
—
|
Adjusted free cash
flow
|
$
421.4
|
|
$
659.0
|
|
$ 1,046.4
|
|
$ 1,289.3
|
|
$
419.4
|
Cash paid for
non-recurring legal settlements
|
200.8
|
|
—
|
|
—
|
|
—
|
|
—
|
Pro-forma adjusted free
cash flow (2)
|
$
622.2
|
|
$
659.0
|
|
$ 1,046.4
|
|
$ 1,289.3
|
|
$
419.4
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP operating
income (1)
|
$
642.8
|
|
$
850.4
|
|
$
908.1
|
|
$
156.4
|
|
$
318.3
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
conversion
|
96.8 %
|
|
77.5 %
|
|
115.2 %
|
|
824.4 %
|
|
131.8 %
|
(1) Non-GAAP operating income is a non-GAAP measure
defined as operating income excluding the impact of certain items
which management believes are not necessarily reflective of normal
operational performance during a period. Refer to the Company's
Annual Reports on Form 10-K for Fiscal 2020 through Fiscal 2024
filed with the SEC for the reconciliation of these amounts to the
most comparable GAAP measure.
(2) Pro-forma adjusted free cash flow excludes the
cash paid for non-recurring legal settlements made during Fiscal
2024 from adjusted free cash flow.
Non-GAAP diluted EPS
Non-GAAP diluted EPS is a non-GAAP measure defined as diluted
EPS excluding the impact of certain items which management believes
are not necessarily reflective of normal operational performance
during a period. Management finds the information useful when
analyzing financial results in order to appropriately evaluate the
performance of the business without the impact of these certain
items. In particular, management believes the consideration of
measures that exclude such items can assist in the comparison of
performance in different periods which may or may not include such
items. The Company estimates the tax effect of all non-GAAP
adjustments by applying a statutory tax rate to each item. The
income tax items represent the discrete amount that affected the
diluted EPS during the period.
|
Fiscal
2024
|
|
Fiscal
2018
|
GAAP Diluted
EPS
|
$
15.01
|
|
$
7.44
|
Litigation
charges
|
(0.06)
|
|
—
|
Pension settlement
loss
|
0.02
|
|
—
|
Acquisition and
integration-related expenses
|
0.41
|
|
—
|
Restructuring
charges
|
0.14
|
|
—
|
Asset
impairments
|
0.13
|
|
—
|
Gain on divestitures,
net
|
(0.22)
|
|
—
|
Tax impact of above
items
|
(0.18)
|
|
—
|
Bermuda economic
transition adjustment
|
(4.88)
|
|
—
|
Impact of revaluation
of deferred taxes under Tax Cut and Jobs Act
|
—
|
|
(0.93)
|
Non-GAAP Diluted EPS
(1)
|
$
10.37
|
|
$
6.51
|
(1) Refer to the Company's fourth quarter Fiscal 2024
and Fiscal 2018 Current Reports on Form 8-K filed with the SEC for
additional information regarding these reconciling items.
View original
content:https://www.prnewswire.com/news-releases/signet-jewelers-repurchases-50-of-convertible-preferred-shares-ahead-of-maturity-302106439.html
SOURCE Signet Jewelers Ltd.