(Source: Canada Newswire)
TORONTO, June 4 /CNW/ - Harry Winston Diamond Corporation (TSX: HW, NYSE: HWD) (the "Company") today reported first quarter results for the period ending April 30, 2009. The Company recorded a consolidated net loss of $45.1 million or $0.68 per share for the quarter, compared to net earnings of $21.3 million or $0.35 per share in the first quarter of the prior year. Consolidated net loss for the quarter included a non-cash dilution loss of $34.2 million or $0.52 per share as a result of the investment by Kinross Gold Corporation in Harry Winston Diamond Limited Partnership, which holds the Company's 40% interest in the Diavik Diamond Mine. The consolidated net loss also includes a $5.8 million net foreign exchange loss or $0.09 per share, compared to a $0.2 million net foreign exchange gain in the comparable quarter of the prior year, and an after-tax gain on the insurance settlement of $1.9 million or $0.03 per share. Excluding the impact of the non-cash dilution loss, the net foreign exchange loss, and the after-tax gain on the insurance settlement, the net loss would have been $6.9 million or $0.10 per share for the quarter.
Robert Gannicott, Chairman and Chief Executive Officer commented: "We began this quarter with a rough diamond market that could see no bottom and retail sales effectively stalled. Rough diamond prices fell to levels not seen since the inception of the Diavik Project, seven years ago. We ended the quarter with consistent improvement in rough diamond prices and the return of customers to our retail stores. This improvement has continued through May in both of our business segments."
Consolidated sales were $109.6 million for the quarter compared to $156.1 million for the comparable quarter of the prior year, resulting in a 69% decrease in gross margin and a loss from operations of $10.1 million.
The mining segment recorded sales of $57.7 million, a 29% decrease from $81.4 million in the comparable quarter of the prior year. Rough diamond production for the calendar quarter was 0.7 million carats, consistent with production in the comparable quarter of the prior year. As a result of lower sales, the mining segment recorded a loss from operations for the quarter of $5.1 million compared to earnings from operations of $42.0 million for the comparable quarter of the prior year.
The retail segment recorded a 30% decrease in sales to $51.9 million, with a loss from operations of $5.0 million compared to a loss from operations of $2.4 million in the first quarter of the prior year. Retail segment selling, general and administrative expenses decreased by $5.8 million from $36.1 million in the comparable quarter of the prior year.
First Quarter Fiscal 2010 Financial Highlights
(US$ in millions except Earnings per Share amounts)
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Three Three Twelve
months months months
ended ended ended
April 30, April 30, January 31,
2009 2008 2009
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Sales 109.6 156.1 609.2
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Earnings from operations (loss) (10.1) 39.6 166.1
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Net earnings (loss) (45.1) 21.3 70.1
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Earnings (loss) per share ($0.68) $0.35 $1.15
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Annual General Meeting and Webcast
Beginning at 10:00AM (EDT) today, June 4, 2009, the Company will hold its Annual Meeting of Shareholders at the Fairmont Royal York Hotel, 100 Front Street West, Toronto, Ontario in the Imperial Room on the Lobby Level. Interested parties unable to attend may listen to a webcast of the meeting and a review of the first quarter results on the company's website at http:// investor.harrywinston.com. An online archive of the webcast will be available on the company's website at http:// investor.harrywinston.com later the same day.
About Harry Winston Diamond Corporation
Harry Winston Diamond Corporation is a specialist diamond enterprise with assets in the mining and retail segments of the diamond industry. Harry Winston supplies rough diamonds to the global market from its 40 per cent ownership interest in the Diavik Diamond Mine (economic ownership of 31%).
The company's retail division is a premier diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo, and Beverly Hills.
The Company focuses on the two most profitable segments of the diamond industry, mining and retail, in which its expertise creates shareholder value. This unique business model provides key competitive advantages; rough diamond sales and polished diamond purchases provide market intelligence that enhances the Company's overall performance.
For more information, please visit www.harrywinston.com.
For investor information, visit http://investor.harrywinston.com or call Investor Relations on (416) 362-2237 ext 290.
2010 First Quarter Report
HARRY WINSTON DIAMOND CORPORATION
Three Months Ended April 30, 2009
Highlights
(All figures are in United States dollars unless otherwise indicated)
Harry Winston Diamond Corporation recorded a consolidated net loss of $45.1 million or $0.68 per share for the quarter, compared to net earnings of $21.3 million or $0.35 per share in the first quarter of the prior year. Consolidated net loss for the quarter included a non-cash dilution loss of $34.2 million or $0.52 per share as a result of the investment by Kinross Gold Corporation in Harry Winston Diamond Limited Partnership, which holds the Company's 40% interest in the Diavik Diamond Mine. The consolidated net loss also includes a $5.8 million net foreign exchange loss or $0.09 per share, compared to a $0.2 million net foreign exchange gain in the comparable quarter of the prior year.
Consolidated sales were $109.6 million for the quarter compared to $156.1 million for the comparable quarter of the prior year, resulting in a 69% decrease in gross margin and a loss from operations of $10.1 million.
The mining segment recorded sales of $57.7 million, a 29% decrease from $81.4 million in the comparable quarter of the prior year. The decrease in sales resulted from lower rough diamond prices in the first quarter. Rough diamond production for the calendar quarter was 0.7 million carats, consistent with production in the comparable quarter of the prior year. As a result of lower sales, the mining segment recorded a loss from operations for the quarter of $5.1 million compared to earnings from operations of $42.0 million for the comparable quarter of the prior year.
The retail segment recorded a 30% decrease in sales to $51.9 million, with a loss from operations of $5.0 million compared to a loss from operations of $2.4 million in the first quarter of the prior year. Retail segment selling, general and administrative expenses decreased by $5.8 million from $36.1 million in the comparable quarter of the prior year.
Management's Discussion and Analysis
Prepared as of June 3, 2009
(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED)
The following is management's discussion and analysis ("MD&A") of the results of operations for Harry Winston Diamond Corporation ("Harry Winston Diamond Corporation", or the "Company") for the three months ended April 30, 2009 and its financial position as at April 30, 2009. This MD&A is based on the Company's consolidated financial statements prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP") and should be read in conjunction with the unaudited consolidated financial statements and notes thereto for the three months ended April 30, 2009 and the audited consolidated financial statements of the Company and notes thereto for the year ended January 31, 2009. Unless otherwise specified, all financial information is presented in United States dollars. Unless otherwise indicated, all references to "first quarter" refer to the three months ended April 30, 2009 and all references to "international" for the retail segment refer to Europe and Asia. Certain comparative figures have been reclassified to conform with the current year's presentation.
Caution Regarding Forward-Looking Information
Certain information included in this MD&A may constitute forward- looking information within the meaning of Canadian and United States securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding plans, timelines and targets for construction, mining, development, production and exploration activities at the Diavik Diamond Mine, future mining and processing at the Diavik Diamond Mine, projected capital expenditure requirements and the funding thereof, new salon openings, liquidity and working capital requirements and sources, estimated reserves and resources at, and production from, the Diavik Diamond Mine, the number and timing of expected rough diamond sales, expected diamond prices and expectations concerning the diamond industry, expected cost of sales and gross margin trends in the mining segment, and expected sales trends in the retail segment. Actual results may vary from the forward-looking information. See "Risks and Uncertainties" on page 15 for material risk factors that could cause actual results to differ materially from the forward-looking information.
Forward-looking information is based on certain factors and assumptions regarding, among other things, mining, production, construction and exploration activities at the Diavik Diamond Mine, the level of worldwide diamond production and world and US economic conditions and demand for luxury goods. Specifically, in estimating the Company's projected Diavik Diamond Mine capital expenditure requirements over the next five years, the Company has used an average Canadian/US dollar exchange rate of $0.90. In making statements regarding expected diamond prices and expectations concerning the diamond industry and expected sales trends in the retail segment, the Company has made assumptions regarding, among other things, world and US economic conditions and demand for luxury goods. While the Company considers these assumptions to be reasonable based on the information currently available to it, they may prove to be incorrect. See "Risks and Uncertainties" on page 15.
Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what we currently expect. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, risks associated with the remote location of and harsh climate at the Diavik Diamond Mine site, risks associated with regulatory requirements, fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate, financing risk, risks relating to the Company's salon expansion strategy and the risks of competition in the luxury jewelry segment. Please see page 15 of this Interim Report, as well as the Company's Annual Report, available at www.sedar.com, for a discussion of these and other risks and uncertainties involved in the Company's operations.
Readers are cautioned not to place undue importance on forward- looking information, which speaks only as of the date of this Management's Discussion and Analysis, and should not rely upon this information as of any other date. Due to assumptions, risks and uncertainties, including the assumptions, risks and uncertainties identified above and elsewhere in this Management's Discussion and Analysis, actual events may differ materially from current expectations. The Company uses forward-looking statements because it believes such statements provide useful information with respect to the expected future operations and financial performance of the Company, and cautions readers that the information may not be appropriate for other purposes. While the Company may elect to, it is under no obligation and does not undertake to update or revise any forward-looking information, whether as a result of new information, future events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Company's filings with Canadian and United States securities regulatory authorities and can be found at www.sedar.com and www.sec.gov, respectively.
Summary Discussion
Harry Winston Diamond Corporation is a specialist diamond company focusing on the mining and retail segments of the diamond industry. The Company supplies rough diamonds to the global market from production received from its 40% ownership interest in the Diavik Diamond Mine (economic interest of 31%), located off Lac de Gras in Canada's Northwest Territories. The Company also owns a 100% interest in Harry Winston Inc., the premier fine jewelry and watch retailer operating under the Harry Winston(R) brand.
The Company's most significant asset is an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI") (60%) and Harry Winston Diamond Limited Partnership ("HWDLP") (40%) where HWDLP holds an undivided 40% ownership interest in the assets, liabilities and expenses. DDMI is the operator of the Diavik Diamond Mine. DDMI and HWDLP are headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary of Rio Tinto plc of London, England. As a result of the strategic investment by Kinross Gold Corporation ("Kinross") of Toronto, Canada, described below, HWDLP is 77.5% owned by the Company and 22.5% owned by Kinross.
On March 31, 2009, Kinross made a net investment of $150.0 million to acquire an indirect interest in the Diavik Diamond Mine and a direct equity stake in the Company. Kinross subscribed for 15.2 million of the Company's treasury shares at a price of $3.00 per share, being approximately 19.9% of the Company's issued equity post the transaction. Kinross also subscribed for new partnership units representing a 22.5% interest in HWDLP, for a net effective subscription value of $104.4 million. With the closing of the Kinross transaction, the Company's economic interest in the Diavik Diamond Mine is 31%.
Market Commentary
The Diamond Market
During the quarter, the rough diamond market recovered slightly from the low point reached at the beginning of the fiscal year. The diamond processing and jewelry manufacturers are returning to the market as positive demand from Asia coupled with the first signs of activity from the US market have encouraged manufacturers to begin restocking. This renewed activity in a market previously depleted as the result of reductions in rough diamond production by the mining industry has improved prices for both rough and polished diamonds.
The Retail Jewelry Market
The global economic downturn continues to negatively impact the luxury diamond jewelry market. Although there have been very tentative indications that the U.S. economy is stabilizing, the global retail environment remains very challenging.
(R) Harry Winston is a registered trademark of Harry Winston Inc.
