DALLAS, May 05, 2006 (BUSINESS WIRE) -- Zale Corporation (NYSE:ZLC) today announced that Mark
Lenz, Group Senior Vice President and Chief Financial Officer, has
been placed on administrative leave until further notice.
This decision was made after recent discussions with the Company's
outside auditors concerning Mr. Lenz's failure to timely disclose in
conversations with the auditors that vendor payments scheduled to be
made during the last two weeks of the Company's fiscal year ended July
2005 were delayed until the first week of August 2005. The delay of
the scheduled payments in July did not affect reported revenues or
earnings, but did increase net cash flows from operating activities
and free operating cash flow. The Company believes that both cash and
accounts payable were properly reflected on the balance sheet. The
Company is determining the exact amount of the deferred payments, but
currently believes it did not exceed $8.2 million. For the fiscal year
ended July 31, 2005, the Company reported net cash flows from
operating activities of $168 million and disclosed free operating cash
flow, a non-GAAP financial measurement, of $89 million. The Company
has discussed this matter with the Securities and Exchange Commission
and is reviewing the matter internally and with its auditors.
"The Company's Board of Directors concluded that based on this
information a change in chief financial officers was appropriate,"
commented Betsy Burton, Acting Chief Executive Officer. "The Company
continues to believe that its accounting was appropriate and complied
with generally accepted accounting principles."
The Company also announced that George Mihalko has been appointed
as Acting Chief Administrative Officer and Chief Financial Officer
effective immediately. He has also been appointed to the Company's
Board of Directors and will report directly to Betsy Burton, Acting
Chief Executive Officer.
Mr. Mihalko brings to Zale extensive retail experience, having
served as Vice Chairman, Chief Administrative Officer and Chief
Financial Officer of The Sports Authority, Inc. until August 2003. He
has also held executive positions with Pamida Holdings Corporation and
Pier 1 Imports. Prior to that, he served in diverse management
positions with Burlington Northern, Inc., Porsche Cars North America,
Inc. and Firestone Tire & Rubber Company. Mr. Mihalko holds a B.S. and
an M.B.A in Finance and International Business from the University of
"We are pleased to have someone of George's caliber join our
Company," said Ms. Burton. "He brings to Zale a proven track record
and expertise in the area of finance and accounting and will add
experience and leadership to the executive management team."
Zale Corporation is North America's largest specialty retailer of
fine jewelry operating approximately 2,345 retail locations throughout
the United States, Canada and Puerto Rico. Through its ZLC Direct
organization, Zale also operates online at www.zales.com and
www.baileybanksandbiddle.com. Zale Corporation's brands include Zales
Jewelers, Zales Outlet, Gordon's Jewelers, Bailey Banks & Biddle Fine
Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.
Additional information on Zale Corporation and its brands is available
SOURCE: Zale Corporation
David H. Sternblitz
Vice President and Treasurer