SIGNET JEWELERS LTD, 10-K filed on 3/26/2020
Annual Report
v3.20.1
Document and Entity Information - USD ($)
12 Months Ended
Feb. 01, 2020
Mar. 20, 2020
Aug. 03, 2019
Cover page.      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Feb. 01, 2020    
Document Transition Report false    
Entity File Number 1-32349    
Entity Registrant Name SIGNET JEWELERS LIMITED    
Entity Incorporation, State or Country Code D0    
Entity Address, Address Line One Clarendon House    
Entity Address, Address Line Two 2 Church Street    
Entity Address, City or Town Hamilton    
Entity Address, Postal Zip Code HM11    
Entity Address, Country BM    
City Area Code 441    
Local Phone Number 296 5872    
Title of 12(b) Security Common Shares of $0.18 each    
Trading Symbol SIG    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 893,811,751
Entity Common Stock, Shares outstanding   52,346,157  
Documents Incorporated by Reference
The Registrant will incorporate by reference information required in response to Part III, Items 10-14, from its definitive proxy statement for its annual meeting of shareholders which will be filed with the Securities and Exchange Commission within 120 days after February 1, 2020.
   
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0000832988    
Current Fiscal Year End Date --02-01    
v3.20.1
Consolidated Statements Of Operations - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Income Statement [Abstract]      
Sales $ 6,137.1 $ 6,247.1 $ 6,253.0
Cost of sales (3,904.2) (4,024.1) (4,063.0)
Restructuring charges - cost of sales (9.2) (62.2) 0.0
Gross margin 2,223.7 2,160.8 2,190.0
Selling, general and administrative expenses (1,918.2) (1,985.1) (1,872.2)
Credit transaction, net 0.0 (167.4) 1.3
Restructuring charges (69.9) (63.7) 0.0
Goodwill and intangible impairments (47.7) (735.4) 0.0
Other operating income (loss) (29.6) 26.2 260.8
Operating income (loss) 158.3 (764.6) 579.9
Interest expense, net (35.6) (39.7) (52.7)
Other non-operating income, net 7.0 1.7 0.0
Income (loss) before income taxes 129.7 (802.6) 527.2
Income taxes (24.2) 145.2 (7.9)
Net income (loss) 105.5 (657.4) 519.3
Dividends on redeemable convertible preferred shares (32.9) (32.9) (32.9)
Net income (loss) attributable to common shareholders $ 72.6 $ (690.3) $ 486.4
Earnings (loss) per common share:      
Earnings per share: basic (usd per share) $ 1.40 $ (12.62) $ 7.72
Earnings per share: diluted (usd per share) $ 1.40 $ (12.62) $ 7.44
Weighted average common shares outstanding:      
Weighted average common shares outstanding: basic (in shares) 51.7 54.7 63.0
Weighted average common shares outstanding: diluted (in shares) 51.8 54.7 69.8
v3.20.1
Consolidated Statements Of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Pre-tax amount      
Foreign currency translation adjustments $ (1.7) $ (35.9) $ 50.9
Available-for-sale securities:      
Unrealized gain (loss) (0.2) 0.6 0.5
Reclassification adjustment for (gains) losses to net income 1.0 0.0 0.0
Impact from adoption of new accounting pronouncements [1] 0.0 (1.1) 0.0
Cash flow hedges:      
Unrealized gain (loss) 14.8 6.2 3.4
Reclassification adjustment for (gains) losses to net income (3.4) (2.1) (4.6)
Pension plan:      
Actuarial gain (loss) 0.5 (4.1) 0.0
Reclassification adjustment to net income for amortization of actuarial (gains) losses 1.2 0.9 2.8
Prior service costs 0.0 (8.1) (0.6)
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.0 (1.4)
Net curtailment gain and settlement loss 0.0 0.0 (3.7)
Total other comprehensive income (loss) 12.2 (43.6) 47.3
Tax (expense) benefit      
Foreign currency translation adjustments 0.0 0.0 0.0
Available-for-sale securities:      
Unrealized gain (loss) 0.0 (0.2) (0.2)
Reclassification adjustment for (gains) losses to net income 0.0 0.0 0.0
Impact from adoption of new accounting pronouncements [1] 0.0 0.3 0.0
Cash flow hedges:      
Unrealized gain (loss) (3.6) (1.4) (1.6)
Reclassification adjustment for (gains) losses to net income 0.7 0.6 1.1
Pension plan:      
Actuarial gain (loss) (0.1) 0.7 0.0
Reclassification adjustment to net income for amortization of actuarial (gains) losses (0.2) (0.2) (0.6)
Prior service costs 0.0 1.6 0.1
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.0 0.3
Net curtailment gain and settlement loss 0.0 0.0 0.7
Total other comprehensive income (loss) (3.2) 1.4 (0.2)
After-tax amount      
Net income 105.5 (657.4) 519.3
Foreign currency translation adjustments (1.7) (35.9) 50.9
Available-for-sale securities:      
Unrealized gain (loss) (0.2) 0.4 0.3
Reclassification adjustment for (gains) losses to net income 1.0 0.0 0.0
Impact from adoption of new accounting pronouncements [1] 0.0 (0.8) 0.0
Cash flow hedges:      
Unrealized gain (loss) (11.2) (4.8) (1.8)
Reclassification adjustment for (gains) losses to net income 2.7 1.5 3.5
Pension plan:      
Actuarial gain (loss) 0.4 (3.4) 0.0
Reclassification adjustment to net income for amortization of actuarial (gains) losses 1.0 0.7 2.2
Prior service costs 0.0 (6.5) (0.5)
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.0 (1.1)
Net curtailment gain and settlement loss 0.0 0.0 (3.0)
Total other comprehensive income (loss) 9.0 (42.2) 47.1
Total comprehensive income (loss) $ 114.5 $ (699.6) $ 566.4
[1]
Adjustment reflects the reclassification of unrealized gains related to the Company’s available-for-sale equity securities as of February 3, 2018 from AOCI into retained earnings associated with the adoption of ASU 2016-01.
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Feb. 01, 2020
Feb. 02, 2019
Current assets:    
Cash and cash equivalents $ 374.5 $ 195.4
Accounts receivable 38.8 23.7
Other current assets 403.5 244.0
Income taxes 6.3 5.8
Inventories, net 2,331.7 2,386.9
Total current assets 3,154.8 2,855.8
Non-current assets:    
Property, plant and equipment, net 741.9 800.5
Operating lease right-of-use assets 1,683.3  
Goodwill 248.8 296.6
Intangible assets, net 263.8 265.0
Other assets 201.8 181.2
Deferred tax assets 4.7 21.0
Total assets 6,299.1 4,420.1
Current liabilities:    
Loans and overdrafts 95.6 78.8
Accounts payable 227.9 153.7
Accrued expenses and other current liabilities 697.0 502.8
Deferred revenue 266.2 270.0
Operating lease liabilities 338.2  
Income taxes 27.7 27.7
Total current liabilities 1,652.6 1,033.0
Non-current liabilities:    
Long-term debt 515.9 649.6
Operating lease liabilities 1,437.7  
Other liabilities 116.6 224.1
Deferred revenue 731.5 696.5
Deferred tax liabilities 5.2 0.0
Total liabilities 4,459.5 2,603.2
Commitments and contingencies
Series A redeemable convertible preferred shares of $0.01 par value: 500 shares authorized, 0.625 shares outstanding 617.0 615.3
Shareholders’ equity:    
Common shares of $0.18 par value: authorized 500 shares, 52.3 shares outstanding (2019: 51.9 outstanding) 12.6 12.6
Additional paid-in capital 245.4 236.5
Other reserves 0.4 0.4
Treasury shares at cost: 17.7 shares (2019: 18.1 shares) (984.9) (1,027.3)
Retained earnings 2,242.9 2,282.2
Accumulated other comprehensive loss (293.8) (302.8)
Total shareholders’ equity 1,222.6 1,201.6
Total liabilities, redeemable convertible preferred shares and shareholders’ equity $ 6,299.1 $ 4,420.1
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Feb. 01, 2020
Feb. 02, 2019
Common shares, par value (usd per share) $ 0.18 $ 0.18
Common shares, authorized (in shares) 500,000,000 500,000,000
Common shares, outstanding (in shares) 52,300,000 51,900,000
Treasury shares, shares (in shares) 17,700,000 18,100,000
Series A Redeemable Convertible Preferred Stock    
Preferred shares, par value (usd per share) $ 0.01 $ 0.01
Preferred shares, authorized (in shares) 500,000,000 500,000,000
Preferred shares, outstanding (in shares) 625,000 625,000
v3.20.1
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Cash flows from operating activities:      
Net income $ 105.5 $ (657.4) $ 519.3
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 178.0 183.6 203.4
Amortization of unfavorable leases and contracts (5.5) (7.9) (13.0)
Share-based compensation 16.9 16.5 16.1
Deferred taxation 21.5 (105.6) (33.4)
Credit transaction, net 0.0 160.4 (30.9)
Goodwill and intangible impairments 47.7 735.4 0.0
Restructuring charges 25.9 84.9 0.0
Net gain on extinguishment of debt (6.2) 0.0 0.0
Other non-cash movements (4.3) (3.4) 2.6
Changes in operating assets and liabilities:      
Decrease (increase) in accounts receivable (15.2) 45.7 242.1
Proceeds from sale of in-house finance receivables 0.0 445.5 952.5
Decrease (increase) in other assets and other receivables (184.2) 0.7 (6.0)
Decrease (increase) in inventories 48.8 (194.3) 210.9
Increase (decrease) in accounts payable 77.2 (78.5) (51.4)
Increase (decrease) in accrued expenses and other liabilities 232.9 55.9 3.9
Change in operating lease assets and liabilities (9.4) 0.0 0.0
Increase in deferred revenue 30.8 9.7 10.0
Increase (decrease) in income taxes payable 0.6 10.9 (82.4)
Pension plan contributions (5.3) (4.4) (3.2)
Net cash provided by operating activities 555.7 697.7 1,940.5
Investing activities      
Purchase of property, plant and equipment (136.3) (133.5) (237.4)
Proceeds from sale of assets 0.5 5.5 0.0
Purchase of available-for-sale securities (13.3) (0.6) (2.4)
Proceeds from sale of available-for-sale securities 8.3 9.6 2.2
Acquisition of R2Net Inc., net of cash acquired 0.0 0.0 (331.8)
Net cash used in investing activities (140.8) (119.0) (569.4)
Financing activities      
Dividends paid on common shares (77.4) (79.0) (76.5)
Dividends paid on redeemable convertible preferred shares (31.2) (31.2) (34.7)
Repurchase of common shares 0.0 (485.0) (460.0)
Proceeds from term and bridge loans 100.0 0.0 350.0
Repayments of term and bridge loans (294.9) (31.3) (372.3)
Settlement of Senior Notes, including third party fees (241.5) 0.0 0.0
Proceeds from securitization facility 0.0 0.0 1,745.9
Repayment of securitization facility 0.0 0.0 (2,345.9)
Proceeds from revolving credit facilities 858.3 787.0 814.0
Repayments of revolving credit facilities (588.3) (787.0) (870.0)
Payment of debt issuance costs (9.3) 0.0 0.0
Increase (decrease) of bank overdrafts 47.5 25.9 (0.1)
Other financing activities (0.2) (2.1) (4.0)
Net cash used in financing activities (237.0) (602.7) (1,253.6)
Cash and cash equivalents at beginning of period 195.4 225.1 98.7
Increase (decrease) in cash and cash equivalents 177.9 (24.0) 117.5
Effect of exchange rate changes on cash and cash equivalents 1.2 (5.7) 8.9
Cash and cash equivalents at end of period $ 374.5 $ 195.4 $ 225.1
v3.20.1
Consolidated Statements Of Shareholders' Equity - USD ($)
$ in Millions
Total
Common shares at par value
Additional paid-in capital
Other reserves
Treasury shares
Retained earnings
Accumulated other comprehensive (loss) income
Balance at Jan. 28, 2017 $ 2,490.2 $ 15.7 $ 280.7 $ 0.4 $ (1,494.8) $ 3,995.9 $ (307.7)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 519.3         519.3  
Other comprehensive income (loss) 47.1           47.1
Dividends on common shares (77.5)         (77.5)  
Dividends on redeemable convertible preferred shares (32.9)         (32.9)  
Repurchase of common shares (460.0)       (460.0)    
Net settlement of equity based awards (2.8)   (6.5)   12.3 (8.6)  
Share options exercised 0.3   (0.1)   0.4    
Share-based compensation expense 16.1   16.1        
Balance at Feb. 03, 2018 2,499.8 15.7 290.2 0.4 (1,942.1) 4,396.2 (260.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Impact from adoption of new accounting pronouncements [1] (16.5)         (15.7) (0.8)
Net income (657.4)         (657.4)  
Other comprehensive income (loss) (41.4)           (41.4)
Dividends on common shares (79.4)         (79.4)  
Dividends on redeemable convertible preferred shares (32.9)         (32.9)  
Repurchase of common shares (485.0)       (485.0)    
Treasury share retirements 0.0 (3.1) (58.4)   1,391.0 (1,329.5)  
Net settlement of equity based awards (2.1)   (11.8)   8.8 0.9  
Share-based compensation expense 16.5   16.5        
Balance at Feb. 02, 2019 1,201.6 12.6 236.5 0.4 (1,027.3) 2,282.2 (302.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 105.5         105.5  
Other comprehensive income (loss) 9.0           9.0
Dividends on common shares (77.4)         (77.4)  
Dividends on redeemable convertible preferred shares (32.9)         (32.9)  
Net settlement of equity based awards (0.1)   (8.0)   42.4 (34.5)  
Share-based compensation expense 16.9   16.9        
Balance at Feb. 01, 2020 $ 1,222.6 $ 12.6 $ 245.4 $ 0.4 $ (984.9) $ 2,242.9 $ (293.8)
[1]
Reflects reclassifications to retained earnings related to 1) unrealized gains related to the Company’s equity security investments as of February 3, 2018 from AOCI associated with the adoption of ASU 2016-01 and 2) deferred costs associated with the sale of extended service plans due to the adoption of ASU 2014-09.
v3.20.1
Organization and summary of significant accounting policies
12 Months Ended
Feb. 01, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and summary of significant accounting policies Organization and summary of significant accounting policies
Signet Jewelers Limited (“Signet” or the “Company”), a holding company incorporated in Bermuda, is the world’s largest retailer of diamond jewelry. The Company operates through its 100% owned subsidiaries with sales primarily in the United States (“US”), United Kingdom (“UK”) and Canada. During the first quarter of Fiscal 2019, the Company realigned its organizational structure. The new structure is expected to allow for further integration of operational and product development processes and support growth strategies. In accordance with this organizational change, beginning with quarterly reporting for the 13 weeks ended May 5, 2018, the Company identified three reportable segments as follows: North America, which consists of the legacy Sterling Jewelers and Zale divisions; International, which consists of the legacy UK Jewelry division; and Other. The “Other” reportable segment consists of all non-reportable segments, including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones and unallocated corporate administrative functions. See Note 6 for additional discussion of the Company’s segments.
On September 12, 2017, the Company completed the acquisition of R2Net Inc., a Delaware corporation (“R2Net”). See Note 5 for additional information regarding the acquisition.
In October 2017, the Company, through its subsidiary Sterling Jewelers Inc. (“Sterling”), completed the sale of the prime-only quality portion of Sterling’s in-house finance receivable portfolio to Comenity Bank (“Comenity”). In June 2018, the Company, through its subsidiary Sterling, completed the sale of all eligible non-prime in-house accounts receivable to CarVal Investors (“CarVal”) and Castlelake, L.P. (“Castlelake”). See Note 4 for additional information regarding the transaction.
Signet’s sales are seasonal, with the fourth quarter accounting for approximately 35-40% of annual sales, with December being by far the highest volume month of the year. The “Holiday Season” consists of results for the months of November and December. As a result of the Company’s seasonality, it anticipates operating income will be almost entirely generated in the fourth quarter.
The Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. There are no material related party transactions. The following accounting policies have been applied consistently in the preparation of the Company’s consolidated financial statements.
(a) Basis of preparation
The consolidated financial statements of Signet are prepared in accordance with US generally accepted accounting principles (“US GAAP” or “GAAP”) and include the results for the 52 week period ended February 1, 2020 (“Fiscal 2020”), as Signet’s fiscal year ends on the Saturday nearest to January 31. The comparative periods are for the 52 week period ended February 2, 2019 (“Fiscal 2019”) and the 53 week period ended February 3, 2018 (“Fiscal 2018”). Intercompany transactions and balances have been eliminated in consolidation. Related to the adoption of new accounting pronouncements disclosed in Note 2 and the change in segments disclosed in Note 6, Signet has reclassified certain prior year amounts to conform to the current year presentation.
(b) Use of estimates
The preparation of these consolidated financial statements, in conformity with US GAAP and US Securities and Exchange Commission (“SEC”) regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to the valuation of accounts receivable, inventories, deferred revenue, derivatives, employee benefits, operating lease liabilities income taxes, contingencies, asset impairments, indefinite-lived intangible assets, depreciation and amortization of long-lived assets as well as accounting for business combinations.
The reported results of operations are not indicative of results expected in future periods.
(c) Foreign currency translation
The financial position and operating results of certain foreign operations, including the International segment and the Canadian operations of the North America segment, are consolidated using the local currency as the functional currency. Assets and liabilities are translated at the rates of exchange on the balance sheet date, and revenues and expenses are translated at the monthly average rates of exchange during the period. Resulting translation gains or losses are included in the accompanying consolidated statements of shareholders’ equity as a component of accumulated other comprehensive income (loss) (“AOCI”). Gains or losses resulting from foreign currency transactions are included within other operating income (loss) in the consolidated statements of operations, whereas translation adjustments and gains or losses related to intercompany loans of a long-term investment nature are recognized as a component of AOCI.
(d) Revenue recognition
The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied.
See Note 3 for additional discussion of the Company’s revenue recognition.
(e) Cost of sales and selling, general and administrative expenses
Cost of sales includes merchandise costs net of discounts and allowances, freight, processing and distribution costs of moving merchandise from suppliers to distribution centers and stores inclusive of payroll, inventory shrinkage, store operating and occupancy costs, net bad debts and charges for late payments prior to credit outsourcing. Store operating and occupancy costs include utilities, rent, real estate taxes, common area maintenance charges and depreciation.
Selling, general and administrative expenses include store staff and store administrative costs; centralized administrative expenses, including information technology and cost of in-house credit prior to the Company’s outsourcing initiatives and subsequently third-party credit costs; advertising and promotional costs and other operating expenses not specifically categorized elsewhere in the consolidated statements of operations.
Compensation and benefits costs included within cost of sales and selling, general and administrative expenses were as follows:
(in millions)
Fiscal 2020
 
Fiscal 2019
 
Fiscal 2018
Wages and salaries
$
1,079.2

 
$
1,127.2

 
$
1,140.3

Payroll taxes
84.8

 
90.3

 
93.8

Employee benefit plans
15.7

 
17.2

 
13.0

Share-based compensation
16.9

 
16.5

 
16.1

Total compensation and benefits
$
1,196.6

 
$
1,251.2

 
$
1,263.2


(f) Store opening costs
The opening costs of new locations are expensed as incurred.
(g) Advertising and promotional costs
Advertising and promotional costs are expensed within selling, general and administrative expenses. Production costs are expensed at the first communication of the advertisements, while communication expenses are recognized each time the advertisement is communicated. For catalogs and circulars, costs are all expensed at the first date they can be viewed by the customer. Point of sale promotional material is expensed when first displayed in the stores. Gross advertising costs totaled $388.9 million in Fiscal 2020 (Fiscal 2019: $387.8 million; Fiscal 2018: $360.5 million).
(h) In-house customer finance programs
Prior to the second quarter of Fiscal 2019, the North America segment operated customer in-house finance programs that allowed customers to finance merchandise purchases from its stores. Finance charges were recognized in accordance with the contractual agreements. Gross interest earned was recorded as other operating income in the consolidated statements of operations. See Note 13 for additional discussion of the Company’s other operating income (loss). In addition to interest-bearing accounts, a portion of credit sales were made using interest-free financing for one year or less, subject to certain conditions.
Prior to the credit transaction entered into in October 2017 (see Note 4), the accrual of interest was suspended when accounts became more than 90 days aged on a recency basis. Upon suspension of the accrual of interest, interest income was subsequently recognized to the extent cash payments are received. Accrual of interest was resumed when receivables were removed from the non-accrual status.
As a result of the credit transaction noted above, the Company revised its policy to suspend the accrual of interest when accounts became more than 120 days past due on a contractual basis to align with the processes utilized by the Company’s third party credit service provider for the Company’s remaining in-house finance receivable portfolio.
(i) Income taxes
Income taxes are accounted for using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are recognized by applying statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is established
against deferred tax assets when it is more likely than not that all or a portion of the deferred tax assets will not be realized, based on management’s evaluation of all available evidence, both positive and negative, including reversals of deferred tax liabilities, projected future taxable income and results of recent operations.
The Company does not recognize tax benefits related to positions taken on certain tax matters unless the position is more likely than not to be sustained upon examination by tax authorities. At any point in time, various tax years are subject to or are in the process of being audited by various taxing authorities. The Company records a reserve for uncertain tax positions, including interest and penalties. To the extent that management’s estimates of settlements change, or the final tax outcome of these matters is different than the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made.
See Note 12 for additional discussion of the Company’s income taxes.
(j) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand, money market deposits and amounts placed with external fund managers with an original maturity of three months or less. Cash and cash equivalents are carried at cost which approximates fair value. In addition, receivables from third-party credit card issuers typically converted to cash within five days of the original sales transaction are considered cash equivalents.
The following table summarizes the details of the Company’s cash and cash equivalents:
(in millions)
February 1, 2020
 
February 2, 2019
Cash and cash equivalents held in money markets and other accounts
$
326.2

 
$
164.5

Cash equivalents from third-party credit card issuers
46.3

 
29.1

Cash on hand
2.0

 
1.8

Total cash and cash equivalents
$
374.5

 
$
195.4


The Company’s supplemental cash flow information was as follows:
(in millions)
Fiscal 2020
 
Fiscal 2019
 
Fiscal 2018
Non-cash investing activities:
 
 
 
 
 
Capital expenditures in accounts payable
$
0.1

 
$
5.6

 
$
7.0

Supplemental cash flow information:
 
 
 
 
 
Interest paid
$
34.7

 
$
39.1

 
$
50.2

Income tax paid (refunded), net
$
5.7

 
$
(44.8
)
 
$
122.3


(k) Accounts receivable
Accounts receivable under the customer finance programs were presented net of an allowance for uncollectible amounts. This allowance represented management’s estimate of the expected losses in the accounts receivable portfolio as of the balance sheet date, and was calculated using a model that analyzed factors such as delinquency rates and recovery rates. In June 2018, the Company completed the sale of the remaining North America customer in-house finance receivables. Subsequent to the completion of the credit transaction, receivables issued by the Company but pending transfer are classified as “held for sale” and recorded at fair value in the consolidated balance sheet. See Note 21 for additional information regarding the assumptions utilized in the calculation of fair value of the finance receivables held for sale.
Prior to the credit transaction entered into in October 2017 (see Note 4), the Company calculated the allowance for uncollectible amounts as follows:
Record an allowance for amounts under 90 days aged on a recency measure of delinquency based on historical loss experience and payment performance information. The recency method measured the delinquency level by the number of days since the last qualifying payment was received, with the qualifying payment increasing with delinquency level.
Record a 100% allowance for any amount aged more than 90 days on a recency measure of delinquency and any amount associated with an account the owner of which has filed for bankruptcy.
Subsequent to the sale of its prime portfolio and until the sale of its non-prime accounts receivable portfolio, the Company measured delinquency under the contractual basis which aligned with the processes and collection strategies utilized by the Company’s third party credit service provider for the remaining in-house finance receivable portfolio. Under this measure of delinquency, credit card accounts were considered delinquent if the minimum payment was not received by the specified due date. The aging method was based on the number of completed billing cycles during which the customer failed to make a minimum payment. Management utilized the delinquency rates identified within the portfolio when calculating the overall allowance for the portfolio.
Due to the reclassification of the non-prime accounts receivable portfolio to “held for sale” in the first quarter of Fiscal 2019, the Company no longer records allowances for uncollectible amounts or bad debt expense.
See Note 14 for additional discussion of the Company’s accounts receivables.
(l) Inventories
Inventories are primarily held for resale and are valued at the lower of cost or net realizable value. Cost is determined using weighted-average cost, on a first-in first-out basis, for all inventories except for inventories held in the Company’s diamond sourcing operations, where cost is determined using specific identification. Cost includes charges directly related to bringing inventory to its present location and condition. Such charges would include warehousing, security, distribution and certain buying costs. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Inventory reserves are recorded for obsolete, slow moving or defective items and shrinkage. Inventory reserves for obsolete, slow moving or defective items are calculated as the difference between the cost of inventory and its estimated market value based on targeted inventory turn rates, future demand, management strategy and market conditions. Due to the inventory being primarily comprised of precious stones and metals including gold, the age of the inventory has a limited impact on the estimated market value. Inventory reserves for shrinkage are estimated and recorded based on historical physical inventory results, expectations of future inventory losses and current inventory levels. Physical inventories are taken at least once annually for all store locations and distribution centers.
See Note 15 for additional discussion of the Company’s inventories.
(m) Vendor contributions
Contributions are received from vendors through various programs and arrangements including cooperative advertising. Where vendor contributions related to identifiable promotional events are received, contributions are matched against the costs of promotions. Vendor contributions received as general contributions and not related to specific promotional events are recognized as a reduction of inventory costs.
(n) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment charges. Maintenance and repair costs are expensed as incurred. Depreciation and amortization are recognized on the straight-line method over the estimated useful lives of the related assets as follows:
Buildings
 
Ranging from 30 – 40 years
Leasehold improvements
 
Remaining term of lease, not to exceed 10 years
Furniture and fixtures
 
Ranging from 3 – 10 years
Equipment and software
 
Ranging from 3 – 7 years

Computer software purchased or developed for internal use is stated at cost less accumulated amortization. Signet’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, Signet also capitalizes certain payroll and payroll-related costs for employees directly associated with internal use computer projects. Amortization is charged on a straight-line basis over periods from three to seven years.
Property, plant and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Potentially impaired assets or asset groups are identified by reviewing the cash flows of individual stores. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset, based on the Company’s internal business plans. If the undiscounted cash flow is less than the asset’s carrying amount, the impairment charge recognized is determined by estimating the fair value of the assets and recording a loss for the amount that the carrying value exceeds the estimated fair value. The Company utilizes historical experience, internal business plans and an appropriate discount rate to estimate the fair value. Property and equipment at stores planned for closure are depreciated over a revised estimate of their useful lives.
See Note 16 for additional discussion of the Company’s property, plant and equipment.
(o) Goodwill and intangibles
In a business combination, the Company estimates and records the fair value of identifiable intangible assets and liabilities acquired. The fair value of these intangible assets and liabilities is estimated based on management’s assessment, including determination of appropriate valuation technique and consideration of any third party appraisals, when necessary. Significant estimates in valuing intangible assets and liabilities acquired include, but are not limited to, future expected cash flows associated with the acquired asset or liability, expected life and discount rates. The excess purchase price over the estimated fair values of the assets acquired and liabilities assumed is recognized as goodwill. Goodwill is recorded by the Company’s reporting units based on the acquisitions made by each.
Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions were to indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may be greater than its fair value, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded.
Intangible assets with definite lives are amortized and reviewed for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. If the estimated undiscounted future cash flows related to the asset are less than the carrying amount, the Company recognizes an impairment charge equal to the difference between the carrying value and the estimated fair value, usually determined by the estimated discounted future cash flows of the asset.
See Note 18 for additional discussion of the Company’s goodwill and intangibles.
(p) Derivatives and hedge accounting
The Company enters into various types of derivative instruments to mitigate certain risk exposures related to changes in commodity costs and foreign exchange rates. Derivative instruments are recorded in the consolidated balance sheets at fair value, as either assets or liabilities, with an offset to net income or other comprehensive income (“OCI”), depending on whether the derivative qualifies as an effective hedge.
If a derivative instrument meets certain criteria, it may be designated as a cash flow hedge on the date it is entered into. For cash flow hedge transactions, the effective portion of the changes in fair value of the derivative instrument is recognized directly in equity as a component of AOCI and is recognized in the consolidated statements of operations in the same period(s) and on the same financial statement line in which the hedged item affects net income. Amounts excluded from the effectiveness calculation and any ineffective portions of the change in fair value of the derivatives are recognized immediately in other operating income (loss) in the consolidated statements of operations. In addition, gains and losses on derivatives that do not qualify for hedge accounting are recognized immediately in other operating income (loss).
In the normal course of business, the Company may terminate cash flow hedges prior to the occurrence of the underlying forecasted transaction. For cash flow hedges terminated prior to the occurrence of the underlying forecasted transaction, management monitors the probability of the associated forecasted cash flow transactions to assess whether any gain or loss recorded in AOCI should be immediately recognized in net income. Cash flows from derivative contracts are included in net cash provided by operating activities.
See Note 20 for additional discussion of the Company’s derivatives and hedge activities.
(q) Employee Benefits
The funded status of the defined benefit pension plan in the UK (the “UK Plan”) is recognized on the balance sheet, and is the difference between the fair value of plan assets and the projected benefit obligation measured at the balance sheet date. Gains or losses and prior service costs or credits that arise and are not included as components of net periodic pension cost are recognized, net of tax, in OCI.
Signet also operates a defined contribution plan in the UK, a defined contribution retirement savings plan in the US, and an executive deferred compensation plan in the US. Contributions made by Signet to these benefit arrangements are charged primarily to selling, general and administrative expenses in the consolidated statements of operations as incurred.
See Note 22 for additional discussion of the Company’s employee benefits.
(r) Debt issuance costs
Borrowings include primarily interest-bearing bank loans and bank overdrafts. Direct debt issuance costs on borrowings are capitalized and amortized into interest expense over the contractual term of the related loan.
See Note 23 for additional discussion of the Company’s debt issuance costs.
(s) Share-based compensation
Signet measures share-based compensation cost for awards classified as equity at the grant date based on the estimated fair value of the award and recognizes the cost as an expense on a straight-line basis (net of estimated forfeitures) over the requisite service period of employees. Certain share plans include a condition whereby vesting is contingent on Company performance exceeding a given target, and therefore awards granted with this condition are considered to be performance-based awards.
Signet estimates fair value using a Black-Scholes model for awards granted under the Omnibus Plan and the binomial valuation model for awards granted under the Share Saving Plans. Deferred tax assets for awards that result in deductions on the income tax returns of subsidiaries are recorded by Signet based on the amount of compensation cost recognized and the subsidiaries’ statutory tax rate in the jurisdiction in which it will receive a deduction.
Share-based compensation is primarily recorded in selling, general and administrative expenses in the consolidated statements of operations, consistent with the relevant salary cost.
See Note 26 for additional discussion of the Company’s share-based compensation plans.
(t) Contingent liabilities
Provisions for contingent liabilities are recorded for probable losses when management is able to reasonably estimate the loss or range of loss. When it is reasonably possible that a contingent liability may result in a loss or additional loss, the range of the potential loss is disclosed.
See Note 27 for additional discussion of the Company’s contingencies.
(u) Dividends
Dividends on common shares are reflected as a reduction of retained earnings in the period in which they are formally declared by the Board of Directors (the “Board”). In addition, the cumulative dividends on preferred shares are reflected as a reduction of retained earnings in the period in which they are declared by the Board, as are the deemed dividends resulting from the accretion of issuance costs related to the preferred shares.
See Note 8 and Note 9 for additional information related to the Company’s equity, including the preferred shares.
v3.20.1
New accounting pronouncements
12 Months Ended
Feb. 01, 2020
Accounting Policies [Abstract]  
New accounting pronouncements New accounting pronouncements
The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.
New accounting pronouncements recently adopted
Leases
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The new guidance primarily impacts lessee accounting by requiring the recognition of a right-of-use asset and a corresponding lease liability on the balance sheet for long-term lease agreements. The lease liability will be equal to the present value of all reasonably certain remaining lease payments. The right-of-use asset will be based on the liability, subject to adjustment for initial direct costs. Lease agreements that are 12 months or less are permitted to be excluded from the balance sheet. In general, leases will be amortized on a straight-line basis with the exception of finance lease agreements. Signet adopted ASU 2016-02 and related updates effective February 3, 2019 using the additional transition method provided for in ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which permitted the Company as of the effective date of ASU 2016-02 to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The impact of this approach was deemed immaterial upon adoption of ASU 2016-02. As part of the adoption of ASU 2016-02, the Company utilized the practical expedient relief package, as well as the short-term leases and portfolio approach practical expedients.
The effects of the changes made to the Company’s condensed consolidated balance sheet as of February 3, 2019 for the adoption of ASC 842 were as follows:
(in millions)
 
February 2, 2019
 
Adjustments due to ASC 842
 
February 3, 2019
Current assets:
 
 
 
 
 
 
Other current assets
 
$
244.0

 
$
(8.8
)
 
$
235.2

Non-current assets:
 
 
 
 
 
 
Operating lease right-of-use assets
 

 
1,927.2

 
1,927.2

Current liabilities:
 
 
 
 
 
 
Accrued expenses and other current liabilities
 
502.8

 
(32.9
)
 
469.9

Operating lease liabilities
 

 
376.5

 
376.5

Non-current liabilities:
 
 
 
 
 
 
Operating lease liabilities
 

 
1,676.9

 
1,676.9

Other liabilities
 
224.1

 
(102.1
)
 
122.0


See additional disclosures related to leases within Note 17.
In addition to the pronouncement above, the following ASU was adopted as of February 3, 2019. The impact on the Company's consolidated financial statements is described within the table below:
Standard
 
Description
ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, issued August 2017.
 
Expands the types of risk management strategies eligible for hedge accounting, refines the documentation and effectiveness assessment requirements and modifies the presentation and disclosure requirements for hedge accounting activities. The adoption of ASU 2017-12 did not have a material impact on the Company’s financial position or results of operations.

New accounting pronouncements issued not yet adopted
Standard
 
Description
ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, issued July 2018.
 
Aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The updated guidance is not expected to have a material impact on the Company’s financial position or results of operations.
ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, issued August 2018.
 
Modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans and clarifies the disclosure requirements regarding projected benefit obligations and accumulated benefit obligations. The ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The new guidance does not affect the existing recognition or measurement guidance, and therefore will have no impact on the Company’s financial condition or results of operations. The Company is evaluating the impact to related disclosures.
ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, issued August 2018.
 
Modifies the disclosure requirements on fair value measurements in Topic 820 and eliminates ‘at a minimum’ from the phrase ‘an entity shall disclose at a minimum’ to promote the appropriate exercise of discretion by entities when considering fair value disclosures and to clarify that materiality is an appropriate consideration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The new guidance does not affect the existing recognition or measurement guidance, and therefore will have no impact on the Company’s financial condition or results of operations. The Company is evaluating the impact to related disclosures.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, issued June 2016.
 
Requires entities to measure and recognize expected credit losses for financial assets measured at amortized cost basis. The estimate of expected credit losses should consider historical information, current information, and reasonable and supportable forecasts of expected losses over the remaining contractual life that affect collectability. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. The new guidance is not expected to have a material impact on the Company’s financial position or results of operations.

v3.20.1
Revenue recognition
12 Months Ended
Feb. 01, 2020
Revenue from Contract with Customer [Abstract]  
Revenue recognition Revenue recognition
The following tables provide the Company’s total sales, disaggregated by banner, for Fiscal 2020, Fiscal 2019 and Fiscal 2018:
 
 
Fiscal 2020
(in millions)
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
Kay
 
$
2,397.7

 
$

 
$

 
$
2,397.7

Zales
 
1,261.3

 

 

 
1,261.3

Jared
 
1,088.1

 

 

 
1,088.1

Piercing Pagoda
 
331.7

 

 

 
331.7

James Allen
 
250.6

 

 

 
250.6

Peoples
 
200.6

 

 

 
200.6

Regional banners
 
35.8

 

 

 
35.8

International segment banners
 

 
518.0

 

 
518.0

Other(1)
 

 

 
53.3

 
53.3

Total sales
 
$
5,565.8

 
$
518.0

 
$
53.3

 
$
6,137.1

 
 
 
 
 
 
 
 
 
 
 
Fiscal 2019
(in millions)
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
Kay
 
$
2,417.8

 
$

 
$

 
$
2,417.8

Zales
 
1,260.7

 

 

 
1,260.7

Jared
 
1,141.4

 

 

 
1,141.4

Piercing Pagoda
 
302.5

 

 

 
302.5

James Allen
 
223.7

 

 

 
223.7

Peoples
 
208.5

 

 

 
208.5

Regional banners
 
87.1

 

 

 
87.1

International segment banners
 

 
576.5

 

 
576.5

Other(1)
 

 

 
28.9

 
28.9

Total sales
 
$
5,641.7

 
$
576.5

 
$
28.9

 
$
6,247.1

 
 
 
 
 
 
 
 
 
 
 
Fiscal 2018
(in millions)
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
Kay
 
$
2,428.1

 
$

 
$

 
$
2,428.1

Zales
 
1,244.3

 

 

 
1,244.3

Jared
 
1,192.1

 

 

 
1,192.1

Piercing Pagoda
 
278.5

 

 

 
278.5

James Allen
 
88.1

 

 

 
88.1

Peoples
 
215.4

 

 

 
215.4

Regional banners
 
168.7

 

 

 
168.7

International segment banners
 

 
616.7

 

 
616.7

Other(1)
 

 

 
21.1

 
21.1

Total sales
 
$
5,615.2

 
$
616.7

 
$
21.1

 
$
6,253.0

(1)  
Includes sales from Signet’s diamond sourcing initiative.
The following tables provide the Company’s total sales, disaggregated by major product, for Fiscal 2020, Fiscal 2019 and Fiscal 2018:
 
Fiscal 2020
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
Bridal
$
2,403.4

 
$
214.3

 
$

 
$
2,617.7

Fashion
2,131.0

 
110.5

 

 
2,241.5

Watches
214.9

 
169.1

 

 
384.0

Other(1)
816.5

 
24.1

 
53.3

 
893.9

Total sales
$
5,565.8

 
$
518.0

 
$
53.3

 
$
6,137.1

 
 
 
 
 
 
 
 
 
Fiscal 2019
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
Bridal
$
2,478.6

 
$
234.0

 
$

 
$
2,712.6

Fashion
2,128.1

 
126.3

 

 
2,254.4

Watches
238.2

 
190.9

 

 
429.1

Other(1)
796.8

 
25.3

 
28.9

 
851.0

Total sales
$
5,641.7

 
$
576.5

 
$
28.9

 
$
6,247.1

 
 
 
 
 
 
 
 
 
Fiscal 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
Bridal
$
2,407.3

 
$
247.3

 
$

 
$
2,654.6

Fashion
2,168.2

 
137.0

 

 
2,305.2

Watches
243.6

 
195.5

 

 
439.1

Other(1)
796.1

 
36.9

 
21.1

 
854.1

Total sales
$
5,615.2

 
$
616.7

 
$
21.1

 
$
6,253.0

(1)  
Other revenue primarily includes gift and other miscellaneous jewelery sales, repairs, warranty and other miscellaneous non-jewelry sales.


The following tables provide the Company’s total sales, disaggregated by channel, for Fiscal 2020, Fiscal 2019 and Fiscal 2018:
 
Fiscal 2020
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
Store
$
4,880.2

 
$
453.2

 
$

 
$
5,333.4

eCommerce
685.6

 
64.8

 

 
750.4

Other

 

 
53.3

 
53.3

Total sales
$
5,565.8

 
$
518.0

 
$
53.3

 
$
6,137.1

 
 
 
 
 
 
 
 
 
Fiscal 2019
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
Store
$
5,022.4

 
$
513.4

 
$

 
$
5,535.8

eCommerce
619.3

 
63.1

 

 
682.4

Other

 

 
28.9

 
28.9

Total sales
$
5,641.7

 
$
576.5

 
$
28.9

 
$
6,247.1

 
 
 
 
 
 
 
 
 
Fiscal 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
Store
$
5,176.7

 
$
557.5

 
$

 
$
5,734.2

eCommerce
438.5

 
59.2

 

 
497.7

Other

 

 
21.1

 
21.1

Total sales
$
5,615.2

 
$
616.7

 
$
21.1

 
$
6,253.0


The Company recognizes revenues when control of the promised goods and services are transferred to customers, in an amount that reflects the consideration expected to be received in exchange for those goods. Transfer of control generally occurs at the time merchandise is taken from a store, or upon receipt of the merchandise by a customer for an e-commerce shipment. The Company excludes all taxes assessed by government authorities and collected from a customer from its reported sales. The Company’s revenue streams and their respective accounting treatments are further discussed below.
On February 4, 2018, the Company adopted ASU No. 2014‑09 Revenue from Contracts with Customers (Topic 606) and related updates (“ASC 606”) using the modified retrospective approach applied only to contracts not completed as of the date of adoption with no restatement of prior periods and by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. Financial results included in the Company's consolidated financial statements for Fiscal 2020 and Fiscal 2019 are presented under ASC 606, while Fiscal 2018 is presented under the previous accounting standard, ASC 605. As a result of adopting ASC 606, the Company adjusted its presentation related to customer trade-ins, accounting for returns reserves, costs associated with selling extended service plans and treatment of the amortization of certain bonus and profit-sharing arrangements related to third-party credit card programs. During Fiscal 2019, an additional $111.2 million of revenue was recognized primarily for non-cash consideration from customer trade-ins and $16.5 million of previously capitalized contract acquisitions costs were reclassified to beginning retained earnings.
Merchandise sales and repairs
Store sales are recognized when the customer receives and pays for the merchandise at the store with cash, in-house customer finance, private label credit card programs, a third-party credit card or a lease purchase option. For online sales shipped to customers, sales are recognized at the estimated time the customer has received the merchandise. Amounts related to shipping and handling that are billed to customers are reflected in sales and the related costs are reflected in cost of sales. Revenues on the sale of merchandise are reported net of anticipated returns and sales tax collected. Returns are estimated based on previous return rates experienced. Any deposits received from a customer for merchandise are deferred and recognized as revenue when the customer receives the merchandise. Revenues derived from providing replacement merchandise on behalf of insurance organizations are recognized upon receipt of the merchandise by the customer. Revenues on repair of merchandise are recognized when the service is complete and the customer collects the merchandise at the store.
Extended service plans and lifetime warranty agreements (“ESP”)
The Company recognizes revenue related to ESP sales in proportion to when the expected costs will be incurred. The deferral period for ESP sales is determined from patterns of claims costs, including estimates of future claims costs expected to be incurred. Management reviews the trends in claims to assess whether changes are required to the revenue and cost recognition rates utilized. A significant change in estimates related to the time period or pattern in which warranty-related costs are expected to be incurred could materially impact revenues. All direct costs associated with the sale of these plans are deferred and amortized in proportion to the revenue recognized and disclosed as either other current assets or other assets in the condensed consolidated balance sheets. These direct costs primarily include sales commissions and credit card fees. Amortization of deferred ESP selling costs is included within selling, general and administrative expenses in the consolidated statements of operations. Amortization of deferred ESP selling costs were $29.5 million and $52.4 million in Fiscal 2020 and Fiscal 2019, respectively.
Unamortized deferred selling costs as of Fiscal 2020 and Fiscal 2019 were as follows:
(in millions)
February 1, 2020
 
February 2, 2019
Deferred ESP selling costs
 
 
 
Other current assets
$
23.6

 
$
23.8

Other assets
80.0

 
75.4

Total deferred ESP selling costs
$
103.6

 
$
99.2


The North America segment sells ESP, subject to certain conditions, to perform repair work over the life of the product. Customers generally pay for ESP at the store at the time of merchandise sale. Revenue from the sale of the lifetime ESP is recognized consistent with the estimated pattern of claim costs expected to be incurred by the Company in connection with performing under the ESP obligations. Lifetime ESP revenue is deferred and recognized over a maximum of 17 years after the sale of the warranty contract. Although claims experience varies between our national banners, thereby resulting in different recognition rates, approximately 55% of revenue is recognized within the first two years on a weighted average basis.
The North America segment also sells a Jewelry Replacement Plan (“JRP”). The JRP is designed to protect customers from damage or defects of purchased merchandise for a period of three years. If the purchased merchandise is defective or becomes damaged under normal use in that time period, the item will be replaced. JRP revenue is deferred and recognized on a straight-line basis, generally over the three year protection period.
Signet also sells warranty agreements in the capacity of an agent on behalf of a third-party. The commission that Signet receives from the third-party is recognized at the time of sale less an estimate of cancellations based on historical experience.
Sale vouchers
Certain promotional offers award sale vouchers to customers who make purchases above a certain value, which grant a fixed discount on a future purchase within a stated time frame. The Company accounts for such vouchers by allocating the fair value of the voucher between the initial purchase and the future purchase using the relative-selling-price method. Sale vouchers are not sold on a stand-alone basis. The fair value of the voucher is determined based on the average sales transactions in which the vouchers were issued, when the vouchers are expected to be redeemed and the estimated voucher redemption rate. The fair value allocated to the future purchase is recorded as deferred revenue.
Consignment inventory sales
Sales of consignment inventory are accounted for on a gross sales basis as the Company maintains control of the merchandise through the point of sale as well as provides independent advice, guidance and after-sales service to customers. The products sold from consignment inventory are indistinguishable from other products that are sold to customers and are sold on the same terms. Supplier products are selected at the discretion of the Company. The Company is responsible for determining the selling price and physical security of the products.

Deferred revenue
Deferred revenue is comprised primarily of ESP and voucher promotions as follows:
(in millions)
February 1, 2020
 
February 2, 2019
ESP deferred revenue
$
960.0

 
$
927.6

Voucher promotions and other
37.7

 
38.9

Total deferred revenue
$
997.7

 
$
966.5

 
 
 
 
Disclosed as:
 
 
 
Current liabilities
$
266.2

 
$
270.0

Non-current liabilities
731.5

 
696.5

Total deferred revenue
$
997.7

 
$
966.5

(in millions)
Fiscal 2020
 
Fiscal 2019
ESP deferred revenue, beginning of period
$
927.6

 
$
916.1

Plans sold(1)
405.1

 
395.0

Revenue recognized(2)
(372.7
)
 
(383.5
)
ESP deferred revenue, end of period
$
960.0

 
$
927.6

(1) 
Includes impact of foreign exchange translation.
(2) 
During Fiscal 2020, the Company recognized sales of approximately $193.6 million related to deferred revenue that existed at February 2, 2019 in respect to ESP and voucher promotions.
v3.20.1
Credit transaction, net
12 Months Ended
Feb. 01, 2020
Receivables [Abstract]  
Credit transaction, net Credit transaction, net
During Fiscal 2018, Signet announced a strategic initiative to outsource its North America private label credit card programs and sell the existing in-house finance receivables. Below is a summary of the transactions the Company has entered into as a result of this strategic initiative:
Fiscal 2018
In October 2017, Signet, through its subsidiary Sterling, completed the sale of the prime-only credit quality portion of Sterling’s in-house finance receivable portfolio to Comenity. The following events summarize this credit transaction:
Receivables reclassification: In the second quarter of Fiscal 2018, certain in-house finance receivables that met the criteria for sale to Comenity were reclassified from "held for investment" to "held for sale." Accordingly, the receivables were recorded at the lower of cost (par) or fair value, resulting in the reversal of the related allowance for credit losses of $20.7 million. This reversal was recorded in credit transaction, net in the consolidated statement of operations during the second quarter of Fiscal 2018.
Proceeds received: In October 2017, the Company received $952.5 million in cash consideration reflecting the par value of the receivables sold. In addition, the Company recognized a beneficial interest asset of $10.2 million representing the present value of the cash flows the Company expects to receive under the economic profit sharing agreement related to the receivables sold. The gain upon recognition of the beneficial interest asset was recorded in credit transaction, net in the consolidated statement of operations during the third quarter of Fiscal 2018.
Expenses: During Fiscal 2018, the Company incurred $29.6 million of transaction-related costs. These costs were recorded in credit transaction, net in the consolidated statement of operations during Fiscal 2018.
Asset-backed securitization facility termination: In October 2017, the Company terminated the asset-backed securitization facility in order to transfer the receivables free and clear. The asset-backed securitization facility had a principal balance outstanding of $600.0 million at the time of termination. The payoff was funded through the proceeds received from the par value of receivables sold. See Note 23 for additional information regarding the asset-backed securitization facility.
Program agreement: Comenity provides credit to prime-only credit quality customers with an initial term of seven years and, unless terminated by either party, additional renewal terms of two years. Under the Program Agreement, Comenity established a program to issue Sterling credit cards to be serviced, marketed and promoted in accordance with the terms of the agreement. Subject to limited exceptions, Comenity is the exclusive issuer of private label credit cards or an installment or other closed end loan product in the United States bearing specified Company trademarks, including “Kay”, “Jared” and specified regional brands, but excluding “Zale”, during the term of the agreement. The pre-existing arrangement with Comenity for the issuing of Zale credit cards was unaffected by the execution of the Program Agreement. Upon expiration or termination by either party of the Program Agreement, Sterling retains the option to purchase, or arrange the purchase by a third party of, the program assets from Comenity on terms that are no more onerous to Sterling than those applicable to Comenity under the Purchase Agreement, or in the case of a purchase by a third party, on customary terms. Additionally, the Company received a signing bonus, which may be repayable under certain conditions if the Program Agreement is terminated, and a right to receive future payments related to the performance of the credit program under an economic profit sharing agreement. The Program Agreement contains customary representations, warranties and covenants.
Additionally, Signet and Genesis Financial Solutions (“Genesis”) entered into a five-year servicing agreement in October 2017, under which Genesis will provide credit servicing functions for Signet’s non-prime accounts receivable portfolio prior to its sale, as well as future non-prime account originations.
Fiscal 2019
During March 2018, the Company, through its subsidiary Sterling, entered into a definitive agreement with CarVal to sell all eligible non-prime in-house accounts receivable. In May 2018, the Company exercised its option to appoint a minority party, Castlelake, to purchase 30% of the eligible receivables sold to CarVal under the Receivables Purchase Agreement. In June 2018, the Company completed the sale of the non-prime in-house accounts receivable at a price expressed as 72% of the par value of the accounts receivable. The purchase price was settled with 95% received as cash upon closing. The remaining 5% of the purchase price was deferred until the second anniversary of the closing date. Final payment of the deferred purchase price is contingent upon the non-prime in-house finance receivable portfolio achieving a pre-defined yield. The agreement contains customary representations, warranties and covenants.
Receivables reclassification: In March 2018, the eligible non-prime in-house accounts receivables that met the criteria for sale were reclassified from "held for investment" to "held for sale" on the consolidated balance sheet. Accordingly, the receivables were recorded at the lower of cost (par) or fair value as of the date of the reclassification with subsequent adjustments to the asset fair value as required through the closing date of the transaction. During Fiscal 2019, total valuation losses of $160.4 million were recorded within credit transaction, net in the consolidated statement of operations.
Proceeds received: In June 2018, the Company received $445.5 million in cash consideration for the receivables sold based on the terms of the agreements with CarVal and Castlelake described above. The Company also recorded a receivable related to the deferred purchase
price payment within other assets and will adjust the asset to fair value in each period of the performance period. See Note 21 for additional information regarding the fair value of deferred purchase price.
Expenses: During Fiscal 2019, the Company incurred $7.0 million of transaction-related costs, which were recorded within credit transaction, net in the consolidated statement of operations.
In addition, for a five-year term, Signet will remain the issuer of non-prime credit with investment funds managed by CarVal and Castlelake purchasing forward receivables at a discount rate determined in accordance with their respective agreements. Signet will hold the newly issued non-prime credit receivables on its balance sheet for two business days prior to selling the receivables to the respective counterparty in accordance with the agreements. Servicing of the non-prime receivables, including operational interfaces and customer servicing, will continue to be provided by Genesis.
Accounts receivable, net
Prior to the second quarter of Fiscal 2019, Signet’s accounts receivable primarily consisted of US customer in-house financing receivables. This accounts receivable portfolio historically consisted of a population that was of similar characteristics and was evaluated collectively for impairment.
In October 2017, the Company completed the sale of the prime portion of the Sterling customer in-house finance receivables. See Note 4 for additional information regarding the sale of the prime portion of the customer in-house finance receivable portfolio.
In June 2018, the Company completed the sale of the remaining Sterling and Zale customer in-house finance receivables. See Note 4 for additional information regarding the agreement. For a five-year term ending in 2023, Signet will remain the issuer of non-prime credit with investment funds managed by CarVal and Castlelake purchasing forward flow receivables at a discount rate determined in accordance with their respective agreements. Receivables issued by the Company but pending transfer to Carval and Castlelake as of period end are classified as “held for sale” in the consolidated balance sheet. As of February 1, 2020 and February 2, 2019, the accounts receivable held for sale were recorded at fair value. See Note 21 for additional information regarding the assumptions utilized in the calculation of fair value of the finance receivables held for sale.
(in millions)
February 1, 2020
 
February 2, 2019
Accounts receivable, held for investment
$
34.4

 
$
19.5

Accounts receivable, held for sale
4.4

 
4.2

Total accounts receivable
$
38.8

 
$
23.7


Prior to the sale of the remaining Sterling and Zale customer in-house finance receivables in June 2018, Signet granted credit to customers based on a variety of credit quality indicators, including consumer financial information and prior payment experience. Management monitored the credit exposure based on past due status and collection experience, as it had found a meaningful correlation between the past due status of customers and the risk of loss.
Accounts receivable held for investment includes accounts receivable relating to the insurance loss replacement business in the International segment and accounts receivable from our diamond sourcing initiative in the Other segment.
The activity in Fiscal 2019 and Fiscal 2018 related to the allowance for credit losses on Sterling Jewelers customer in-house finance receivables is shown below. There was no activity in Fiscal 2020 as the completion of the sale of in-house finance receivables occurred in June 2018.
(in millions)
Fiscal 2019
 
Fiscal 2018
Beginning balance:
$
(113.5
)
 
$
(138.7
)
Charge-offs, net
56.3

 
221.2

Recoveries
4.2

 
34.3

Provision
(54.6
)
 
(251.0
)
Reversal of allowance on receivables sold
107.6

 
20.7

Ending balance
$

 
$
(113.5
)
Ending receivable balance evaluated for impairment

 
762.9

Sterling Jewelers customer in-house finance receivables, net
$

 
$
649.4


v3.20.1
Acquisitions
12 Months Ended
Feb. 01, 2020
Business Combinations [Abstract]  
Acquisitions Acquisitions
On September 12, 2017, the Company acquired the outstanding shares of R2Net, the owner of online jewelry retailer JamesAllen.com and Segoma Imaging Technologies. The acquisition rapidly enhanced the Company’s digital capabilities and accelerated its OmniChannel strategy, while adding a millennial-focused online retail brand to the Company’s portfolio. The Company paid $331.8 million, net of acquired cash of $47.3 million, for R2Net. The total consideration paid was funded with a $350.0 million bridge loan. See Note 23 for additional information regarding the bridge loan.
The transaction was accounted for as a business combination during the third quarter of Fiscal 2018 with R2Net becoming a wholly-owned consolidated subsidiary of Signet. Prior to closing the acquisition, the Company incurred approximately $8.6 million of acquisition-related costs for professional services in Fiscal 2018. Acquisition-related costs were recorded as selling, general and administrative expenses in the consolidated statement of operations. The results of R2Net subsequent to the acquisition date are reported as a component of the results of the North America segment. See Note 6 for segment information. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material.
Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed are recorded at their estimated fair values on the acquisition date, with the remaining unallocated net purchase price recorded as goodwill. The following table summarizes the fair values identified for the assets acquired and liabilities assumed in the R2Net acquisition as of September 12, 2017:
(in millions)
Fair values
Cash and cash equivalents
$
47.3

Inventories
12.1

Other current assets
9.7

Property, plant and equipment
3.5

Intangible assets:
 
Trade name
70.6

Technology-related
4.2

Current liabilities
(42.4
)
Deferred tax liabilities
(25.1
)
Fair value of net assets acquired
79.9

Goodwill
299.1

Total consideration transferred
$
379.0


During the second quarter of Fiscal 2019, the Company finalized the valuation of net assets acquired. The goodwill generated from the acquisition is primarily attributable to expected synergies and will not be deductible for tax purposes. See Note 18 for additional information related to goodwill and intangible assets.
v3.20.1
Segment information
12 Months Ended
Feb. 01, 2020
Segment Reporting [Abstract]  
Segment information Segment information
Financial information for each of Signet’s reportable segments is presented in the tables below. Signet’s chief operating decision maker utilizes sales and operating income, after the elimination of any inter-segment transactions, to determine resource allocations and performance assessment measures. During the first quarter of Fiscal 2019, the Company realigned its organizational structure. The new structure allows for further integration of operational and product development processes and supports growth strategies. In accordance with this organizational change, beginning with quarterly reporting for the 13 weeks ended May 5, 2018, the Company reported three reportable segments as follows: North America, which consists of the legacy Sterling Jewelers and Zale divisions; International, which consists of the legacy UK Jewelry division; and Other. Signet’s sales are derived from the retailing of jewelry, watches, other products and services as generated through the management of its reportable segments.
The North America reportable segment operates across the US and Canada. Its US stores operate nationally in malls and off-mall locations principally as Kay (Kay Jewelers and Kay Jewelers Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), Zales (Zales Jewelers and Zales Outlet) and Piercing Pagoda, which operates through mall-based kiosks. Its Canadian stores operate under the Peoples Jewellers store banner. The segment also operates a variety of mall-based regional banners, including Gordon’s Jewelers in the US and Mappins in Canada, and James Allen, which was acquired in the R2Net acquisition.
The International reportable segment operates stores in the UK, Republic of Ireland and Channel Islands. Its stores operate in shopping malls and off-mall locations principally under the H.Samuel and Ernest Jones banners.
The Other reportable segment consists of all non-reportable segments that are below the quantifiable threshold for separate disclosure as a reportable segment, including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones and unallocated corporate administrative functions.
(in millions)
Fiscal 2020
 
Fiscal 2019
 
Fiscal 2018
Sales:
 
 
 
 
 
North America segment(1)
$
5,565.8

 
$
5,641.7

 
$
5,615.2

International segment
518.0

 
576.5

 
616.7

Other
53.3

 
28.9

 
21.1

Total sales
$
6,137.1

 
$
6,247.1

 
$
6,253.0