-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SLb42Jc5Rs5FD0W9lPcBHpXqVBgsmrbKghgY1e857dCxBeWo74nHBgXHRKfEqllf QzdSmZUU2j0BdwEgrEnxZA== 0000740670-95-000004.txt : 19950615 0000740670-95-000004.hdr.sgml : 19950615 ACCESSION NUMBER: 0000740670-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHAELS STORES INC CENTRAL INDEX KEY: 0000740670 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOBBY, TOY & GAME SHOPS [5945] IRS NUMBER: 751943604 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11822 FILM NUMBER: 95547037 BUSINESS ADDRESS: STREET 1: 5931 CAMPUS CIRCLE DR CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 2147147000 MAIL ADDRESS: STREET 1: PO BOX 619566 CITY: DFW STATE: TX ZIP: 75261 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------- --------- Commission file number 0-11822 ------------------------------ MICHAELS STORES, INC. (Exact name of registrant as specified in its charter) Delaware 75-1943604 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5931 Campus Circle Drive Irving, Texas 75063 P.O. Box 619566 DFW, Texas 75261-9566 (Address of principal executive offices, including zip code) (214) 714-7000 (Registrant's telephone number, including area code) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No - Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding as of June 9, 1995 21,413,710 Title ----- Common stock, par value $.10 per share MICHAELS STORES, INC. FORM 10-Q Part I - FINANCIAL INFORMATION Item 1. Financial Statements MICHAELS STORES, INC. CONSOLIDATED BALANCE SHEETS (In thousands except share data) (Unaudited)
ASSETS April 30, January 29, 1995 1995 --------- ---------- Current assets: Cash and equivalents $ 1,836 $ 1,907 Marketable securities 14,777 15,002 Merchandise inventories 407,366 375,096 Deferred income taxes 16,236 15,002 Prepaid expenses and other 16,864 11,525 -------- -------- Total current assets 457,079 418,532 -------- -------- Property and equipment, at cost 225,450 204,032 Less accumulated depreciation (77,561) (62,228) -------- -------- 147,889 141,804 -------- -------- Costs in excess of net assets of acquired operations, net 142,777 117,377 Other assets 8,257 8,313 -------- -------- 151,034 125,690 -------- -------- $756,002 $686,026 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 71,938 $103,649 Short-term bank debt 27,000 - Accrued liabilities and other 87,992 82,441 -------- -------- Total current liabilities 186,930 186,090 -------- -------- Bank debt 102,000 41,100 Convertible subordinated notes 96,940 96,950 Deferred income taxes and other 5,874 5,969 -------- -------- Total long-term liabilities 204,814 144,019 -------- -------- 391,744 330,109 -------- -------- Commitments and contingencies Shareholders' equity: Common stock, 21,409,685 shares outstanding 2,141 2,135 Additional paid-in capital 245,155 244,561 Retained earnings 116,962 109,221 -------- -------- Total shareholders' equity 364,258 355,917 -------- -------- $756,002 $686,026 ======== ========
See accompanying notes to consolidated financial statements. MICHAELS STORES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited)
Quarter Ended ------------------------ April 30, May 1, 1995 1994 --------- -------- Net sales $265,547 $159,798 Cost of sales and occupancy expense 172,043 103,511 Selling, general and administrative expense 78,084 47,216 -------- -------- Operating income 15,420 9,071 Interest expense 3,341 2,026 Other income, net (209) (1,031) -------- -------- Income before income taxes 12,288 8,076 Provision for income taxes 4,731 3,109 -------- -------- Net income $ 7,557 $ 4,967 ======== ======== Earnings per common and common equivalent share $.35 $.28 ==== ==== Weighted average common and common equivalent shares outstanding 21,845 17,856 ====== ======
See accompanying notes to consolidated financial statements. MICHAELS STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Quarter Ended ---------------------- April 30, May 1, 1995 1994 --------- -------- Operating activities: Net income $ 7,557 $ 4,967 Adjustments: Depreciation and amortization 7,561 3,767 Change in assets and liabilities excluding the effects of acquisitions: Merchandise inventories (24,935) (18,562) Prepaid expenses and other (1,773) (2,395) Deferred income taxes and other 4,381 287 Accounts payable (36,866) (771) Income taxes payable - (4,111) Accrued liabilities and other (9,525) (7,321) -------- -------- Net change in assets and liabilities (68,718) (32,873) -------- -------- Net cash used in operating activities (53,600) (24,139) -------- -------- Investing activities: Additions to property and equipment (11,934) (14,178) Net proceeds from sales of property and equipment 1,791 - Purchases of marketable securities - (5,046) Net proceeds from sales of marketable securities - 1,865 Acquisitions and other (24,684) (217) -------- -------- Net cash used in investing activities (34,827) (17,576) -------- -------- Financing activities: Net borrowings under bank credit facilities 87,900 42,500 Proceeds from issuance of common stock and other 456 1,215 -------- -------- Net cash provided by financing activities 88,356 43,715 -------- -------- Net increase (decrease) in cash and equivalents (71) 2,000 Cash and equivalents at beginning of year 1,907 867 -------- -------- Cash and equivalents at end of period $ 1,836 $ 2,867 ======== ======== Cash payments for: Interest $ 1,141 $ 293 Income taxes 215 7,220
See accompanying notes to consolidated financial statements. MICHAELS STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Months ended April 30, 1995 (Unaudited) Note A - ------ The accompanying consolidated financial statements are unaudited (except for the Consolidated Balance Sheet as of January 29, 1995) and, in the opinion of management, reflect all adjustments that are necessary for a fair presentation of financial position and results of operations for the three months ended April 30, 1995. All of such adjustments are of a normal and recurring nature. Because of the seasonal nature of the Company's business, the results of operations for the three months ended April 30, 1995 are not indicative of the results to be expected for the entire year. Note B - ------ In March 1995, the Company purchased Aaron Brothers Holdings, Inc. ("Aaron Brothers"), which owns a chain of 71 framing and art supplies stores predominantly in California, for a purchase price of $25 million in cash including the assumption of $19.7 million of debt. The transaction was accounted for as a purchase; accordingly, the purchase price has been preliminarily allocated to assets and liabilities based on estimated values as of the acquisition date. The cost in excess of the estimated fair value of net assets acquired was recorded as goodwill in the amount of $26.3 million, which will be amortized on a straight-line basis over a period of 40 years. The results of operations for April 1995 are included in the accompanying consolidated financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- The Company acquired 71 specialty framing and art supplies stores and opened 15 Michaels stores during the first three months of fiscal 1995. Capital expenditures for these stores, and, to a lesser extent, the remodeling and expansion of existing stores, the opening of a new distribution facility, and system enhancements, amounted to $11.9 million in the first three months of fiscal 1995. The Company expects capital expenditures during the remainder of fiscal 1995 to approximate $47.0 million, relating primarily to the opening of new stores and additional systems enhancements. In March 1995, the Company paid $25 million in cash, including the assumption and retirement of $19.7 million of debt associated with the acquisition of Aaron Brothers. At April 30, 1995 the Company had working capital of $270.1 million, compared to $232.4 million at January 29, 1995. The Company currently has a bank credit agreement ("Credit Agreement") which includes an unsecured line of credit and provides for the issuance of letters of credit. Borrowings under the Credit Agreement, which expires June 16, 1998, are limited to the lesser of $200 million or the Company's borrowing base (as defined in the Credit Agreement), in either case minus the aggregate amount of outstanding letters of credit. As of April 30, 1995, the Company had $69.1 million in available unused credit capacity under the Credit Agreement. Management believes that the Company has sufficient working capital, cash flow from operating activities, and available unused credit capacity to sustain current growth plans. Results of Operations - --------------------- The following table shows the percentage of net sales that each item in the Consolidated Statements of Income represents. This table should be read in conjunction with the following discussion and with the Company's financial statements, including the notes:
For the Quarter Ended -------------------- April 30, May 1, 1995 1994 --------- ------ Net sales 100.0% 100.0% Cost of sales and occupancy expense 64.8 64.8 Selling, general and administrative expense 29.4 29.5 ----- ----- Operating income 5.8 5.7 Interest expense 1.3 1.3 Other income, net (0.1) (0.6) ----- ----- Income before income taxes 4.6 5.0 Provision for income taxes 1.8 1.9 ----- ----- Net income 2.8% 3.1% ===== =====
Three months ended April 30, 1995 compared to the - ------------------------------------------------- three months ended May 1, 1994 ------------------------------ Net sales for the three months ended April 30,1995 were $265.5 million, an increase of $105.7 million or 66.2%, compared to the same period of the prior year. The results for the first quarter of fiscal 1995 included sales of 205 Michaels stores (net of 25 closures) that were added during the previous twelve months, 15 of which were added during the first quarter of fiscal 1995, and 71 Aaron Brothers stores which were included from March 27, 1995. Sales of newer stores accounted for $98.1 million of the increase. Comparable store sales increased 9% over the same period last year. Cost of sales and occupancy expense was flat compared to the same period last year, as a percentage of sales, with a slight decrease in cost of sales being offset by an increase in occupancy costs, resulting from a high proportion in the current year of newer and acquired stores having a relatively lower sales base over which fixed occupancy costs can be spread. The Company expects cost of sales and occupancy expense for the second quarter of this year to be higher, as a percentage of sales, than last year's comparable quarter, due to increased promotional sales activity as well as to an increase in occupancy costs. The increased promotional sales activity has been undertaken partly in response to a general softness in the retail sector. Primarily as a result of this higher level of promotional activity, the Company expects a decrease in net income and earnings per share for this year's second quarter compared to the prior year comparable period, before giving effect to the $7.1 million store closure and conversion charge reflected in last year's second quarter results. Selling, general and administrative expense decreased by 0.1%, as a percentage of sales, in the first quarter of fiscal 1995 compared to the same period of the prior year, due to a slight improvement in labor and related administrative expenses as a percentage of sales. The increase in interest expense for the first quarter of fiscal 1995 to $3.3 million from $2.0 million for the same period a year ago was due primarily to increased bank borrowings. The decrease in other income was due principally to a decline in the size of the investment portfolio this year compared to the prior year period. The Company's effective tax rate remained static at 38.5%, with a tax reduction due to investment in tax advantaged securities being offset by the effect of additional amortization of goodwill, which is not deductible for tax purposes, related to the Company's fiscal 1994 acquisitions. MICHAELS STORES, INC. FORM 10-Q Part II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of shareholders on June 6, 1995. The following are the results of the election of two directors to the board, voted upon at the meeting:
Nominees For Withheld -------- --- -------- Charles J. Wyly, Jr. 17,351,030 132,100 Jack E. Bush 17,354,765 128,365
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11 - Computation of Earnings Per Common Share for the three months ended April 30, 1995. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the period covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICHAELS STORES, INC. By: /s/ R. Don Morris ---------------------------- R. Don Morris Executive Vice President and Chief Financial Officer (Principal Financial Officer) Dated: June 14, 1995 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE 11 Computation of Earnings Per Common Share for the three months ended April 30, 1995. EXHIBIT 11 MICHAELS STORES, INC. Computation of Earnings Per Common Share Three Months Ended April 30, 1995 (Unaudited)
Weighted Average Outstanding Equivalent Shares ----------------------- Total Fully Outstanding Primary Diluted ----------- ---------- ---------- Outstanding at beginning of quarter 21,354,167 21,354,167 21,354,167 Shares issued during quarter 55,518 16,084 16,084 ---------- ---------- Weighted average outstanding shares 21,370,251 21,370,251 Common Equivalent Shares: Dilutive shares attributable to stock options (computed by the treasury stock method) 474,469 474,469 ---------- ---------- ---------- Total outstanding shares 21,409,685 21,844,720 21,844,720 ========== ========== ========== Earnings per common and common equivalent share $.35 $.35 ==== ====
EX-27 2
5 0000740670 MICHAELS STORES, INC. 1,000 3-MOS JAN-28-1996 APR-30-1995 1,836 14,777 0 0 407,366 457,079 225,450 77,561 756,002 186,930 0 2,141 0 0 362,117 756,002 265,547 265,547 172,043 250,127 0 0 3,132 12,288 4,731 7,557 0 0 0 7,557 .35 .35
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