Finlay Enterprises Reports Second Quarter and First Half Fiscal 2008 Results

NEW YORK, Aug. 27 /PRNewswire-FirstCall/ -- Finlay Enterprises, Inc.
(OTC Bulletin Board: FNLY), a leading retailer of fine jewelry operating
luxury stand-alone specialty jewelry stores and licensed fine jewelry
departments in department stores throughout the United States, announced today
its financial results for the second quarter and first six months of fiscal
2008. Results from the prior year period ended August 4, 2007 exclude from
continuing operations the results from Parisian stores that closed in fiscal
2007, which have been classified as discontinued operations in accordance with
generally accepted accounting principles (GAAP).
Second Quarter Results
Sales for the second quarter increased 28.8% to $190.6 million compared to
$148.0 million in the comparable period of 2007. Specialty jewelry stores
consisting of Carlyle, Congress, and Bailey Banks & Biddle, which was acquired
in November 2007, contributed sales of $74.9 million for the second quarter,
as compared to $27.0 million for the same period last year. Comparable store
sales (stores open for the same months during the comparable period) for the
second quarter decreased 4.8%.
For the thirteen weeks ended August 2, 2008, the Company reported a loss
from continuing operations of $12.3 million, or $1.32 per share, compared to a
loss of $8.5 million, or $0.93 per share, in the second quarter of fiscal
2007. Loss from operations before depreciation and amortization expenses
(EBITDA) for the second quarter totaled $7.1 million, compared to a loss of
$1.9 million in the prior year period. See Reconciliation of EBITDA in the
attached tables.
The current quarter and six month period loss from continuing operations
and EBITDA reflect the expected interim loss associated with the Bailey Banks
& Biddle division, which was not included in the prior year results. As is the
case with most jewelry retailers, the fourth quarter for Bailey Banks & Biddle
is expected to account for the majority of its sales and profitability for the
fiscal year.
First Half Results
On a continuing operations basis, sales for the six months ended August 2,
2008 increased 27.3% to $395.7 million compared to $310.9 million in the first
six months of fiscal 2007. Specialty jewelry stores contributed sales of
$152.6 million for the six month period as compared to $54.3 million in 2007.
Comparable store sales for the six months decreased 4.6%.
For the twenty-six weeks ended August 2, 2008, the Company reported a loss
from continuing operations of $23.3 million, or $2.51 per share, compared to a
loss of $16.2 million, or $1.79 per share, for the twenty-six weeks ended
August 4, 2007. EBITDA for the six months totaled a loss of $10.9 million
compared to a loss of $3.3 million in the prior year period.
Arthur E. Reiner, Chairman and Chief Executive Officer of Finlay
Enterprises, Inc. commented, "The second quarter was impacted by ongoing
weakness in consumer confidence as well as a challenging retail environment.
It is largely for these reasons that we continue to maintain strong discipline
in managing our operating expenses and inventory levels in order to maximize
our liquidity position. Our conservative approach to managing cash enabled us
to end the second quarter with availability under our credit facility very
close to our original plan. Moving forward, we will continue to intensify our
focus on brand building within the Bailey Banks & Biddle and Carlyle
businesses, as we transition our Company from a 100% leased business to a more
diversified business with a focus on expanding the specialty store division."
Company Outlook
Given the uncertainty of the macroeconomic environment in which the
Company is currently operating, management has decided not to comment on the
Company's guidance for the full year.
Conference Call
The Company's management will host a conference call to review results and
answer questions. The conference call will be held today, August 27, 2008, at
10:00 a.m. Eastern Time. A live broadcast of the call will be available on
the Company's website http://www.finlayenterprises.com and will remain
available for approximately 90 days.
Finlay Enterprises, Inc., through its wholly-owned subsidiary, Finlay Fine
Jewelry Corporation, is one of the leading retailers of fine jewelry operating
luxury stand-alone specialty jewelry stores and licensed fine jewelry
departments in department stores throughout the United States and achieved
sales of $835.9 million in fiscal 2007. The number of locations at the end of
the second quarter of fiscal 2008 totaled 781, including 67 Bailey Banks &
Biddle, 35 Carlyle and five Congress specialty jewelry stores.
This release may contain forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on Finlay's
current expectations and beliefs, are not a guarantee of future performance
and involve known and unknown risks, uncertainties and other factors. Actual
results, performance or achievements may differ materially from those
contained in, or implied by, these forward-looking statements, depending upon
a variety of factors including, in particular, the risks and uncertainties
described in Finlay's filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We undertake no
obligation to release publicly any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. The inclusion of
any statement in this release does not constitute an admission by Finlay or
any other person that the events or circumstances described in such statement
are material.
- financial tables follow -

FINLAY ENTERPRISES, INC.
Consolidated Statements of Operations and other information
(in thousands, except share and per share data)
(unaudited)

Thirteen Weeks Ended Thirteen Weeks Ended
August 2, 2008 August 4, 2007

Sales $190,558 100.0% $148,004 100.0%
Cost of sales 105,746 55.5 79,628 53.8
Gross margin 84,812 44.5 68,376 46.2
Selling, general and
administrative
expenses 91,868 48.2 70,274 47.5
Depreciation and
amortization 4,449 2.3 3,704 2.5
Loss from operations (11,505) (6.0) (5,602) (3.8)
Interest expense, net 8,797 4.6 6,412 4.3
Loss from continuing
operations before
income taxes (20,302) (10.6) (12,014) (8.1)
Benefit for income
taxes (8,020) (4.2) (3,559) (2.4)
Loss from continuing
operations (1) (12,282) (6.4) (8,455) (5.7)
Discontinued
operations, net of tax - - 87 0.1
Net loss $(12,282) (6.4)% $(8,368) (5.6)%

Net income (loss) per
share applicable to
common shares - Basic
and Diluted:
Loss from continuing
operations $(1.32) $(0.93)
Discontinued
operations, net
of tax $ - $0.01
Net loss $(1.32) $(0.92)

Weighted average shares
outstanding -
Basic & Diluted 9,317,490 9,094,353

Other information:
EBITDA (2) $(7,056) $(1,898)

Reconciliation of
EBITDA:
Loss from operations $(11,505) $(5,602)
Add: Depreciation and
amortization 4,449 3,704
EBITDA $ (7,056) $(1,898)

Twenty-Six Weeks Ended Twenty-Six Weeks Ended
August 2, 2008 August 4, 2007

Sales $395,670 100.0% $310,875 100.0%
Cost of sales 218,728 55.3 166,133 53.5
Gross margin 176,942 44.7 144,742 46.5
Selling, general and
administrative expenses 187,891 47.5 148,053 47.6
Depreciation and
amortization 9,427 2.4 7,247 2.3
Loss from operations (20,376) (5.2) (10,558) (3.4)
Interest expense, net 17,572 4.4 12,490 4.0
Loss from continuing
operations before
income taxes (37,948) (9.6) (23,048) (7.4)
Benefit for income taxes (14,655) (3.7) (6,840) (2.2)
Loss from continuing
operations (1) (23,293) (5.9) (16,208) (5.2)
Discontinued operations,
net of tax - - 236 0.1
Net loss $(23,293) (5.9)% $(15,972) (5.1)%

Net income (loss) per
share applicable to
common shares - Basic
and Diluted:
Loss from continuing
operations $(2.51) $(1.79)
Discontinued operations,
net of tax $ - $0.03
Net loss $(2.51) $(1.76)

Weighted average shares
outstanding -
Basic & Diluted 9,270,127 9,073,415

Other information:
EBITDA (2) $(10,949) $(3,311)

Reconciliation of
EBITDA:
Loss from
operations $ (20,376) $(10,558)
Add: Depreciation
and amortization 9,427 7,247
EBITDA $ (10,949) $(3,311)

1) Included in continuing operations for the second quarter and first six
months of fiscal 2008 are pre-tax charges totaling $0.9 million, or
$0.06 per share, and $1.8 million, or $0.12 per share, respectively,
associated with severance for field personnel and accelerated
depreciation in conjunction with the Macy's and Lord & Taylor
anticipated store closings at the end of the current fiscal year.

2) EBITDA, a non-GAAP financial measure, represents income (loss) from
operations before depreciation and amortization expenses. The Company
believes EBITDA provides additional information for determining its
ability to meet future debt service requirements. EBITDA should not
be construed as a substitute for net income or cash flow from
operating activities (all determined in accordance with GAAP) for the
purpose of analyzing Finlay's operating performance, financial
position and cash flow as EBITDA is not defined by generally accepted
accounting principles. Finlay has presented EBITDA, however, because
it is commonly used by certain investors to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service and/or incur debt. Finlay's computation
of EBITDA may not be comparable to similar titled measures of other
companies.

FINLAY ENTERPRISES, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

August 2, August 4,
2008 (1) 2007
Assets

Cash $ 4,902 $ 3,010
Accounts receivable 24,890 25,469
Inventory 580,305 414,369
Other current assets 17,521 8,186
Total current assets 627,618 451,034

Fixed assets, net 71,718 53,891
Other assets 25,715 14,828
Total assets $ 725,051 $ 519,753

Liabilities and Stockholders' Equity

Short-term borrowings $ 307,448 $ 102,084
Accounts payable 46,954 38,904
Other current liabilities 69,562 61,932
Total current liabilities 423,964 202,920
Long-term debt 200,000 200,000
Deferred income taxes and other non-current
liabilities 10,412 9,912
Total liabilities 634,376 412,832
Total stockholders' equity 90,675 106,921

Total liabilities and stockholders'
equity $ 725,051 $ 519,753

1) The balance sheet as of August 2, 2008 includes the assets and
liabilities of Bailey Banks & Biddle, which was acquired on November
9, 2007.

SOURCE Finlay Enterprises, Inc.

Bruce Zurlnick, Senior Vice President and Chief Financial Officer, Finlay
Enterprises, Inc., +1-212-808-2800; or Leigh Parrish or Caren Barbara, or
Media, Samantha Cohen, +1-212-850-5600, all of Financial Dynamics