EX-99.1 2 d15687exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1

     
  (MICHAELS LOGO)
NEWS RELEASE
 
Jeffrey N. Boyer
FOR IMMEDIATE RELEASE
 
Executive Vice President -
 
Chief Financial Officer
 
(972) 409-1581
 
    
 
Christopher J. Holland
 
Vice President - Finance
 
(972) 409-1667

Michaels Reports Record First Quarter Earnings

— Net Income Up 41% —

— EPS Climbs 40% to $.42 —

IRVING, Texas — May 26, 2004 — Michaels Stores, Inc. (NYSE: MIK) today reported record earnings for its first quarter ended May 1, 2004. Net income for the quarter was $29.3 million compared to net income of $20.8 million in the same period last year, a 41% increase. Diluted earnings per share for the quarter were $.42 compared to $.30 in the same period last year, a 40% increase. Total sales for the first quarter increased 11% to $725.9 million from $656.4 million for the same period last year. For the quarter, same-store sales were up 6% and operating margins, as a percent of sales, increased 120 basis points to 7.2%.

     Michael Rouleau, President and Chief Executive Officer, said, “We are very pleased with our sales and earnings performance for the first quarter. Our better-than-expected same-store sales were driven, in part, by the implementation of our new perpetual inventory and automated replenishment systems which helped us maintain higher store-level in-stocks versus last year. We were also affected by a more favorable retail environment. During the first quarter, we continued the accelerated clearance markdown program we began in the third quarter of fiscal 2003, resulting in a slight reduction in our gross profit as a percent to sales compared to the first quarter last year. Importantly, solid cost controls in the quarter allowed us to fully leverage our strong sales growth and expand our operating margin to a record first quarter level.”

     Rouleau continued, “We expect another year of record earnings for fiscal 2004. We now expect full year diluted earnings per share to increase 15% to 20% over last year’s $2.54. On a quarterly basis, diluted earnings per share are expected to increase 10% to 15% in the second quarter, 15% to 20% in the third quarter, and 10% to 15% in the fourth quarter. Same-store sales in each of the next three quarters and for the year are expected to increase 3% to 5%. Within the second quarter, we currently expect same-store sales to increase approximately 3% in May and 8% to 10% in June, but to decline 2% to 4% in July due to a shift in the timing of the Fourth of July and related changes in our promotional calendar.”

     The Company also announced that between February 1, 2004, the start of the fiscal year, and May 11, 2004, it has repurchased approximately 500,800 shares of its common stock under its stock repurchase plans at an average price of $48.24 per share. As of May 26, 2004, under certain repurchase plans, the Company is authorized to repurchase approximately 2.4 million additional shares plus any shares that may be repurchased with proceeds from the exercise of options under its General Stock Option Plan.

     A conference call will be held at 4:00 p.m. CT today to discuss first quarter earnings results. Those who wish to participate in the call may do so by dialing 973-633-6740. Any interested party will also have the

8000 BENT BRANCH DRIVE — IRVING, TEXAS 75063
972/409-1300

 

 

opportunity to access the call via the Internet at www.michaels.com. To listen to the live call, please go to the website at least fifteen minutes early to register and download any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available for 30 days after the date of the event. Replay may be accessed at www.michaels.com or by phone at 973-341-3080, PIN 4251247.

     The Company plans to release its May 2004 sales results on Thursday, June 3, 2004 at 6:30 a.m. CT. Any interested party may view the Company’s press release at www.michaels.com.

     Michaels Stores, Inc. is the world’s largest specialty retailer of arts, crafts, framing, floral, wall décor, and seasonal merchandise for the hobbyist and do-it-yourself home decorator. As of May 26, 2004, the Company owns and operates 819 Michaels stores in 48 states and Canada, 158 Aaron Brothers stores, located primarily on the West Coast, two ReCollections stores in the Dallas/Fort Worth Metroplex, and three wholesale operations.

     Certain statements contained herein which are not historical facts are forward looking statements that involve risks and uncertainties, including, but not limited to, estimation risks, customer demand and trends in the arts and crafts industry, related inventory risks due to shifts in customer demand, the effect of economic conditions, the impact of competitors’ locations or pricing, the availability of acceptable locations for new stores, difficulties with respect to new information system technologies, supply constraints or difficulties, the results of financing efforts, the effectiveness of advertising strategies and other risks detailed in the Company’s Securities and Exchange Commission filings. The Company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available.

     This press release is also available on the Michaels Stores, Inc. website (www.michaels.com).

— Tables Follow —

8000 BENT BRANCH DRIVE — IRVING, TEXAS 75063
972/409-1300

 

 

Michaels Stores, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)

                 
    Quarter Ended
    May 1,   May 3,
    2004
   2003
Net sales
   $ 725,852     $ 656,388  
Cost of sales and occupancy expense
     465,628       420,548  
 
    
 		      
 		  
Gross profit
     260,224       235,840  
Selling, general, and administrative expense
     205,701       194,594  
Store pre-opening costs
     2,483       1,753  
 
    
 		      
 		  
Operating income
     52,040       39,493  
Interest expense
     5,328       5,071  
Other (income) and expense, net
     (789 )     (856 )
 
    
 		      
 		  
Income before income taxes
     47,501       35,278  
Provision for income taxes
     18,169       14,464  
 
    
 		      
 		  
Net income
   $ 29,332     $ 20,814  
 
    
 		      
 		  
Earnings per common share:
                
Basic
   $ 0.43     $ 0.31  
 
    
 		      
 		  
Diluted
   $ 0.42     $ 0.30  
 
    
 		      
 		  
Dividends per common share
   $ 0.12     $ —  
 
    
 		      
 		  

 

 

Michaels Stores, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)

                         
    May 1,   January 31,   May 3,
    2004
   2004
   2003
ASSETS
                        
Current assets:
                        
Cash and equivalents
   $ 381,352     $ 341,825     $ 211,040  
Merchandise inventories
     906,655       892,923       857,181  
Prepaid expenses and other
     40,031       29,198       21,574  
Deferred and prepaid income taxes
     20,990       19,426       20,348  
 
    
 		      
 		      
 		  
Total current assets
     1,349,028       1,283,372       1,110,143  
 
    
 		      
 		      
 		  
Property and equipment, at cost
     825,928       808,230       731,548  
Less accumulated depreciation
     (434,257 )     (420,313 )     (368,995 )
 
    
 		      
 		      
 		  
 
     391,671       387,917       362,553  
 
    
 		      
 		      
 		  
Goodwill
     115,839       115,839       115,839  
Other assets
     14,850       14,519       13,907  
 
    
 		      
 		      
 		  
 
     130,689       130,358       129,746  
 
    
 		      
 		      
 		  
Total assets
   $ 1,871,388     $ 1,801,647     $ 1,602,442  
 
    
 		      
 		      
 		  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current liabilities:
                        
Accounts payable
   $ 214,454     $ 172,708     $ 166,944  
Accrued liabilities and other
     190,040       194,395       160,162  
Income taxes payable
     —       2,377       10,160  
 
    
 		      
 		      
 		  
Total current liabilities
     404,494       369,480       337,266  
 
    
 		      
 		      
 		  
9 1/4% Senior Notes due 2009
     200,000       200,000       200,000  
Deferred income taxes
     28,241       28,241       21,513  
Other long-term liabilities
     38,184       36,628       31,498  
 
    
 		      
 		      
 		  
Total long-term liabilities
     266,425       264,869       253,011  
 
    
 		      
 		      
 		  
 
     670,919       634,349       590,277  
 
    
 		      
 		      
 		  
Commitments and contingencies
                        
Stockholders’ equity:
                        
Preferred Stock, $0.10 par value, 2,000,000 shares authorized; none issued
     —       —       —  
Common Stock, $0.10 par value, 150,000,000 shares authorized; shares issued and outstanding of 68,586,669 at May 1, 2004, 67,997,567 at January 31, 2004, and 66,566,841 at May 3, 2003
     6,859       6,800       6,657  
Additional paid-in capital
     510,542       495,910       480,982  
Retained earnings
     681,477       660,365       523,479  
Accumulated other comprehensive income
     1,591       4,223       1,047  
 
    
 		      
 		      
 		  
Total stockholders’ equity
     1,200,469       1,167,298       1,012,165  
 
    
 		      
 		      
 		  
Total liabilities and stockholders’ equity
   $ 1,871,388     $ 1,801,647     $ 1,602,442  
 
    
 		      
 		      
 		  

 

 

Michaels Stores, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

                 
    Quarter Ended
    May 1,   May 3,
    2004
   2003
Operating activities:
                
Net income
   $ 29,332     $ 20,814  
Adjustments:
                
Depreciation
     21,678       19,854  
Amortization
     98       100  
Other
     291       283  
Changes in assets and liabilities:
                
Merchandise inventories
     (13,732 )     (47,763 )
Prepaid expenses and other
     (10,833 )     (2,935 )
Deferred income taxes and other
     919       297  
Accounts payable
     41,746       72,180  
Income taxes payable
     3,588       (12,295 )
Accrued liabilities and other
     (6,660 )     (19,517 )
 
    
 		      
 		  
Net change in assets and liabilities
     15,028       (10,033 )
 
    
 		      
 		  
Net cash provided by operating activities
     66,427       31,018  
 
    
 		      
 		  
Investing activities:
                
Additions to property and equipment
     (25,834 )     (13,746 )
Net proceeds from sales of property and equipment
     9       5  
 
    
 		      
 		  
Net cash used in investing activities
     (25,825 )     (13,741 )
 
    
 		      
 		  
Financing activities:
                
Proceeds from stock options exercised
     14,236       1,257  
Repurchase of Common Stock
     (7,798 )     (25,968 )
Cash dividends paid to stockholders
     (8,220 )     —  
Proceeds from issuance of Common Stock and other
     707       443  
 
    
 		      
 		  
Net cash used in financing activities
     (1,075 )     (24,268 )
 
    
 		      
 		  
Net increase (decrease) in cash and equivalents
     39,527       (6,991 )
Cash and equivalents at beginning of period
     341,825       218,031  
 
    
 		      
 		  
Cash and equivalents at end of period
   $ 381,352     $ 211,040  
 
    
 		      
 		  

 

 

Michaels Stores, Inc.
Summary of Operating Data
(Unaudited)

                 
    Quarter Ended
    May 1,   May 3,
    2004
   2003
Michaels stores (A):
                
Retail stores open at beginning of period
     804       754  
Retail stores opened
     14       18  
Retail stores opened (relocations)
     12       5  
Retail stores closed
     —       (A )
Retail stores closed (relocations)
     (12 )     (5 )
 
    
 		      
 		  
Retail stores open at end of period
     818       771  
 
                
Aaron Brothers stores:
                
Retail stores open at beginning of period
     158       148  
Retail stores opened
     —       5  
 
    
 		      
 		  
Retail stores open at end of period
     158       153  
 
                
ReCollections stores:
                
Retail stores open at beginning of period
     2       —  
Retail stores opened
     —       —  
 
    
 		      
 		  
Retail stores open at end of period
     2       —  
 
                
Star Wholesale stores (A):
                
Wholesale stores open at beginning of period
     3       2  
Wholesale stores opened
     —       —  
 
    
 		      
 		  
Wholesale stores open at end of period
     3       2  
 
    
 		      
 		  
Total store count at end of period
     981       926  
 
    
 		      
 		  
 
                
Other operating data:
                
Average inventory per Michaels store (in thousands)
   $ 1,026     $ 1,059  
Comparable store sales increase
     6 %     2 %

(A)   Opening store counts reflect a reclassification of our Los Angeles combination wholesale-retail store from a Michaels store to a Star Wholesale store. Beginning in Fiscal 2004, our Los Angeles wholesale-retail store will be managed as part of our Star Wholesale concept.